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Chapter 08
Responsible service of gambling
Responsible service of gambling
Introduction
- The financial position of Victoria in 1991 was grim. The State’s public sector debt had risen to $28 billion, from about $23 billion in 1988. Unemployment was around 10 per cent. The budget deficit for the year was expected to exceed $1 billion.1
- For some time, the government had been subject to pressure to legalise casinos in the state. Given the circumstances, it is not surprising that the government finally agreed. The reasons were compelling. Significant economic benefits were expected. There would be a growth in employment. Tourism to the state would increase. Associated businesses would benefit. And, importantly, government revenue would rise.
- In the second reading of the Casino Control Bill, the responsible Minister explained that ‘[Melbourne] is a world-class city and the time has come when it should have a world-class casino’.2
- The Minister acknowledged that there were significant risks associated with establishing a casino. The risks the Minister identified were the potential for criminal activity and the influence of organised crime. In his 1983 Report, Mr Connor, QC warned that criminal organisations would find casinos ideal for the purposes of money laundering.3
- The Minister said that the Casino Control Bill was ‘designed to provide strict control over all aspects of the operation of casinos’ so as to exclude criminal activity and influence.4
- Nothing was said by the Minister introducing the Casino Control Bill about the potential harmful effects of gambling at a casino.5
- The opposition supported the establishment of a casino. The Member for Monash, a former barrister, said that the opposition:
decided that, after very careful investigation of the economic, social and regulatory factors involved, there should be a casino in this State and that it should be what is described as a world-class casino.6
- The Member for Monash went on to say:
On balance the economic benefits of casinos outweigh the risk on the regulatory side, the risk that is undoubtedly the greatest being that of organised crime taking an interest in casinos and intruding into them. The opposition came to the view that the level of surveillance and regulation is such that it will reduce the risk to a very low level.
- The only mention of the harmful effects of gambling during the parliamentary debate of the Casino Control Bill was in the context of loansharking and extortion. It was pointed out that there was a real potential for extortion where people have a gambling problem. They would be concentrated in one area and would potentially fall prey to those who lend money.8
- The stated purposes of the Casino Control Bill, which remain in the Casino Control Act to this day,9 reflected the government’s priorities and concerns. They were to:
[e]stablish a system for the licensing, supervision and control of casinos with the aims of:
- ensuring that the management and operation of casinos remains free from criminal influence or exploitation; and
- ensuring that gaming in casinos is conducted honestly; and
- promoting tourism, employment, and economic development generally in the State.10
- Following the passage of the Bill in June 1991, the government took immediate steps to establish a casino, commencing the process to issue the casino licence in late 1991.11 The casino was anticipated to be a $1 billion development that could earn $100 million per year in gambling revenue for the State.12
The benefits of gambling
- Gambling in Australia has become a large and expanding industry. It incorporates a diverse range of activities, from charitable gambling to internet gaming. New products are being developed. The trend to increased spending on recreation and leisure and the expansion of commercial forms of gambling allows gambling to be promoted as a legitimate form of entertainment.13
- The gambling industry makes a significant contribution to the Victorian economy in terms of employment, investment tourism and tax revenue.14 Over 15,000 people are employed at clubs and hotels that have EGMs, at the Melbourne Casino and at standalone TAB agencies.15
- In dollar terms, between 2001 and 2019 more than $4 billion was spent on all forms of gambling in Victoria each year.16
- Gambling taxes have become a stable source of State revenue, with between $1.63 billion and $2 billion received annually by the State in the 2009 to 2020 financial years.17 In the 2020 financial year, gambling taxes were the State’s fifth-highest source of revenue.18 This revenue helps fund some of the essential services that the government provides, including health services, community projects and community education initiatives.
- Crown’s contribution to the economy must be acknowledged. Crown is a major employer (over 20,000 people are employed across the Crown Resorts businesses, including over 11,500 who work in Melbourne)19 and makes a substantial contribution to Victorian, Western Australian and Commonwealth revenues. It provides training and educational opportunities and, through its philanthropic arm, the Crown Foundation, contributes to cultural and charitable causes.20
- More specifically, Crown paid over $650 million in taxes in Australia in 2019. Since 2014 it has paid at least $812.4 million in corporate income tax to the Commonwealth as well as contributing over $3 billion to Victoria’s revenue. Through its procurement activities, Crown also supports many other Australian businesses.21
- In a submission to a 2015 Productivity Commission research paper into tourism, Crown Resorts contended that, with the exception of airlines, it was Australia’s largest generator of tourism revenue and that a third of its revenue came from international visitors. Crown Resorts also asserted that, in circumstances where Australia’s market share of tourism from China in particular was declining, it stood to ‘capture growing international demand for luxury travel, as [Crown’s integrated resorts] cater to the desire of the Asian middle class’.22
- Crown Melbourne was the fifth most visited attraction in Melbourne in 2019, with 2.2 million overnight visitors. Of this number, 1.6 million were domestic overnight visitors and 610,800 were international overnight visitors.23
- In the 2020 financial year, the Melbourne Casino and other gambling services contributed $149 million in ‘direct tourism gross value added’ to the State. While this industry sector does not make the highest direct tourism gross value added contribution, the amount is still significant.24
- More broadly, many people who gamble (including at the Melbourne Casino) do so because they enjoy it. Some studies have tentatively linked certain forms of gambling with an improved sense of wellbeing.25 The recreational and functional benefits of the Melbourne Casino extend beyond gambling to other forms of entertainment, and to accommodation and function spaces.
The harm caused by gambling
A brief overview
- The Productivity Commission conducted the first independent national review of the social and economic impacts of the gambling industries across Australia.26
- Its report was published in 1999.27 It was a novel and influential effort to evaluate the costs and benefits of gambling. The Productivity Commission’s work has been augmented by reports from the VRGF,28 the work of other organisations in Victoria29 and interstate,30 and a growing body of international reports and scholarship.31
- The Productivity Commission identified problem gambling as a significant social cost resulting from the rapid growth and commercialisation of the gambling industry. It noted the industry’s ability:
simultaneously to provide entertainment that is harmless to many people, while being a source of great distress—and even of financial and personal ruin—to a significant minority. The imbalances between the consequences for each group can be very marked, a feature not found in other entertainment industries.32
- A common research tool to assess the risk and prevalence of problem gambling is the Problem Gambling Severity Index (PGSI). The PGSI is a tool based on research on the common signs and consequences of problematic gambling,33 and is a standardised measure of at-risk behaviour used by the VRGF.
- The PGSI is used by respondents to self-assess their gambling behaviour over the past 12 months. They answer nine questions by selecting a score for each: never (0), rarely (1), sometimes (1), often (2) or always (3). The scores are added up and respondents are placed in one of the following categories:
- non-problem gambler (the person’s gambling has no negative consequences)
- low-risk gambler (the person experiences a low level of problems with their gambling with few or no identified negative consequences—for example, they may very occasionally spend over their limit or feel guilty about gambling)
- a moderate-risk gambler (the person experiences a moderate level of problems leading to some negative consequences—for example, they may sometimes spend more than they can afford, lose track of time or feel guilty about gambling)
- a problem gambler (the person gambles with negative consequences and a possible loss of control—for example, they may often spend more than their limit, gamble to win money back and feel stressed about their gambling).34
- This and similar indices, such as the Short Gambling Harm Screen, have been used to measure the level of problem gambling in the population.
The number of problem gamblers
- In 2009, the Productivity Commission conducted a further inquiry into Australia’s gambling industries. The report, published in 2010, estimated that there were between 80,000 and 160,000 adults suffering severe problems from their gambling and between 250,000 and 350,000 adults at moderate risk, experiencing low levels of harm, and who could progress to problem gambling.35 In its 2017 report, ‘The Social Cost of Gambling to Victoria’ (2017 VRGF Report), the VRGF estimated that out of a total Victorian population of around 4 million people, there were approximately 35,000 problem gamblers, 122,600 moderate-risk gamblers and 391,000 low-risk gamblers.36 In a later report, published in March 2020 (2020 VRGF Report), the VRGF estimated that there were approximately 36,000 problem gamblers, 118,000 moderate-risk gamblers and 329,000 low-risk gamblers in Victoria.37
- In 2018, the VRGF conducted an online questionnaire, rather than using the usual telephone-based survey method, and found markedly higher rates of problem gambling. It estimated that averaged over all age groups, the prevalence of problem gambling was 11 per cent and that the prevalence in the 25–34 year age group was 23 per cent.38 The authors observed that individuals may be more willing to acknowledge their gambling problems in an anonymous online questionnaire than in a telephone interview. They also noted that participants were chosen to be more representative of the general Victorian population than in other studies.39
- Evidence given to the Commission was that the prevalence of problem gambling in the Victorian adult population in the 2019 financial year was 0.7 per cent.40
The money lost to gambling
- Research showed that in the 2019 financial year, approximately 70 per cent of Victorian adults had participated in some form of gambling in the previous 12 months.41 The principal forms of legal gambling in Victoria are EGMs, casino table games, betting, lotteries, raffles and bingo.42
- Annual gambling losses are substantial. The amount lost per adult in Victoria in the 2018 financial year was estimated to be $1,163.43 Broken down by gambling product, the losses on EGMs are the greatest. Some $2.7 billion was lost on EGMs in Victoria in the 2018 financial year. This may be compared with sports betting losses in Victoria, which were around $371.7 million in the same period.44
- It is instructive to consider gambling losses by reference to problem gamblers and moderate-risk gamblers.
- The 2010 Productivity Commission Report estimated that problem gamblers likely accounted for around 40 per cent (possibly as much as 60 per cent or, in the most conservative case, as low as a (still significant) 22 per cent) of EGM losses, and moderate-risk gamblers accounted for a further 19 per cent (possibly as much as 27 per cent or, in the most conservative case, 7 per cent). Problem gamblers accounted for $2.6 billion of EGM losses.45
- More recently, the 2017 VRGF Report estimated that problem and moderate-risk gamblers in Victoria accounted for 59.4 per cent of EGM spending in the 2015 financial year (moderate-risk gamblers accounting for 23 per cent and problem gamblers accounting for 35.8 per cent), and that only 18.7 per cent of EGM spending came from non-problem gamblers.46 It also found that problem gamblers accounted for 58.7 per cent of table games spending at the Melbourne Casino, moderate-risk gamblers accounted for 19.1 per cent and low-risk gamblers accounted for 15.3 per cent. A mere 6.9 per cent of the casino’s table games spending came from non-problem gamblers.47
- The total amount spent on gambling at the Melbourne Casino is significant. Between the 2008 and 2018 financial years, this amount rose from approximately $1.1 billion to approximately $1.8 billion.48
The response of government and industry
- In 2006, the State Government acknowledged that over 55,000 adult Victorians had become addicted to gambling. The vast majority were addicted to gambling on EGMs.49
- As more evidence of the harmful effects of problem gambling emerged and the cost of those effects mounted, both the government and the industry took action to minimise the harm. Initiatives included:
- prohibiting minors from accessing gambling
- conducting community awareness campaigns
- requiring the provision of information about gaming rules, odds and rates of returns
- establishing self-exclusion programs
- putting warning messages on gambling terminals
- placing restrictions on advertising
- establishing gambling assistance hotlines.50
Non-gamblers affected by gambling
- The number of people with gambling problems is much smaller than the number of people who may be affected by those problems.51
- Work carried out by the VRGF in 2016 confirmed that the harm done by gambling extends well beyond the gambler. The types of harm experienced by ‘affected others’—people in the familial and social networks of gamblers who are experiencing harms—include:
- relationship disruption, conflict or breakdown
- poorer health
- emotional and psychological distress
- financial harm
- reduced performance at work or in study
- cultural problems (for example, personal conflicts about gambling when it is against cultural beliefs, reduced ability to participate in cultural practices or meet community expectations, and reduced connection to the cultural community)
- criminal activity
- life course and intergenerational harms.52
- The 2017 VRGF Report stated that in the 2015 financial year:
- Gambling-related harm imposed both direct and indirect costs on the gambler.
