The Star’s chair Heap, Bekier, O'Neill and more sued by ASIC for breaching directors’ duties

Just days after The Star Entertainment Group (ASX: SGR) was hit with another $100 million fine, the current and former top brass of the embattled casino and resorts company have today been sued by the Australian Securities and Investment Commission (ASIC) for alleged breaches of their duties.

ASIC’s civil penalty proceedings in the Federal Court have named a number of high ranking members of The Star’s leadership team from 2017 to 2019, including former chair John O’Neill and former managing director and CEO Matt Bekier.

The company’s current chair Ben Heap has also been unable to escape ASIC’s legal action, in addition to current non-executive director Katie Lahey and former non-executive directors Richard Sheppard, Gerard Bradley, Sally Pitkin and Zlatko Todorcevski - the former CEO of Boral (ASX: BLD).

Others named in the lawsuit include former company secretary and group general counsel Paula Martin, former chief casino officer Greg Hawkins, and former CFO Harry Theodore.

The watchdog alleges breaches of directors’ duties under section 180 of the Corporations Act, each of which attract a maximum penalty of $1,050,000 for each breach.

“ASIC alleges that Star’s board and executives failed to give sufficient focus to the risk of money laundering and criminal associations, which are inherent in the operation of a large casino with an international customer base,” ASIC deputy chair Sarah Court said.

ASIC further alleges that the board members in question approved the expansion of Star’s relationship with certain individuals with reported criminal links, rather than addressing money laundering risk by inquiring into whether Star should be dealing with them.

It also alleges that board members, when provided with information about money laundering risks affecting Star, did not take steps to make further enquiries of management about those critical risks and that this was a breach of their directors’ duty obligations. 

Bekier, Martin and Hawkins have been singled out specifically by ASIC, which alleged the three breached their duties by not adequately addressing the money laundering risks that arose from dealing with Asian gambling junket Suncity and its funder, as well as continuing to deal with them despite becoming aware of reports of criminal links.

Suncity was Star’s largest junket, with the company’s turnover from Suncity being approximately $2.1 billion, $4 billion and $5.9 billion for the 2017, 2018 and 2019 financial years respectively. It organised trips for high-roller overseas customers, known as junkets, to visit Star’s casinos.

Further, the three are alleged to have not appropriately escalated money laundering issues to the board.

In terms of Theodore and Martin specifically, ASIC alleges the two knowingly permitted misleading statements to be provided to National Australia Bank (ASX: NAB) regarding the use of debit cards issued by China Union Pay International (CUP) at NAB ATMs located on Star’s premises.

“Those statements disguised the fact that Star was permitting CUP cards to be used for gambling, which was prohibited by CUP,” ASIC said.

“ASIC is aware over $900 million was obtained by Star customers using CUP cards in NAB ATMs from 2013 to 2019.

“ASIC also alleges that they, and Mr Bekier, failed to report these matters to Star’s board.”

ASIC chair Joe Longo said the role of directors was critical to a company’s general standing and performance, including how a company deals with significant issues.

“As I’ve said on many occasions, directors and officers are a critical part of the conduct of business in Australia,” Longo said.

“Their duty is to understand the operations of the company over which they preside, and the particular risks faced by the business.

“They are required to bring an inquiring mind to business operations. It is not ‘set and forget.”

In a short statement, The Star has acknowledged the proceedings and noted it was not party to the law suit.

ASIC’s claims are retreading ground covered by a New South Wales Independent Liquor and Gaming Authority (ILGA) inquiry held earlier this year, which interrogated many of the the current and former board members that ASIC is looking to sue.

That Inquiry, led by Adam Bell SC, resulted in a $100 million fine for the casino operator, and was followed up more recently by another $100 million fine from Queensland Attorney-General Shannon Fentiman who also slapped on a 90-day suspension of The Star’s Casino licence in the state in the wake of the Gotterson review of its Brisbane and Gold Coast operations.

Both reviews of the company’s operations revealed systemic failures on the casino’s behalf, and heard that while senior management was responsible for developing a culture of acquiescence that gave rise to the stated risks over the past decade, The Star’s former board of directors was said to have been largely kept in the dark in relation to the poor oversight.

Prior to ASIC’s announcement, The Star was already facing legal action from the financial crimes watchdog, after AUSTRAC took the company to the Federal Court in November alleging ‘serious and systemic’ failures that exposed the group to criminal exploitation.

AUSTRAC’s action involves two Star subsidiaries, The Star Pty Limited and The Star Entertainment QLD Limited, which are the respective operators of the group’s Sydney and Queensland operations.

ASIC’s civil penalty proceedings are the first to actually name the individuals involved in the company’s murky past.

Many of those named in the Federal Court proceedings were singled out by Naomi Sharp SC - the counsel assisting Adam Bell SC - in her closing submissions.

Harry Theodore in particular was named and shamed by Sharp, who said he was "very reluctant to make concessions in his evidence when they were fairly called for", and took a "long time" to make concessions about unethical conduct when grilled by the SC.

However, of all the directors on the Star’s board, Sharp made it particularly clear that she believed Sally Pitkin was the only one who had done any real soul searching before stepping up to the stage.

The Bell review resulted in mass-resignations from The Star board, including former CEO Matt Bekier and former executive chairman John O’Neill who both stepped down just prior to appearing at the ILGA review.

Bekier’s departure led to the appointment of Geoff Hogg as acting CEO, who only stayed in the role for three months before resigning ahead of his appearance at the Queensland review. Since then the group has appointed former Tyro Payments (ASX: TYR) managing director Robbie Cooke to the top role.

Former directors Sally Pitkin and Gerard Bradley, as well as former CFO Theodore, former chief casino officer Hawkins and former chief legal and risk officer Paula Martin all also left during the leadership clean out this year.