NSW casino regulator mulls The Star's fate after second Bell report handed down

Shares in The Star Entertainment Group (ASX: SGR) were placed in a trading halt today after the NSW casinos regulator revealed that its concerns, which prompted a second inquiry into the company’s casino licence holding suitability, have been validated.

The NSW Independent Casino Commission (NICC) says it is currently considering the “next steps for the future of the suspended casino operator” after making public the second Bell Report into The Star.

The NICC has also hit the company with a $3.2 million bill for the full cost of the second Bell inquiry which revealed a state of dysfunction between the former board of the casino group and the regulator.

The Star has requested the trading halt to consider the report and “implications it may have for disclosures” regarding it FY24 result, while also preparing a response to media speculation of a potential liquidity crisis facing the company within weeks.

The shares are likely to remain suspended until at least this coming Monday, 2 September 2024.

The NICC today made public two volumes of the three-volume Bell Report prepared by Adam Bell SC form his second inquiry held earlier this year. The casino regulator says it is reviewing the findings to determine implications this may have for The Star.

In 2022, Bell’s first inquiry into The Star – which was triggered by a raft of allegations that the casino group was enabling suspected money laundering and organised crime activities through its VIP operations – delivered a serious blow to the company after it was found to be unsuitable to hold a casino licence.

Since then, Nicholas Weeks, as special manager appointed by the NICC to oversee The Star’s remediation program, has had complete control of the casino licence.

NICC chief commissioner Philip Crawford today reveals that the latest Bell Report validates the regulator’s concerns that led to the second Inquiry.

“The Bell Report reveals a company that had not moved quickly enough to address the governance and cultural concerns raised in the first Bell Report,” says Crawford.

“It has only very recently turned its attention to dealing with challenges that should have been prioritised earlier.”

Crawford notes that a recent cleanout of The Star’s board, including former CEO Robbie Cooke and chairman David Foster, has been a big step towards change for the group.

Both Cooke and Foster resigned after the second Bell inquiry heard evidence of a “state of war” between the former executives and the NICC amid The Star’s remediation efforts.

The company has since appointed former Crown Resorts boss Steve McCann as CEO and former Crown cultural turnaround specialist Jeannie Mok as its new chief operating officer.

Crawford says the experience that these executives bring to The Star in terms of dealing with cultural transformation and regulators more broadly “will be vital if the NICC decides that The Star should remain as the operator of The Star Casino”. 

“The level of transparency and cooperation has certainly improved since their appointments,” says Crawford.

"However, the Bell Report underscores the NICC’s concerns that it was not receiving all of the facts from The Star at a time when we needed certainty the company could fund and prioritise an urgent business turnaround.

“The NICC is responsible for regulating an industry that is highly vulnerable to criminal infiltration and we are tasked with setting regulatory standards that meet the community’s expectations.

“It was unclear whether The Star could feasibly operate under less supervision, when it was exhibiting past behaviours with its licence still suspended.”

The NICC says it is reviewing Bell’s findings, including four compliance breaches, with plans to respond “in due course”.