- The costs imposed by gambling-related harm extended to affected others in the form of divorce or separation; experiences of violence; emotional distress; and, in extreme cases, the impact of suicide attempts or fatality by suicide.
- Costs extended to third parties and the community in the form of productivity loss and work impacts; the cost of crime to businesses and the Victorian justice system; and costs to the health and human service sector, the mental health sector and homelessness services.
- Every problem gambler affected approximately six others through their gambling, while gamblers at moderate risk affected three others, and low-risk gamblers affected one other.53
- The 2017 VRGF Report estimated that affected others could constitute over 22 per cent of the Victorian population; however, it noted that a substantial percentage of this population would be experiencing minor harms, not enough to give rise to a high degree of emotional stress and the costs associated with that.54
Costing the harms
- The cost to Victorians of the harms caused by gambling far exceeds the amounts lost by those gambling. The Victorian Auditor-General has assessed this cost to be around $7 billion a year, through damage to relationships, health and wellbeing, monetary losses and other social costs.55
- A brief survey of some of the types of harms that contribute to those costs follows.
Financial costs
- The financial costs of gambling harms are substantial, and can stem from bankruptcy, unpaid debts and excessive spending on gambling (which may result in financial strain, debt or less money available for essential items). The VRGF 2017 Report estimated that in the 2015 financial year alone, 2,693 bankruptcies may have been the result of gambling in Victoria. It estimated the annual cost of gambling-related bankruptcy in Victoria to be $70.1 million.56 That figure did not take into account the indirect costs that may arise from bankruptcy, such as costs to relationships (for example, emotional distress and divorce), and the use of government services such as housing assistance or financial support.57
Costs to health and wellbeing
- The physical and psychological impacts of gambling can be very grave. Problem gambling is associated with substantially lower levels of life satisfaction. The 2020 VRGF Report used the Australian Unity Wellbeing Index to measure Victorian adult respondents’ overall life satisfaction, as well as their satisfaction with how safe they felt; their standard of living; their personal relationships; their health; their future security; what they were currently achieving in life; and their feeling of being part of a community. Problem gamblers had notably lower scores than other respondents in every domain.58
- The 2017 VRGF Report indicated that in the 2015 financial year, over 40 per cent of problem gamblers reported increased depression due to gambling within the previous 12 months. Some 7.5 per cent of problem gamblers reported that their gambling had contributed to or caused a suicide attempt or ideation. Even adjusting this rate to accommodate the possibility that gambling was not the sole contributing factor, this amounted to 2,112 suicide attempts or ideation among problem gamblers alone within the previous 12 months. The total number of suicide attempts or ideation for low-risk, moderate-risk and problem gamblers was estimated to be 8,802.59
- The 2017 VRGF Report estimated (again, applying a reduction to account for those who may have committed suicide in any event) that there were 587 suicides in Victoria caused by gambling problems in the 2015 financial year.60
Costs to relationships and family
- Problem gambling has been shown to have disruptive and destructive consequences for relationships and families.
- The 2017 VRGF Report records that almost 20 per cent of problem gamblers in Victoria reported that their gambling contributed to or caused their divorce or separation. Applying a 20 per cent reduction to account for instances of divorce or separation that may have occurred in any event, it was estimated that gambling problems contributed to or caused 14,693 divorces or separations among low-risk, moderate-risk and problem gamblers.61
- Gambling has also been empirically associated with family violence. The relationship between gambling and family violence is complex.62 Gambling can result in stress, anger or financial crisis, which in some cases may increase the likelihood of family violence. In other cases, problematic gambling may be an effect of family violence. Some research indicates that there is a nearly threefold increase in the probability of violence in families where there is problem or moderate-risk gambling.63
Productivity and work costs
- Problem gambling can interfere with a person’s ability to function as a productive, gainfully occupied member of the community. The 2017 VRGF Report considered, for example, the cost of gambling-related job losses, absenteeism and lost productivity in the 2015 financial year. Datasets indicated that reduced productivity at work due to gambling problems cost businesses over $323 million that year.64 More than 16,000 people were estimated to be absent from work because of gambling problems, costing over $46 million.65 Further, over 11 per cent of problem gamblers, and almost 5,000 people with varying levels of gambling problems were estimated to have lost their job as a result of gambling problems (again adjusted to account for those who may have lost their job in any event).66
Costs to government
- Gambling imposes substantial costs on various branches of government. There are costs to the justice system as a result of gamblers who commit offences connected with gambling problems. In the 2015 financial year, some 18,513 people with varying levels of gambling problems were estimated to have committed a crime due to gambling.67
- Wider costs to government include the cost of establishing and maintaining the public structures that regulate, research and treat gambling-related problems; and the cost of people with gambling problems accessing health and human services, mental health services and homelessness services.68
Concluding remarks
- Concentrating attention on the financial costs of harms caused by gambling problems ignores the larger picture. Many of the most profound impacts of gambling problems defy quantification. The true impact of a life lost to suicide on the person’s family and friends is incalculable. The same is true of the personal cost to a life of irrecoverable years spent overwhelmed by addiction, uncertainty and hopelessness, or of a childhood marred by violence or homelessness.
The number of problem gamblers at the Melbourne Casino
- The Melbourne Casino is a huge, attractive and busy venue. In the five financial years from 2016 to 2020, Crown spent some $2.46 billion on marketing, rewards and other benefits and enticements to attract customers.69 These measures have been very successful. In each of the years 2016 to 2019, the Melbourne Casino had between 22.4 and 23.4 million visits. Numbers declined in 2020 because of the closures resulting from the COVID-19 pandemic.70
- The number of visits includes players who visit the Melbourne Casino on more than one occasion in a day. This means that estimating the number of individuals who attend each day is difficult. The likely number is somewhere between 12,000 and 14,000 players per day.71
- The Melbourne Casino attracts many gamblers who have problems with their gambling. Data from the 2020 VRGF Report shows that in 2018−19:
- Twenty-five per cent of people who had gambled at the Melbourne Casino in the previous 12 months experienced some harm from gambling.
- Just over a third of Victorians experiencing problem gambling, and nearly a third of all Victorians at moderate risk of experiencing problem gambling, had gambled at the Melbourne Casino in the previous 12 months.
- Compared to the broader population of Victorians who gamble on table games, EGMs, bingo and Keno, those gambling at the Melbourne Casino are more likely to report having experienced at least one form of gambling harm.
- Sixty-one per cent of people gambling on EGMs at the Melbourne Casino experiencing ‘problem gambling’ had used unrestricted EGMs in the previous 12 months.72
- Using data from the 2020 VRGF Report, Ms Rosa Billi, Branch Head for Research and Evaluation at the VRGF, concluded that the prevalence of problem gamblers at the Melbourne Casino may be three times higher than among all Victorian adults who gamble.73
- Crown says there are three issues of concern with Ms Billi’s analysis: (a) it is not statistically significant; (b) the sample size is too small to draw an accurate conclusion; and (c) since her conclusions were drawn from the 2020 VRGF Report’s findings but not published within it, they have not been peer-reviewed.74
- Those concerns can be put aside. First, the issues were not raised with Ms Billi, so she could not rebut or answer any criticism. To rely on them now is unfair.
- Second, Ms Billi’s analysis has some support in the research. A 2015 paper titled ‘Responsible Gambling and Casinos’, commissioned by Gambling Research Australia, reached the following conclusion:
In general, regular casino gamblers were found (i.e. by prevalence studies) to be more likely compared to other gamblers to be problem gamblers with 10 per cent of casino gamblers in the general population likely to be moderate risk to problem gamblers (New South Wales); casino gamblers were over three times more likely to be problem gamblers and moderate risk gamblers than other gamblers (South Australia).
- Finally, even if the issues raised by Crown were valid, it is open to conclude that, as a matter of common sense, problem gamblers are more likely to be found in the casino when compared to all Victorian adults who gamble.
- So much appeared obvious to Parliament when considering the establishment of a casino in Victoria. During the debate on the Casino Control Bill, the Member for Monash said:
Finally, it was pointed out to those who consulted on the issue that the potential for extortion is enormous where those who have a gambling problem … can be seen as concentrated in one area, and will perhaps be prey to those who lend money (emphasis added).76
- The evidence and submissions received by this Commission indicate that problem gamblers are drawn to the casino for many reasons, including because it is open 24 hours a day and has more EGMs than any other venue.77
The features of EGMs
- It is important to understand why such a large proportion of problem gamblers are attracted to EGMs, and why most money gambled by problem gamblers is spent on EGMs.
- Ms Billi said research that had examined the structural characteristics of EGMs has identified a range of factors associated with gambling harm. These factors include:
- the rapid speed of play relative to other forms of gambling
- the lack of natural breaks from gambling
- the highly variable and unpredictable outcomes, together with product characteristics such as ‘near misses’ (where losses are presented as ‘almost wins’) and ‘losses disguised as wins’ (where a person loses more than they stake, yet the outcome is accompanied by the celebratory machine sounds and graphics that occur when a person wins),78
which may lead to persistent gambling in the face of losses, particularly among those experiencing problem gambling.79
- Ms Billi said research shows that:
- people who experience problems with gambling are more likely to gamble out of a desire to escape or alter mood, and products that offer rapid, continuous gambling appear to be a more effective means of achieving these goals
- faster, more continuous gambling activities are more conducive to potentially harmful patterns of gambling behaviour, such as increasing stake size in an attempt to recoup losses
- the absence of a natural break from gambling prevents a person from reflecting on the gambling outcome
- increased EGM play speed may be associated with higher spending, greater underestimates of the amount spent, placing of higher bets and impaired recall of outcomes.80
- Other research confirms Ms Billi’s evidence. For example, there is evidence that EGMs can induce a dissociative ‘flow state’ where a gambler’s awareness of self, the passage of time and surroundings is diminished.81 For problem gamblers in particular, that ‘flow state’ may itself be addictive,82 especially for those suffering from depression, who find superficial relief in a dissociative state.83
- Research suggests that losses disguised as wins produce a response in the brain similar to that produced by wins, encouraging gamblers to continue gambling, and that they can enhance the ‘flow state’.84 Similarly, losses presented as ‘near misses’ may stimulate an even greater urge to continue playing than an actual win, and can result in players gambling for longer than intended.85
- In addition to having these general characteristics, the EGMs at the Melbourne Casino have particular characteristics that others in Victoria do not. The restrictions imposed on the EGMs at the Melbourne Casino are less stringent in many instances than those imposed on EGMs at other gaming venues in Victoria. The following table sets out the operational differences.
EGM features
Clubs and hotels
Crown (restricted mode)
Crown (unrestricted mode)
Spin rate
Cannot be shorter than 2.14 seconds
Cannot be shorter than 2.14 seconds
No restriction
Bank note acceptor
Cannot accept bank notes greater than $50
Cannot accept bank notes greater than $50
No restriction
Load-up limit
Limit of $1,000
Limit of $9,949
No restriction
Pay-out limit
Winnings higher than $2,000 must be paid by cheque
Winnings higher than $2,000 must be paid by cheque
No restriction
AutoPlay
Prohibited
Prohibited
Allowed
Maximum bet per spin
$5
$10
No restriction
Source: Submission 60 VRGF, 31 May 2021, 20.
- As can be seen from this table, EGMs at the Melbourne Casino can operate in both restricted and unrestricted mode. Of the 2,628 EGMs permitted to be operated at Crown Melbourne,86 1,000 are permitted to operate in ‘unrestricted’ mode when certain requirements are satisfied (including that a player has a pre-set time and loss limit on their YourPlay account, and has not exceeded either limit).87 Crown Melbourne is the only venue in the state that has EGMs permitted to operate in unrestricted mode.88
- Mr Mark Mackay, Executive General Manager of Gaming Machines, acknowledged that because there are no maximum bet limits on unrestricted EGMs and there are higher bet limits on restricted EGMs at the casino than at other EGM venues, the risk of harm from gambling at the Melbourne Casino is greater than the risk of harm from gambling on any other EGMs in Victoria.89
The Gambling Code
- It is a condition of Crown Melbourne’s casino licence that it must implement a Gambling Code.90 Repeated breaches of its Gambling Code is a ground upon which the regulator may take disciplinary action against Crown Melbourne.91
- The requirement to implement a Gambling Code came about in the following way.
- In October 2006, the Victorian Government issued its report ‘Taking Action on Problem Gambling’.92 The Report set out the steps the government intended to take in response to problem gambling. The steps included establishing a code of conduct for the Victorian gambling industry to be implemented in 2007.93
- The requirement that there be a Gambling Code was implemented by the Gambling Legislation Amendment (Problem Gambling and Other Measures) Act 2007 (Vic). This legislation introduced a number of measures designed to deal with the prevention, early intervention and treatment of gambling-related harm.94 In relation to casinos, the measures included limiting the availability of ATMs in the casino, making it an offence to provide gaming machines outdoors and making it an offence to allow an intoxicated person to gamble.95
- It also required a range of gambling licence holders, including Crown Melbourne, to implement a Gambling Code. For Crown Melbourne, this new obligation was imposed under section 69 of the Casino Control Act.96
- Section 69 now provides:
It is a condition of a casino licence that the casino operator implement a Responsible Gambling Code of Conduct that complies with—
...
[the relevant Ministerial direction]97
- The latest Ministerial direction that applies to Crown Melbourne was made on 17 September 2018.98 The required contents of a Gambling Code are set out in part 2 of the direction. Most are concerned with the provision of information to customers. Others require positive action by the casino operator.99
- Under the heading ‘Interaction with customers’, the Ministerial direction provides:
A code must require the relevant person to interact with customers to foster responsible gambling, and must identify how this will occur.
In particular, a code must specify a process for interacting with those customers who:
- have requested information about, or assistance with, a gambling problem or self-exclusion; and
- are displaying indicators of distress that may be related to problem gambling.100
- An important question that arises is whether Crown Melbourne is implementing its Gambling Code. The answer to that question requires an investigation into:
- Crown Melbourne’s obligations under its Gambling Code
- what action it takes to comply with those obligations
- whether that action is adequate to secure compliance.
- Before answering those questions, it is necessary to consider the terms of its Gambling Code.
A brief history of the Gambling Code
- Crown Melbourne has adopted different versions of its Gambling Code.
- The first version, adopted in 2009, required the following interaction with customers:
A customer displaying signs of distress or unacceptable behaviour will be approached by a staff member who will offer assistance and referrals to specialist support as required. These signs are known by our staff and may include, but are not limited to, a person:
- either gambling every day or finding it difficult to stop gambling;
- gambling for extended periods without a break;
- avoiding contact while gambling;
- communicating very little with anyone else;
- barely reacting to events going on around them;
- displaying aggressive, antisocial or emotional behaviour while gambling; and
- making requests to borrow money from staff or other customers or continuing to gamble with the proceeds of large wins.
The assistance offered by staff may take the form of:
- interaction with the customer and encouraging them to take a break from gambling;
- offering the customer non-alcoholic refreshments such as a cup of tea or coffee in a quieter and more private area such as our break-out lounge areas or the [Responsible Gaming Support Centre].101
- The Gambling Code also required that all contacts with a customer by the Responsible Gaming Liaison Officers (RGLOs) and senior management would be recorded in an incident register, along with the action taken.102
- The circumstances in which there would be interaction with a customer were altered in the third version of the Gambling Code, which was adopted in 2012. The relevant part then read:
A customer displaying signs of distress or unacceptable behaviour will be approached by a staff member who will offer assistance and referrals to specialist support as required.
Observable Signs are seen or reported behaviours or patterns of behaviours which are potential indicators that a person may be experiencing problems with their gambling behaviours. These are seen or reported in context and usually more than one is displayed to indicate potential problems with gambling. Observable signs are included in Crown’s Responsible Service of Gaming training …103
- The ‘Observable Signs’ changed, to the following:
- Self disclosure of a problem with gambling or problems related to gambling
- Request to self-exclude
- Distorted and irrational attitudes about gambling
- Barely reacting to surrounding events
- Intolerance to losing, displayed as bad temper or distress
- Significant variation in mood during a gambling session
- Children left unattended whilst parent/guardian gambles
- Regular complaints to staff about losing or blaming the venue/staff for their losses
- Requests to borrow money for gambling
- Showing a pattern of gambling for long periods without a break
- Progressive reduction of self-care e.g. appearing unkempt or fatigued
- Requests for assistance from family and/or friends concerned about an individual’s gambling behaviour104
- The Gambling Code noted:
These [Observable Signs] are adapted from ‘Identifying Problem Gamblers in Gambling Venues’, Delfabbro et al, 2007 and ‘Current Issues related to identifying the problem gambler in the gambling venue’ various authors, Australian Gambling Council, 2002.105
- The fourth version of the Gambling Code, adopted in July 2016, made further changes to the section on intervention with customers. Three are material:
The following change was made (marked up against third version added):
As part of delivering exceptional customer service, our staff are encouraged to engage with our customers. A customer displaying observable signs of distress or unacceptable behaviours that may be related to potential problem gaming behaviours or unacceptable behaviour will be approached by a staff member who will offer assistance and referrals to specialist support as required.106
The list of Observable Signs of problem gambling became:
- Self-disclosure of a problem with gaming or request to self-exclude
- Requests for assistance from family and/or friends concerned about an individual’s gaming behaviour
- Children left unattended whilst parent/guardian gambles
- Gets angry while gaming or shows signs of distress during or after gaming
- Often gambles for long periods without a break
- Witnessed or heard that a customer was trying to borrow money for gaming
- Significant decline in personal grooming or appearance
- Observed conflict over gaming between family members or friends
- Unrealistic remarks about gaming
- Complains to staff about losing or blames the casino or gaming product for losing
- Secretive or embarrassed about being at the casino or stays on to gamble when friends leave the venue
- Gambles without reacting to what is going on around him/her and avoids contact or conversation with others
- Frequent visits to the ATM107
In similar terms to earlier versions of the Code, the fourth version provided:
Persons displaying [Observable Signs] will be referred to RGLOs or senior management who have undergone advanced responsible gaming training.108
- The fourth version stated that, in addition to the sources mentioned in the third version, the Observable Signs in this version were also adapted from the 2014 ‘Validation Study of In-Venue Problem Gambler Indicators’ (2014 Study), by Anna Thomas, Paul Delfabbro and Andrew R Armstrong.109
- The fifth version, adopted in October 2016, made no relevant changes.110 The sixth version, adopted in 2019, made only one relevant change. Instead of persons displaying Observable Signs being referred to ‘RGLOs or senior management’111 they were now to be referred to ‘[Responsible Gaming Advisors] or management for referral to the [Responsible Gaming Advisors]’.112 During the Commission hearings, in May 2021, a seventh version of the Gambling Code was adopted. It contained no relevant changes.113
- In summary, the most recent Gambling Code requires Crown Melbourne staff to act if a customer displays an Observable Sign that may be related to potential problem gambling behaviours or unacceptable behaviour. One action is for the staff member to approach the customer and offer assistance. The other is for the customer to be referred to a Responsible Gaming Advisor (RGA) or to management for referral to an RGA.
A key Observable Sign under the Gambling Code
- As has been explained, there were originally separate Observable Signs, being ‘either gambling every day or finding it difficult to stop gambling’ and ‘gambling for extended periods without a break’.114 The two were subsequently combined into: ‘showing a pattern of gambling for long periods without a break’.115 That Observable Sign then became ‘often gambles for long periods without a break’.116 This Observable Sign was the subject of considerable attention during the Commission hearings.
- The proper understanding of Observable Signs can be gathered from the research cited in the Gambling Code, namely the 2014 Study,117 the 2007 study, ‘Identifying Problem Gamblers in Gambling Venues’ (2007 Study)118 and the 2002 study, ‘Current Issues Related to Identifying the Problem Gambler in the Gambling Venue’ (2002 Study).119 While the focus of the research was on EGMs, the 2007 Study involved participants who gambled on other games and the 2002 Study referred to casinos generally.120
Long periods without a break
- The 2002 Study is not a research project, but ‘a compilation of submissions from a [panel] of Australian and international experts working in research or clinical practice’.121 As to length of playing sessions, the 2002 Study states:
The panel had a wide range of session times indicative of problems. While most may not agree that the lower end of the range (1 hour) is indicative of anything serious, certainly five to six hours and beyond would raise concerns especially if linked to a number of sessions per week—although this latter feature was not a frequent response from the panel … This is also harder to quantify in absolutes, and people may lose very quickly if playing maximum stakes, many lines and experiencing a bad run. But clearly, a long session can be an indicator of trouble.122
- The 2007 Study involved a literature review and empirical research. The authors found that ‘there are certain behaviours that most, if not all, problem gamblers produce on at least some occasions’.123 One was that ‘[a] problem gambler typically gambles for long periods (often 3 hours or more) and often lose[s] track of what is going on around them’.124 The authors developed a list of indicators that would assist gaming venue staff to identify problem gambling. The list included ‘gambles for three hours or more without a break of 15 minutes or longer’ and ‘gambles for five or more hours without a break of 15 minutes or longer’.125
- The 2014 Study revised the indicators of a gambling problem identified in the 2007 Study. The authors noted the importance of long periods of continuous play; that is, play without a meaningful break:
The results of the present study showed that the most common visible indicators of problem gambling which can be observed in venues relate to the duration and intensity of gambling or to ways of raising funds or chasing wins. Problem gamblers were likely to be intensely focused on their play, want to play for long periods of time without a proper break and play very rapidly or frenetically (emphasis added).126
- The revised list of indicators of a gambling problem in the 2014 Study included as a ‘probable’ indicator of a gambling problem, ‘often gambles for long periods (3+ hours) without a proper break’.127
- These studies make clear that the reference to ‘gambl[ing] for long periods’ in Crown Melbourne’s Gambling Code should be understood to mean gambling for at least three hours, with an outer limit of five to six hours, without a proper break.
- For its part, Crown Melbourne contends for a different approach. It says that the reference to a ‘long period without a break’ is a reference to the periods of permitted play set out in its internal Play Periods Policy.128
- There is no merit in this contention. The proper meaning of any aspect of a Gambling Code cannot be affected by a document not incorporated by reference into the Code.
‘Often’
- Since the fourth version of Crown’s Gambling Code, the relevant Observable Sign has required the customer to exhibit the behaviour of ‘often gambles for long periods without a break’ (emphasis added). The meaning of ‘often’ is unclear.
- The research contained in the 2002 Study suggests ‘often’ could mean a number of gambling sessions per week,129 gambling at least once a week,130 or gambling more than five hours a week.131
- The preferable view is that ‘often’ means two or more gambling sessions in a week. Gambling for a long period without a break for more than one session a week may not be an indicator of problem gambling. Gambling for five hours in a week is also unlikely, without more, to be a sign of problem gambling. It is reasonable to proceed on the basis that gambling for two or more sessions in a week could be a sign that there are problems.
- In the end, the correct construction, whatever it is, will not affect the outcome of the Commission’s analysis. This is because it is also reasonable to proceed on the basis that a significant number of players who gamble for extended periods are likely to do so more than once a week.
Play Periods
- Crown Melbourne has an established policy that sets out the steps for Crown Melbourne staff to ‘administer and supervise those parts of the [Gambling] Code’ related to the Observable Sign ‘Often gambles for long periods without a break’ and to ‘breaks in play’.132
- This policy is the Play Periods Policy mentioned earlier.
A brief summary of the Play Periods Policy
- Following a proposal in 2010,133 a ‘Play Periods Trial’ was implemented in May 2012.134 The trial provided that:
- after 12 hours of play, the customer would be observed by a manager and/or RGLO and action or no action would be taken as required
- after 16 hours of play, the customer would be spoken to by a manager or RGLO and action or no action would be taken as required
- after 20 hours of play, the customer would be spoken to by an RGLO and action or no action would be taken as required
- after 22 hours of play, the customer would be spoken to by an RGLO and action or no action would be taken as required
- after 24 hours of play, the customer may be asked to leave depending on prior engagement/observation.135
- Version 1.1 of the Play Periods Policy was adopted in February 2018 and provided that:
- after significant continuous gambling for less than 24 hours, the customer would be reminded to take substantial regular breaks
- after 24 hours of continuous gambling, the customer would be asked to leave and be directed by an RGLO to take a 24-hour break
- SYCO (being the loyalty program data collection system in place)136 reports would be generated every four hours, and RGLOs would check all ratings where there was gambling for 16 hours or greater.137
- Version 1.2, also adopted in February 2018, was in relevantly the same terms as Version 1.1.138
- Version 1.3, adopted in December 2018, made the following relevant changes:
- After significant continuous gambling ‘without appropriate breaks’ for less than 24 hours, the customer would be reminded to take substantial regular breaks.
- After 24 hours of continuous gambling ‘without appropriate breaks’, the customer would be asked to leave and would be directed by an RGLO to take a 24-hour break.
- Gaming staff or an RGLO would interact with the customer at 12, 16 and 20 hours of gambling to encourage the customer to take a break from play.
- If the customer also displayed ‘any observable signs’, the customer would be asked by staff to take a break.
- RGLOs would check all ratings where there was gambling for 12 hours or greater.139
- Version 1.4, adopted in May 2019, was in relevantly the same terms as Version 1.3 (save that the title of ‘RGLO’ was changed to ‘RGA’).140
- No Version 1.5 was produced to the Commission.
- Version 1.6, adopted in December 2019, was in relevantly the same terms as Version 1.4 save for two key changes:
- It expressly applied only to Crown loyalty program members as distinct from all customers.
- It provided that gaming staff or an RGA would interact with or observe, as appropriate, the member (as distinct from interact with only) at 12, 16 and 20 hours of gambling to encourage the member to take a break from play.141
- Version 1.7, adopted in December 2020, also expressly applied only to Crown loyalty program members. It included the following relevant changes:
- Members who continuously gambled ‘without appropriate breaks’ for significant periods of less than 18 hours would be reminded to take regular breaks.
- Members who continuously gambled for 18 hours ‘without appropriate breaks’ would be asked to leave and be directed by an RGA or Gaming Manager to take a 24-hour break.
- Gaming staff or an RGA would interact with or observe, as appropriate, the member at 12, 15 and 17 hours of gambling to encourage the member to take a break from play.142
- Accordingly, since Version 1.3 of the policy, the first time a staff member is required to check on a player, on the basis of their length of continuous play without appropriate breaks, has been at the 12-hour mark. No interaction has ever been required before this time under the various versions of the Play Periods Policy. This is also reflected in practice.143
- Moreover, Versions 1.6 and 1.7 of the Play Periods Policy do not mandate interaction, and permit observation of the customer at the 12-hour mark.144 Indeed, in practice, an RGA would only observe from afar and would not interact with the customer unless there was some other Observable Sign displayed at that time.145 The same process may occur at the 15 and 17-hour mark (under Version 1.7 of the Play Periods Policy).146
What constitutes a break?
- There is little evidence of what length of time constitutes a ‘break’. This makes it difficult to determine when a patron has gambled for a particular time ‘without appropriate breaks’ (as specified in the Play Periods Policy since Version 1.3). According to an internal paper prepared by the VCGLR in June 2020, the position is as follows:
RGAs are provided with … mobile phone alerts of members who have been on the gaming floor for more than 12 hours without a substantial break, based on their loyalty club use. This new technology seeks intervention at:
- 12 hours of continuous play without breaks of more than 2 hours
- 14 hours of continuous play without breaks of more than 3 hours
- 20 hours of continuous play (irrespective of breaks), and
- 24 hours of continuous play (irrespective of breaks).147
- The break times are not unreasonable. On the other hand, the length of the break time is largely irrelevant as a harm mitigation measure by Crown Melbourne for reasons that will be explained.
A recent ‘enhancement’ to the Play Periods Policy
- In May 2021, and in direct response to this Commission’s exploration of the issue,148 the Crown Resorts board endorsed a plan to introduce Responsible Service of Gaming (RSG) ‘enhancements’.149 These enhancements will be discussed later. At present, it is only necessary to mention that one enhancement was an alteration to the Play Periods Policy. The alteration was that:
Crown will introduce the following time limits on playing at Gaming machines, Table Games and Electronic Table Games:
- Domestic Players—12 hours in a 24 hour period with observation/intervention at eight and 10 hours. Customers will not be able to play for more than 48 hours in a week.
- International Premium Program Players—staying less than seven days—18 hours in a 24 hour period with interventions at hours 12, 14 and 16. Players staying for longer than 7 days would align with Domestic Player limits.150
- Crown has indicated that a new Play Periods Policy, reflecting the above changes in respect of domestic players, was approved on 24 May 2021.151
- While the change is a positive development, precisely how the new Play Periods Policy will operate is not clear.
- Further, the change was developed and approved in just six days, and in circumstances where the person responsible for the change, Mr Steven Blackburn (Group Chief Compliance and Financial Crime Officer of Crown Resorts),152 did not appear to have a full understanding of the issues involved. This is not intended to be a criticism of him.153
- One final matter should be noted. There is evidence that Crown Melbourne was ‘also looking at implementing a 3-hour check, between three and four-hour and implementing an additional check at that stage’.154 Crown has not indicated when a change along those lines would be implemented.155
- What follows focuses on Play Periods Policy Version 1.7 (unless the context indicates otherwise).
Breaches of the Play Periods Policy
- The evidence reveals the following:
- Crown Melbourne has consistently failed to comply with both the Gambling Code and the Play Periods Policy. Players have been allowed to gamble continuously for 12 hours or more without any observation or interaction.156 Some customers have been allowed to gamble continuously for well over 24 hours.157
- Faithful compliance with the Play Periods Policy is inconsistent with the requirements of the Gambling Code (this observation applies equally to the May 2021 enhancement). The Gambling Code requires that a customer be approached and offered, or referred to, assistance when they display an Observable Sign. It provides that ‘often gambl[ing] for long periods without a break’ is an Observable Sign.158 The literature on which this Observable Sign is based shows that a ‘long period’ is between three hours and five to six hours.159 Yet, the various versions of the Play Periods Policy discussed above do not require an observation or interaction by Crown Melbourne staff until at least 12 hours of gambling (without a break of two or more hours).160 In practice, the position is worse. At the 12-hour mark, staff will only observe a customer, not interact with them, unless they are displaying some other Observable Sign.161
- The alerts sent to RGAs in relation to play periods do not include information about how frequently customers gamble, making it very difficult for the RGAs to know whether a customer has been gambling ‘often’.162
- The alerts are concerned with ‘carded’ customers only (that is, Crown loyalty program members).163 RGAs must rely on observation alone to determine whether an ‘uncarded’ customer has ‘often gambled for long periods of time without a break’. That is an almost impossible task. As one RGA agreed, her job would be ‘much, much easier … if people were playing carded’.164
- The evidence that establishes these propositions will now be addressed.
Identifying patrons with gambling problems
The measures implemented by Crown Melbourne
- Ms Sonja Bauer, then Group General Manager of Responsible Gaming at Crown Resorts, gave detailed evidence about how Crown Melbourne deals with customers with gambling problems. She explained that:
- All Crown Melbourne employees are trained in RSG when they commence employment. Operational staff such as food and beverage and gaming staff undertake refresher training every two years thereafter.165 The training includes Observable Signs.166 Staff are trained to inform an RGA,167 or their manager (who will in turn inform an RGA), when they notice a customer displaying Observable Signs.168 Some staff also attend VIP/Operational management meetings where gaming managers are updated on RSG matters.169
- Crown Melbourne established a Responsible Gaming Centre (RGC) in 2002. It comprises ‘a reception area, private counselling rooms and an office area, and is located close to, but away from the casino gaming floor’.170 It is staffed by RGAs, responsible gaming psychologists and a chaplaincy service.171 There are three responsible gaming psychologists and one part-time chaplain.172
- RGAs are trained to implement and deliver Crown Melbourne’s responsible gaming programs and services ‘with the aim of minimising harm for customers and their families’.173 RGAs are required to spend a proportion of their time walking the gaming floor ‘to approach and respond to customers exhibiting problem gaming indicators, and [to attend] to referrals and enquiries from staff’.174
- Crown Melbourne maintains an electronic database known as the Responsible Gaming Register (Register), used by responsible gaming staff ‘to log activities pertaining to the service of responsible gaming’. It generates daily reports and can produce reports on particular customers when required.175
- The Play Periods Policy is applied to regulate the time customers spend engaged in gambling.176 The evidence indicates that customers may gamble at the Melbourne Casino using a Crown loyalty card (enabling them to gain points and associated benefits), or without a card. Crown Melbourne staff commonly refer to this as ‘carded play’ and ‘uncarded play’. Where a player is engaged in carded play on EGMs, it is possible to measure the time they have spent gambling within a given day. If a carded player spends 12 hours gambling without a break of two or more hours, an RGA will receive an alert on their mobile phone via a system called ‘Splunk’, which enables the RGA to identify the player’s location. The RGA can then check on the player. Further alerts are received at 15, 17, 18, 20 and 24 hours of play (without appropriate breaks).177
- There is a ‘Crown Model’, which is a predictive data modelling tool that Crown Melbourne has devised. Using characteristics of carded players who have subsequently self-excluded, it attempts to predict problematic play. The model does not operate in real time. Rather, RGAs are provided with reports listing a tranche of 100 members whom the model identified as appropriate for interaction with the RSG Team. Efforts are then made to interact with that person.178 The evidence indicates that the reports are created approximately every six weeks, and the RSG Team has about four to five weeks to action each report, and to evaluate and report on the data obtained.179
- Crown Melbourne maintains a Self-Exclusion Program where individuals who wish to self-exclude can visit the RGC and undertake in writing to do so, or can self-exclude via the online portal on Crown Melbourne’s website. Customers will self-exclude for a minimum of 12 months, during which Crown Melbourne’s policy requires certain steps to be taken to ensure those customers cannot gamble at the Melbourne Casino. A third party exclusion program also operates, permitting family members or others to apply to Crown Melbourne to review a person’s gambling behaviour. Third parties may also contact RGAs to report concern for others.180
- There is a Time Out Program, which is an adjunct to the Self-Exclusion Program. Through this, customers can elect to ban themselves from the gaming floor for three or six months.181
- These tools are not effective. Crown Melbourne now understands that there are ‘serious deficiencies in some aspects of its Responsible Gambling services’.182
Staffing levels and staff training
- The challenges of administering RSG at the Melbourne Casino are immense. The venue is enormous. In the years 2016 to 2019 there were between 22.4 and 23.4 million visits to the gaming floor each year,183 with an estimated 12,000 to 14,000 unique visitors each day.184
- The key RSG staff on the casino floor are the RGAs.185
- Until 2018, Crown Melbourne employed only seven RGAs. In 2018, the number was increased to 12 following concerns raised in the VCGLR’s Sixth Review.186
- Increasing the number of RGAs to 12 was intended to provide even coverage across the 24 hours of the day that the Melbourne Casino is open.187 But with only 12 RGAs, no more than three are at work at any one time.188 The Commission assumes that as has been announced, when a further four RGAs are hired,189 there will be no more than four RGAs at work at any one time.
- Whether the number of RGAs present at one time is three or four, it is inadequate.190 RGAs have numerous responsibilities. These include providing information or advice to staff, entering information into the Register, speaking with customers who are contemplating self-exclusion and managing customers who have attempted to enter the gaming floor despite having self-excluded.191
- The RGA position description specifies that only 30 per cent of an RGA’s role will be dedicated to ‘Customer Service and Operations’, which includes walking the gaming floor.192
- This means that most of the time, there are fewer than three RGAs present on the gaming floor. Sometimes no RGA is present on the gaming floor because they are attending to other duties.193
- Even when all three RGAs are on the gaming floor, each has to supervise approximately 870 EGMs and approximately 180 gaming tables (including poker and other table games).194
- Save for the RGAs, operational staff have little training in responsible gambling. All operational staff (including gaming, food and beverage and security personnel) receive a 45-minute training session as part of their induction,195 and online refresher training for an hour every two years.196 Staff working in EGM areas of the casino receive a further hour of advanced training,197 and some staff are required to undertake additional hospitality or management training.198 However, only 10 minutes of the induction training,199 and five minutes of the advanced training, are dedicated to Observable Signs.200
- Crown Melbourne expects the task of the RGAs to be supported by all staff working on the gaming floor. That expectation is not the reality. In the end, Ms Bauer accepted that, more often than not, food and beverage staff and dealers were there to do their primary jobs and were not, for example, keeping track of play periods.201
- In any event, there are practical difficulties with the approach that all Crown Melbourne staff are involved in RSG.202 The roles of operational staff—whether they are serving food and drinks at a busy bar or dealing hands at a blackjack table—do not permit them to provide meaningful support to the RGAs in relation to the dozens, if not hundreds, of customers in their immediate vicinity.
- Research has found that staff are not keen to intervene with customers displaying problem gambling behaviours.
- Research indicates that staff in gaming machine venues are generally reluctant to make an uninvited approach unless the customer is being aggressive, trying to borrow money or appears to be extremely upset. Approaches to offer assistance were very rare.203 This research suggests that staff will only intervene to prevent disruption to other patrons on the gaming floor rather than to assist the problem gambler.
- Crown submits that an operating model under which all staff are charged with at least some responsibility for looking out for Observable Signs is possible.204 That might be so in theory. But it would require extraordinary changes to workplace practices for such a model to operate effectively. Certainly, it will not be achieved in the short term.
- A number of Crown Melbourne staff who work on or near the gaming floor were randomly selected to give evidence about the assistance they give to RGAs. The staff included food and beverage staff, dealers and hosts. Each gave their evidence anonymously.
- There were compelling similarities in their evidence. For example, several of them:
- were not even familiar with the term ‘Observable Signs’, let alone able to name specific Observable Signs205
- could not accurately explain Crown’s Play Periods Policy206
- did not know what RSG meant,207 or did not often encounter or deal with RSG issues in their work208
- did not know where the RGC was located or had never been there209
- could not name any of the 12 RGAs at Crown and/or could not recall speaking to them210
- had never, or not more than once over their years of employment, referred anyone to the RGC or suggested to their manager that someone be referred.211
The evidence from customers
- That Crown Melbourne staff face an impossible task attempting to identify and deal with customers who gamble continuously for extended periods is borne out by the evidence of what actually happens on the Melbourne Casino gaming floors.
- The Commission heard from several people who had gambled at the Melbourne Casino. Most gave evidence about their past or ongoing struggles with problem gambling. Their evidence provided a vivid and powerful picture of the sometimes devastating consequences of gambling.
Case studies
Elizabeth’s story
Elizabeth is a trained secondary school teacher. She has tertiary qualifications. She also worked in real estate for a number of years.212
Elizabeth owned a house in a beachside suburb. The house was sold and Elizabeth planned to use the proceeds ($120,000) to buy another house in Melbourne. But she was a problem gambler. She lost approximately $80,000 gambling.213 In the end, Elizabeth only had $5,000 left.214
One evening, Elizabeth went to the Melbourne Casino in the ‘misguided hope that [she] might win all of what [she] had lost back’. She gambled for approximately 52 hours straight. Staff members would start their various shifts. She would recognise them. At one point, a staff member asked, ‘[A]re you still here?’ Elizabeth just nodded, smiled and said, ‘Yes I am. This is my time off.’215
Elizabeth lost her $5,000. She said, ‘Never ever did one other person come and approach me … to say “Are you okay?”’216
When she had lost all of her money, Elizabeth left the casino.
Elizabeth’s gambling continued after this incident. Following one session of gambling during which she lost all of her money, she drove to the Westgate Bridge. She was absolutely desperate. She stopped her car and thought about ending her life.217
What stopped her was the railing that she needed to scale, which was waist high. As she was attempting to clamber over, the bow of a ship appeared. The lights and noise of the ship frightened her, but they also brought her back to her senses.218
Elizabeth returned to her car and drove to the Royal Melbourne Hospital, where she was admitted for a short time. She then underwent counselling.219
Binbin’s story
Binbin was raised in China. He came to Australia when he was 16 to study. He obtained a Bachelor’s degree in law and business and a Master’s degree in accounting.220
He married, and bought several properties.221
After losing his job, Binbin began to gamble, starting with online gambling. He also started gambling at the Melbourne Casino. Binbin's gambling habit became so bad, he excluded himself from online gambling.222
While gambling at the Melbourne Casino, Binbin was invited to gamble in the Mahogany Room (the casino’s high roller room) by a host.223
Over a two-month period between late 2019 and early 2020, Binbin went to the Melbourne Casino and gambled every day, often for over eight hours a day, and on two occasions for ‘maybe 15 hours a day’. On only one occasion was Binbin approached by a staff member about responsible gambling. By then, Binbin had already gambled every day for between one and one and a half months, and had lost around $50,000 to $60,000.224
Binbin sold all of his properties to fund his gambling addiction, but was able to transfer some of the proceeds to his parents so that he could not spend the money. His marriage ended.225
Stuart’s story
Stuart is a relief primary school teacher.226
He began gambling at the Melbourne Casino about 15 years ago. At the time, he was a heavy drinker and drug user.227
Initially, Stuart went to the Melbourne Casino complex with friends, because he could get a drink any time of the day there.228
Then Stuart began playing on the EGMs. Over time, he came to regularly gamble at the Melbourne Casino and other venues.229
Over a 10-year period, Stuart would gamble at the Melbourne Casino about once a month.230 He was often under the influence of drugs or alcohol.231 He was never approached by Crown Melbourne staff for gambling for too long.232
Stuart did not witness Crown Melbourne staff approach any person for gambling for too long.233 He did see staff approach persons if they misbehaved in some way; for example, if they started striking an EGM.234
Carolyn’s story
Carolyn worked as an administration officer in an electrical company.
From time to time, Carolyn gambled at the Melbourne Casino with her employer.235 Initially, she was able to gamble within her means.236 But over a number of years, she developed a harmful addiction.237 Gambling eased her loneliness and she was drawn to the benefits offered to Crown loyalty program members.238
Carolyn began to steal money from her employer to fund her gambling habit. She stole over $400,000 in a seven-year period.239
Ultimately, Carolyn’s crime was discovered and she was convicted and sent to prison for stealing money from her employer.240 At the time she was 64 years old.241
Carolyn gave up her inheritance and all her savings to repay the debt to her employer.242 She now lives a modest life with ‘nothing to show for all [her] years of hard work’, and is heartbroken and anguished.243
During all her time gambling at the Melbourne Casino, even when she spent all day gambling, no one ever approached Carolyn to ask if she was okay or suggest she take a break.244 She said, ‘I would have thought that if they could see you’re sitting there for six, 12, even five hours or whatever, playing, and not taking a break … they would come up and say, “Look, you know, you haven’t taken a break. How about you come and have a coffee?” It doesn’t happen. It doesn’t happen. So long as you’re spending money, it won’t happen.’245
Carolyn believes that if she had been approached while gambling, and spoken to, she ‘might not have spent that time in prison’.246
- The Commission also received submissions attesting to lengthy gambling sessions at the Melbourne Casino with no or insufficient staff intervention.247
- Then there are places at the Melbourne Casino where gamblers may be left unnoticed by staff.248
- Ultimately, Ms Bauer agreed that during the casino’s busiest times, problem gamblers could ‘get lost in a big crowd’, because staff are ‘busy doing other things’.249 Even during quiet periods, problem gamblers go unnoticed because staff levels are lower and the gaming floor is huge.250
- This is aggravated by the fact that RGAs only receive alerts in relation to customers who use carded play.251 For uncarded players, RGAs must rely on face-to-face observation of individual customers.252 On a busy and expansive gaming floor, recognising long periods of continuous play by uncarded players is a difficult, if not impossible, task.
- Ms Bauer accepted that uncarded players are ‘the least likely to be picked up for reminders’ about excessive play periods. Ms Bauer also accepted that if a customer prefers anonymity, they are unlikely to engage in carded play and may well be ‘the ones most likely to be trying to avoid’ being reminded to, for example, take a break.253
Evidence from support workers
- The Commission heard evidence from several people who work with those experiencing gambling harms.
- In the last five years, ‘Gloria’, a gambling counsellor and social worker, has counselled around 200 clients.254 About 85 per cent of her current clients (or their family members) are gambling at the Melbourne Casino. Gloria also visits the casino from time to time as part of her work.255
- Gloria gave evidence that a client had gambled continuously at the casino for more than two days, sleeping on sofas, at the food court and in cars in the car park.256 Gloria said it was common for problem gamblers who visited gambling counsellors to spend more than 24 hours at a time at the Melbourne Casino.257 Gloria also said that staff would only intervene and encourage people to take a break or ask them to leave if they misbehaved (such as by arguing with other customers) or appeared dishevelled.258
- Gloria also gave evidence about the consequences of excessive gambling at the Melbourne Casino. One horrific incident must be mentioned:
A: … One example is the most horrible one. It happened five years ago. And then the wife is like came to my office and reported family violence related to her husband who has the gambling behaviours. And when this man is lose money at Crown Casino he will come back home and whack his wife, then blaming her that she brings bad luck after they getting marriage because before getting marriage the man can win some money, after they get marry he keep losing the money. So he thinks that is all his wife’s fault.
Q: And just so the Commissioner understands, how did the husband propose the money be repaid?
A: He force his wife to provide sex work in their massage shop. He ask his wife to provide either hand job or blow job to the client to collect more money.259
- ‘Ronaldo’ has worked with 70 to 80 clients over the course of a career as a social worker, and currently has 15 active clients.260 Ronaldo estimated that around 75 per cent of clients gamble at the Melbourne Casino for up to 12 hours a day.261 Ronaldo mentioned that one client had gambled for four days, occasionally sleeping in front of EGMs, but that ‘none of the staff there have approached her ever’.262
- Ronaldo had also never heard of casino staff regularly approaching customers who had been gambling for long periods and asking them to take a break.263 During regular work-related visits to the Melbourne Casino, Ronaldo had seen people ‘crying on their phone and … staff walking by without approaching them’, and ‘a lot of people sleeping right in front of the pokie machines’.264
- ‘Prita’, a gambling counsellor,265 also gave evidence. The following exchange took place:
A: So, my clients told me that they can spend hours, like 24 … more than 20 hours per day, or they can stay at Crown for several days without being check in, whether to see if they is okay. And they even report to me that if they keep playing, no one come in and check in with them regardless the longest hour that they’ve stayed at Crown. They always been approached if they were too tired and they fall asleep. That is why one of the staff will check in with them and ask them to leave the venue and take a nap or something like that.
Q: So the only times that your clients reported to you that they had been asked to leave is when they have fallen asleep?
A: Yes.
Q: No other client has been told they were asked to leave because they were gambling too long or exhibiting signs of distress?
A: No, never.266
- One of Prita’s clients, a black tier member (of the Crown loyalty program), told Prita that she had gambled for more than 10 days without stopping, and staff did not check on her or ask whether she was okay.267
- Regrettably, the evidence revealed that the consequences of excessive gambling included loansharking,268 criminal activity,269 forced prostitution270 and even suicide.271 These are precisely the kinds of harms that were identified as potential consequences of gambling at the outset of this chapter.
Evidence from a Responsible Gaming Advisor
- The Commission also heard evidence from an RGA.272 The RGA gave evidence anonymously. This is what was said:
- Customers sometimes engaged in uncarded play to avoid detection.273
- At times customers were permitted to gamble continuously for periods in excess of 12, 14, 16, 18, 20 and even 24 hours.274 Some were permitted to gamble for 24 hours or more without a significant break and without being spoken to or approached.275
- RGAs do not receive alerts in relation to play periods for uncarded players; instead, RGAs must rely on their visual observations as they circulate around gaming areas. This is more difficult than monitoring carded players.276
- Customers sometimes fell asleep at EGMs. In some instances they were woken up and asked to move along, but were not offered any assistance or referred to RSG services.277
- RGAs would receive an alert when a carded player had gambled for 12 hours. Provided the player was not displaying other Observable Signs, they would not approach and speak to them.278
- It is worth expanding on the last point. The RGA gave the following evidence:
Q: … if you get a [phone] alert at 12 hours, and you get to the customer in time and you observe the customer, let’s take that hypothetical example, and I know every case is different, but if you then observe the customer and they are not displaying any other observable signs, in the ordinary course, your approach is to just make that observation at 12 hours; is that right?
A: Yes.
Q: And not, at 12 hours, to go and approach and speak to the customer, in the ordinary course?
A: In the ordinary course, yes.279
The Mahogany Room
- The Mahogany Room is the high roller room at the Melbourne Casino.280 Access is restricted to platinum and black tier members of the Crown loyalty program. There are about 7,000 platinum members and about 750 to 800 black tier members.281 Together, they contribute 62 per cent of turnover from Crown loyalty program members.282 The goings-on at the Mahogany Room are of some importance.
- Mr Peter Lawrence, the General Manager, VIP Customer Service, accepted that customers in the Mahogany Room often gamble for more than 12, 14 or 16 hours.283
- The evidence given by Mahogany Room customers was consistent with Mr Lawrence’s observation, and indicated that there was no intervention by staff during these periods of gambling. One current black tier member gave the following evidence:
Q: … Is the casino staff and the hosts, are they encouraged to get people in no matter what if they know someone has a problem or are they astute and they try to help people with that?
A: They don’t try to help anybody in there ...
Q: Have you ever seen, for example, someone gambling who looks tired or might have been there for a while and someone come along and tap them on the shoulder and say, ‘You’ve been here for a long time, why don’t we get a drink and have a break’?
A: No.284
- A former black tier member said this:
Q: And if you were to gamble—if you were to gamble for 10 hours in a row, or 11, 12, 13, have you gambled those periods?
A: I have on many occasions …
Q: Has anyone tapped you on the shoulder to have a break?
A: Never. Never.
…
A: I’ve never seen anyone tapped on the shoulder and asked the question, you’ve exceeded … I’ve seen people fall asleep.285
The Responsible Gaming Register
- Another source of evidence is the data in the Register. The Register records interactions between RSG staff members and customers and other parties in relation to responsible gaming.286 Ms Bauer extracted information from the Register that she said provided ‘an overview of the behaviours that are recorded that may be indicative of problem gambling behaviours’.287 What the extract shows, for example, is that:
- in 2016, there were a total of 1,470 interactions. Of these, 846 arose from customers voluntarily requesting assistance or seeking self-exclusion, a further 42 were identified by a third party (such as a concerned family member reporting a person’s problem gambling) and 582 were identified by Crown Melbourne staff.
- in 2017, there were a total of 1,603 interactions: 957 voluntarily identified, 34 identified by third parties and 612 identified by Crown Melbourne staff
- in 2018, there were a total of 2,125 interactions: 1,012 voluntarily identified, 67 identified by a third party and 1,046 identified by Crown Melbourne staff
- in 2019, there were 3,366 interactions: 1,724 voluntarily identified, 198 identified by a third party and 1,444 identified by Crown Melbourne staff.288
- We return to these figures later in this chapter. As will be made clear, the figures demonstrate that there is little interaction by Crown Melbourne staff with customers who gamble for extended periods.
- The Register shows many instances where no interaction occurred in response to a phone alert to an RGA (in relation to play periods) for several hours after the alert was received.289 The Register also disclosed many instances where the action taken was not the interaction required by the applicable Play Periods Policy and the Gambling Code.290 Examples include failures to take any action at the 12-hour mark, 16-hour mark, 20-hour mark and even after 24 hours (as required by the relevant Play Periods Policy).291
- These are not isolated instances. They are part of a pattern of systemic failures that is evident from a close examination of the Register.
- An examination of an arbitrarily chosen day from the Register, 10 June 2019, highlights the point.
Time
Comments
8.05 am
PP16 [ie Play Period alert]
VIP
Tables
Local Host manager [A] advised [patron] playing for 19hrs with no significant break.
8.31 am
PP20
VIP
Tables
Local Host manager [A] advised [patron] playing for 20hrs with no significant break.
9.27 am
P24
PRE
Tables
TG ACM [B] advised [patron] playing for over 24hrs with no significant break.
10.50 am
PP16
VIP
Machines
GM VOSM [C] advised [patron] playing for 19hrs with no significant break.
10.55 am
PP16
PRE
Machines
GM VOSM [C] advised [patron] playing for 18hrs with no significant breaks (staying in-house).
12.33 pm
PP20
VIP
Tables
Local Host manager [A] advised [patron] playing for nearly 24hrs with no break longer than 4.5hrs.
12.33 pm
PP16
VIP
Tables
Local Host manager [A] advised [patron] playing for 19hrs with no break longer than 3.5hrs.
12.34 pm
PP16
VIP
Tables
Local Host manager [A] advised [patron] playing for 19hrs with no significant break.
2.58 pm
PP24
VIP
Tables
Local Host manager [D] advised [patron] playing for over 24hrs with no significant breaks.
3.15 pm
PP20
PRE
Machines
GM VOSM [E] advised [patron] playing for 21hrs with no break longer than 4.5hrs.
4.58 pm
PP24
PRE
Machines
GM VOSM [F] advised [patron] playing for over 24hrs with no significant breaks.
5.21 pm
PP16
VIP
Tables
Local Host manager [D] advised [patron] playing for 19hrs with no significant break.
5.22 pm
PP16
VIP
Tables
Local Host manager [D] advised [patron] playing for 19hrs with no significant break.
5.22 pm
PP16
VIP
Tables
Local Host manager [D] advised [patron] playing for 19hrs with no significant break.
5.23 pm
PP20
VIP
Tables
Local Host manager [D] advised [patron] playing for 20hrs with no break longer than 4hrs.
7.43 pm
PP20
VIP
Tables
ACM informed patron has played for 20hrs.
7.47 pm
PP20
Tables
DSM [G] informed patron is at 23hrs.
9.19 pm
PP24
VIP
Tables
DSM [H] informed patron has played for 24hrs.
Source: Exhibit RC0103 Crown Melbourne Responsible Gaming Daily Operations Report, 10 June 2019.
- Two facts stand out from the Register for 10 June 2019. First, the RGAs and staff who were involved failed to comply with the applicable Play Periods Policy (which required gaming staff or an RGA to interact with customers at the 12, 16 and 20-hour mark, and required an RGA to attend if a customer has been gambling for 24 hours or more without a substantial break) and potentially the Gambling Code (which required that patrons displaying Observable Signs be referred to RGAs or certain senior management).292 That is not a criticism—the task asked of them was impossible. Second, in some cases, the patron was only observed several hours after the RGA received notification that the patron had been gambling for an extended period. Both facts are consistent with the evidence that the Commission has heard from patrons and Crown staff alike (discussed above).
- The Commission also examined extracts of the Register for other days. In particular, it examined the Register for 5 March 2021 (another randomly chosen day, but after the Commission had been announced).293 It revealed a similar story.
- The information from the Register is compelling. It casts considerable doubt on the evidence given by Ms Bauer about the successful operation of Crown Melbourne’s responsible gambling policies.
- Ms Bauer understood the damning impact of the information from the Register. To deflect that impact and in response to questions from Crown Melbourne’s counsel,294 Ms Bauer said that the alerts received by the RGAs at the 12, 15 and 17-hour marks did not indicate continuous play at the Melbourne Casino but only the time a customer spent ‘on site’. She explained that the times represented nothing more than an initial ‘card-in’ (that is, a member’s first use of their card at the casino) and the latest card-in. Ms Bauer said that a 17-hour alert would be issued if a member had ‘play[ed] for five minutes, [went] to the football and c[a]me back 17 hours later and play[ed] again’.295
- That this evidence was inaccurate was apparent from information provided by Mr Nicolas Emery, Crown Melbourne’s Chief Marketing Officer.296 He explained that it was possible to determine how long a Crown loyalty program member was at the Melbourne Casino and how long the member was gambling. He said a member’s card ‘tracked … the amount of time someone is spending on a device or a table … We can see the patron hours for our rewards members and we can also see the total patron[’s] hours on the property’.297
- When Ms Bauer was recalled, she confirmed that carded players are ‘measured’ for their gaming activity.298 She gave the following evidence:
Q: If a person comes in, I think [Crown Melbourne’s counsel] mentioned on the last occasion they might enter the car park and enter the premises in some way and swipe their card, the systems that Crown has can record wherever the card is used; correct?
A: Yes.
Q: And so in that way it can record when someone is physically on the site?
A: Yes.
Q: But it can also record, as we’ve already discussed, how long a player has played a particular machine within a certain period?
A: Yes.299
Concluding remarks
- Four points should be noted.
- First, for carded players, the picture that emerges is that, generally speaking, there is no interaction with a customer who gambles for any continuous period up to 12 hours unless that customer displays some other Observable Sign. At the 12-hour mark, a customer might be observed, but no interaction will occur unless the customer displays some other Observable Sign.
- Second, uncarded players are in an even worse position. The monitoring of uncarded players, which only involves observation, is minimal. While steps are being taken by Crown Melbourne to address this issue,300 the only effective solution is to require carded play on all EGMs.
- Third, even if the various versions of the Play Periods Policy provided an appropriate guideline for compliance with the Gambling Code (which they do not), the Policy has not been followed.
- Finally, Crown Melbourne has for many years consistently breached its Gambling Code and, therefore, a condition of its casino licence.
Permitting and encouraging gambling harms
- To this point, consideration has only been given to the issue of gamblers who engage in ‘continuous play’. It is also necessary to consider how Crown Melbourne approaches its RSG obligations in other areas.
- In particular, it is necessary to examine:
- pre-commitment on EGMs
- the role of hosts
- Crown Melbourne’s response to behaviours that elevate the risk of gambling harms, including multiple machine use and the use of ‘picks’
- Crown Melbourne’s capacity to supervise its customers
- Crown Melbourne’s approach to self-exclusion
- Crown Melbourne’s marketing functions, including promotional events and activities, Crown’s loyalty program, and select benefits and enticements offered to its customers
- the use of data and information for research and evaluation.
Pre-commitment on EGMs
- Research to which reference has been made in this chapter shows that a large proportion of problem gamblers are attracted to EGMs.
- Research that complements the evidence heard by the Commission also shows that individuals frequently gamble more than intended during sessions of play. Even if such an individual has decided how much time and money they might spend gambling, they make impulsive choices that ignore those earlier decisions.301
- The Productivity Commission made a number of recommendations to deal with these problems, noting that its main concern in relation to the costs of gambling for Australians was the reduction in the social costs of gambling (in particular, problem gambling).302
- One recommendation was that there should be a pre-commitment system for EGMs.303 A pre-commitment system involves a gambler setting limits on their gambling, such as a loss limit and a time limit before they commence gambling.304 According to the Productivity Commission:
Under ‘partial’ pre-commitment, people are not obliged to be in the system. When they are, they can choose to set or not to set limits, and if they breach such limits, they can continue to play. In contrast, under ‘full’ pre-commitment, people must be in the system, but voluntarily set limits. If they set limits, they are bound by them. Often the former is referred to as ‘voluntary’ pre-commitment and the latter as ‘mandatory’. However, these labels are confusing. Both systems are essentially ‘voluntary’ since the gambler can choose whether to set a limit in either.305
- To avoid any confusion, pre-commitment will be considered in this chapter by reference to the following categories:
- partial (where participation is voluntary) or full (where all players must use the system, but are not required to set limits)
- voluntary (which allows participants to choose whether to set limits) or mandatory (where participants must set limits)
- binding (where a participant cannot continue gambling once a pre-set limit is reached) or non-binding (where a player can elect to continue gambling once reaching a pre-set limit).
- The issue of whether a player should be forced to set limits before they gamble is one of the most contentious issues in discussions about EGM reform. There are those who contend that forcing players to set limits is paternalistic and that individual choice would be violated if players are forced to set limits. Others say that personal responsibility should not be paramount. They argue that the addictive nature of EGMs erodes a person’s free choice about their gambling. That is, the problem gambler needs protection from the harms their gambling causes.
- These arguments will never be fully resolved. In large measure, they depend upon the different personal values and ethics of those who hold the respective viewpoints.
- Putting to one side debates about values and ethics, the fact is that, as the Productivity Commission pointed out, pre-commitment is an effective strategy to control expenditure in respect of time and money spent on gambling.306 Professor Alex Blaszczynski (who, as detailed below, has acted as a consultant for Crown) and colleagues have pointed out in their report on Operator-Based Approaches to Harm Minimisation in Gambling (Harm Minimisation Summary Review) that:
support for the strategy [of pre-commitment] is steeped in the findings of a number of studies that have explored typical methods which individuals meeting the criteria for a gambling disorder have applied in self-regulating their gambling behaviour.307
Moreover, pre-commitment as a harm minimisation strategy has been adopted, or is to be adopted, in a number of jurisdictions (including as a trial).308
- The Productivity Commission concluded that while partial pre-commitment provided some benefits, such as assisting gamblers to set goals and become more aware of their gambling, a partial pre-commitment system would ‘give Ulysses a knife to cut his bonds when the Sirens call’.309
- Accordingly, the Productivity Commission suggested that a full pre-commitment system was necessary. It said:
The Commission’s view is that precommitment is a strong, practicable and ultimately cost-effective option for harm minimisation. It overcomes some of the existing severe deficits in achieving self-control for problem gamblers and for genuine informed consent by many other consumers.
While recognising that even a full precommitment system cannot be a ‘silver bullet’, it may ultimately take pressure off other regulations aimed at harm minimisation.310
- Professor Blaszczynski and colleagues are of the same view. In their Harm Minimisation Summary Review they wrote:
Offering pre-commitment where the problem gambler is responsible for making the choice of setting limits may not be realistic; its use may need to be mandated to maximise the positive outcomes [pre-commitment provides].311
- The authors go on to make two important points:
- To be optimally successful, the structure of any ideal EGM-based pre-commitment system needs to apply to all players and to eliminate the option for a player to (a) exchange cards with other players, or be provided with temporary cards by venue operators once pre-set thresholds are reached; and (b) switch play to a cash-based machine.312
- Any pre-commitment strategy ought to consider setting a reasonable minimum daily amount (losses) as the default level for all individuals. This daily amount can be estimated by taking into account the median losses or the average amount lost by recreational gamblers. This is an arbitrary figure that could be adjusted over time subject to it representing an acceptable daily limit for the majority of problem gamblers.313
- The Victorian Parliament introduced a pre-commitment system for EGMs in 2014 (effective from 1 December 2015) by amendment to the Gambling Regulation Act. The system is a partial, voluntary, non-binding system. On the second reading of the Gambling Regulation Amendment (Pre-Commitment) Bill 2013 (Vic), the then Treasurer said that the pre-commitment system is voluntary, provides players with choice and is effective for harm minimisation.314
- The pre-commitment scheme, which is accessible on all EGMs in Victoria, is called ‘YourPlay’. Under the YourPlay scheme, individuals can activate a YourPlay player card and then pre-set time and loss limits.315 As the VCGLR explained in its Sixth Review:
Under the YourPlay scheme, when a player has set a time or spending limit and the person reaches the YourPlay set limit, the gaming machine is disabled and a message is displayed on the machine notifying the player that the player has reached the limit. A message then asks the player to choose whether to stop game play on the gaming machine or to continue play. If a person chooses to keep playing, the game play will be re-enabled on the gaming machine and YourPlay will continue to track the play.316
- The scheme has not been successful. Relevantly, in 2019, Crown Resorts established a Responsible Gaming Advisory Panel (RGAP), comprised of Professor Blaszczynski, Professor Paul Delfabbro and Professor Lia Nower.317 In August 2020, the panel prepared a paper titled ‘Review of Crown Resort’s Responsible Gaming Programs and Services’ (RG Review).318 The RGAP pointed out:
The uptake of voluntary pre-commitment is extremely low. Most trials show that only 1–5% of people voluntarily sign up for pre-commitment systems and very few use time-based limits. Even when people are actively encouraged to sign up, the rate of utilisation drops off significantly over time and can be close to 0% after around 6 months (citation omitted).319
YourPlay at the Melbourne Casino
- At the Melbourne Casino, when a person reaches a limit under the YourPlay system and elects to continue playing, they are permitted to do so. There is no regulatory obligation on staff to take any action.320
- In the RG Review, the RGAP noted that a limitation of the YourPlay system was that players can continue gambling after reaching their self-imposed limit.321
- Though nothing is being done by Crown Melbourne in this regard, that position need not continue. The following evidence given by Mr Blackburn is important:
Q: Do you agree that Crown should not permit a person to continue gambling if they reach a pre-determined YourPlay time or money limit?
A: I do.
…
Q: So Crown obviously can’t, at the moment the way things are, set limits for patrons. Do you agree customers should be encouraged by Crown to set realistic and affordable YourPlay limits consistent with what the Foundation’s recommendation is?
A: I do.
Q: Do you agree with me that if Crown wanted to have limits and make sure players, when they reached pre-determined limits, stop playing, it is big enough and it has the resources, if it has the will it could make these things happen?
A: I do.322
Hosts
- There are many different types of hosts at the Melbourne Casino.323 The Commission focused on the role of hosts in the Mahogany Room, given the large amounts gambled there.324
- A table game host in the Mahogany Room, called a Mahogany Executive Host (referred to in this chapter as a ‘host’), looks after a number of Crown loyalty program members.325 The host acts as a regular point of contact for those members. The host attends to members’ personal needs, such as making hotel and dining arrangements on their behalf. The host also provides members with incentives and enticements, such as tickets to sporting and musical events.326
- The principal function of the host is to encourage members to gamble at the Melbourne Casino.327 As one former host put it:
… [A] gambler is a gambler, a punter is a punter. When they are onsite, a lot of the time they’re not just going to come in and park their car, jump on the bus and go to the football, they’re going to come back and play.328
- That host said even if a member was taking a break from gambling, they would often contact them and invite them to come to the casino for a catch up. The expectation was that the member might continue their gambling. The host said:
I was always asked to contact them and make sure that they were okay and continue to offer them, hey, look, you may not want to gamble, but he might want to go to the football, so give him football tickets, or they might want to come in for a bit of dinner, sometime.329
- The host said that even if a member had been playing for 15 or 20 hours, they would not suggest they take a break from gambling unless advised to do so by an RGLO (as RGAs were then known).330 Nor did the host feel obliged to suggest self-exclusion if a member was or seemed to be in relatively serious financial trouble. They said: ‘It wasn’t—it wasn’t the nature in the office to do that sort of thing. I mean, if—yeah—no, not really. No’.331
- Indeed, the host indicated that they were instructed to subtly discourage clients from self-excluding:
Q: And if someone said to you, ‘Oh, I’m going to self-exclude, not just have a break’, what would you say in response, in the usual course of conduct? How would you normally respond to that?
A: We would sort of ask if they … I would ask if … if it was one of my clients, I would ask if they are okay, sort of advise that if they do go down the road of self-exclusion just because they’ve had one bad day on the table, it is going to take more than 12 months to get back in, and when you do get back in you have to go through the Government. It is a big process. So we sort of were asked to steer them away from that option and maybe say, ‘Hey, look, instead of self-excluding, maybe just take time off and go to the football next weekend and take time to cool down, go home. Cool your heels and let’s speak in a few days time.’ That’s the road we went down.332
- The host also said that, in effect, they would ‘sort of talk [their clients] out of’ self-excluding in this way.333 They indicated that the Management Team instructed them and other hosts to operate this way.334
- The Commission has examples of the kinds of communications that members received from hosts. Some of these were plainly directed towards emotionally manipulating customers into spending more money for the benefit of their hosts.335
- In summary, the job of the host is ‘to get people to come in and gamble no matter what’.336
- An example of the lengths to which hosts would go to encourage gambling is the case of Ahmed Hasna. Mr Hasna was a black tier card holder.337 He was also addicted to gambling.338 On one occasion, Mr Hasna went to the Melbourne Casino. He had a cheque for $100,000 with him as the payee.339 Mr Hasna asked to exchange the cheque for $100,000 worth of chips. Crown Melbourne agreed to provide the chips.340 Mr Hasna then went to the gaming floor and lost the $100,000.341
- Two days later, the cheque was dishonoured.342 Mr Hasna was called by his host.343 According to the host, he was directed to make the call by Mr Lawrence.344 Mr Hasna told the host that he was experiencing financial hardship and could not repay his debt.345 He said he was considering self-exclusion.346
- On Mr Lawrence’s instruction, the host informed Mr Hasna that he could continue gambling at the casino—and maintain all his black card privileges—on the condition that he repay his $100,000 debt out of any future winnings.347 Mr Hasna agreed.348 In due course the debt was repaid.349 He then continued gambling and lost a considerable sum of money.350
- Mr Lawrence was asked about these events:
Q: You agree with me, don’t you, that the decision to let Mr Hasna come back to gamble was predatory and irresponsible?
A: Irresponsible, yes.
Q: You don’t accept that it is predatory?
A: Yes, it … it is a strong word, but possibly yes.351
- Mr Lawrence said he did not know that Mr Hasna had informed the host that he was in financial difficulty and was contemplating self-exclusion.352 He accepted, however, that he likely knew that Mr Hasna had previously self-excluded and that self-exclusion suggested that the person had problems with gambling.353
- Asked more generally about the culture and practices at Crown Melbourne, particularly in relation to higher tier members, Mr Lawrence said that:
- patrons are not asked about the amount of money they gamble and whether they can afford it354
- hosts do not suggest self-exclusion, even where a person is in financial difficulty355
- hosts and Mahogany Room staff rarely check in on the wellbeing of customers before 12 hours of continuous play356
- patrons regularly gamble for more than 12, 14, 16, 18 and even 24 hours at a time.357
- Mr Lawrence acknowledged that Mr Hasna’s situation was not exceptional. He said that prior to March 2021, Crown Melbourne often permitted patrons who owed debts they could not repay to gamble to pay back their debts. He agreed that this practice was irresponsible.358 The following exchange then took place:
Q: And you must agree with me, mustn’t you, that that is because what is driving you, your colleagues in the Mahogany Room, is money. When you are looking at things, you are motivated by money, above all else. That’s the reality of the situation, isn’t it, Mr Lawrence?
A: I would accept that.
…
Q: And the point of all this, the thrust of it, is that when left to balance the competing interests, profits or the welfare of customers in the Mahogany Room, you and your colleagues prioritise money. That is just the reality, isn’t it?
A: Certainly revenue is an important part of what we need to achieve, but
…
Q: Answer my question.
A: … (overspeaking) … yes, I agree.359
- It goes without saying, but it must be said, that it is inconsistent with the practice of responsible gambling for a casino to encourage a patron to gamble in the hope that the patron can win enough to discharge their debt to the casino. Yet this is what happened with Mr Hasna. And, according to Mr Lawrence, it has happened in many other instances.360
- In summary, the evidence before the Commission has made it clear that, at least to a significant extent, hosts engage in the following conduct. They:
- proactively contact clients and entice them to come to the casino to gamble361
- arrange for customers to collect gifts like tickets from the casino, and invite patrons to dinners at the casino, in the hope that when the customer enters the complex they will gamble362
- do not speak to clients about the amount of money they are gambling or whether they can afford it363
- rarely ask customers to take a break from gambling364
- continue to contact clients if they have not visited the casino for a period of time, or had decided to take a break from gambling (though according to Mr Lawrence, contact would be made after an appropriate break had been taken, to entice the customer back into the complex in the hope that they started gambling again)365
- before March 2021, irresponsibly permitted customers to gamble even if they owed the casino money,366 with the practice only changing in response to this Commission367
- do not suggest that customers should self-exclude, and perhaps even discourage self-exclusion.368
The misuse of gambling products
- Mr Mackay was asked about the use of picks and similar devices to depress the ‘play’ buttons on EGMs, and about customers gambling on more than one EGM at a time.
- On the first issue, it is important to understand that restricted EGMs are designed to require a player to press ‘play’ for each game. To be clear, the use of picks allows players to depress the play button without having to manually interact with the machine.369
- Mr Mackay acknowledged that customers sometimes used picks and similar devices for this purpose.370 He agreed this was an issue that Crown Melbourne had known about for some time.371 He agreed that ‘if one were to prioritise the welfare of Victorians, [Crown Melbourne] wouldn’t have a practice that allowed people to have picks and other devices that depressed the play button’.372
- As it turned out, prior to February 2018, Crown Melbourne issued Crown-branded picks to allow patrons to simulate ‘autoplay’. When the use became public knowledge, staff were instructed to confiscate Crown-branded picks if they observed them being used. However, according to Mr Mackay, where players used picks or similar devices that did not carry a Crown brand, the players were discouraged from using them but were not stopped from playing in that way, and the use of these devices continues.373
- While Mr Mackay did not accept the proposition, it appears that preventing the use of only Crown-branded picks indicates that Crown Melbourne is concerned with the reputational damage rather than preventing the harms caused by the use of those devices.374
- Under the current gaming rules, in certain circumstances a customer can play on up to three EGMs at a time.375 That is something that must change.
- Mr Mackay agreed that if Crown Melbourne were to prioritise the welfare of Victorians, it would not allow play on multiple EGMs to occur.376 He also acknowledged that the use of multiple EGMs was a practice that Crown Melbourne had known about for at least a few years.377
- Mr Mackay said that in January or February 2021, ‘with the pending update of the casino rules’, a direction was issued requiring staff on the main gaming floor to request customers to stop playing multiple machines.378 The practice is still allowed in the premium Teak and Mahogany Rooms.379
- At the conclusion of his evidence, Mr Mackay accepted that Crown Melbourne could have done more over the years to foster RSG and minimise gambling harms.380 He could hardly have done otherwise.
Supervision of at-risk customers
- Ms Bauer estimated that in 2016 there were 1,470 interactions recorded in the Register that may indicate problem gambling behaviours, in 2017 there were 1,603, in 2018 there were 2,125, and in 2019 there were 3,366. Many of those interactions likely relate to multiple attendances on the same person.381
- As was noted earlier, in the 2019 financial year problem gamblers were found to constitute approximately 0.7 per cent of the Victorian adult population.382 They were found to constitute approximately 1.1 per cent of the Victorian adult population who gambled.383 There is a wider cohort who are at risk of becoming problem gamblers (‘moderate' and ‘low-risk’ gamblers), and a still wider cohort who may suffer gambling harms despite not being problem, moderate or even low-risk gamblers.384
- It was also noted earlier that people gambling at the Melbourne Casino may be more likely to suffer gambling harms than they would at any other venue.385 In 2018–19, 25 per cent of people who gambled at the Melbourne Casino experienced some type of gambling-related harm. The prevalence of people who experience problem gambling at the Melbourne Casino may be three times higher when compared to all Victorian adults who gamble.386
- Assume that there are 12,000 to 14,000 unique visitors each day at the Melbourne Casino:387
- If 1.1 per cent of this group are problem gamblers,388 then on an average day there may be 132 to 154 problem gamblers at the Melbourne Casino and a larger number who are moderate or low-risk gamblers.
- If 3.3 per cent of this group are problem gamblers (that is, three times the prevalence compared to all Victorian adults who gamble), then on an average day there may be 396 to 462 problem gamblers at the Melbourne Casino and a larger number who are moderate or low-risk gamblers.
- If 25 per cent of this group experience gambling harm,389 that would be an average of 3,000 to 3,500 people per day who experience such harm.
- Yet the Register shows that on an average day in 2016 there were only about four interactions relating to behaviours that may be indicative of problem gambling (some of which may have related to the same person).390 That increased to about nine interactions per day by 2019.391
- On any view, a large number of customers engaging in problem or risky gambling are escaping attention.392
- Ms Bauer’s written statement to the Commission also included the complete set of interactions relating to referrals to the RGC that were recorded in the Register (not just those Ms Bauer identified as possibly indicative of problem gambling behaviours) for the last five calendar years.393 The tables show, for example, that there were 4,372 such referrals in 2016, 4,816 in 2017, 12,206 in 2018 and 18,259 in 2019.394
- Included in these numbers are categories of interaction only tangentially related to problem gamblers or the minimisation of gambling harm. For example, an interaction may be the report of a missing person.395 Further, as is noted above, many of the interactions relate to multiple attendances on the same person.396
Self-exclusion
- Crown Melbourne’s Self-Exclusion Program is available to customers wanting to voluntarily ban themselves from gaming areas.397 A request to self-exclude is viewed as a ‘very strong’ Observable Sign and staff who are approached by customers wishing to self-exclude are required by the Gambling Code to refer the customer ‘as soon as practicable’ to the RGC.398
- An RGA then conducts an interview with the customer to provide information about self-exclusion, its implications and the process for revoking a self-exclusion order.399 Customers can choose a self-exclusion period of one, two or three years.400 The exclusion remains in place until an application for revocation is made.401 A customer cannot apply for revocation prior to the end of their chosen period.402
- Upon self-exclusion, the customer loses all their Crown Rewards loyalty points.403 If they breach, or attempt to breach, a self-exclusion order, an RGA is called and manages the incident.404
- In July 2016, Crown Melbourne introduced an online self-exclusion process. This has received only a very minimal response.405
- Several submissions received by the Commission state that customers who have self-excluded continue to enter the casino with no staff intervention.406
- One reason is likely to be that there is an insufficient number of RGAs.407
- Another is the slow deployment of facial recognition technology, which is a valuable tool to detect the presence of self-excluded customers.408 Mr Craig Walsh, Executive Director, Security and Surveillance, gave this evidence:
Q: Do you now regret not prioritising or at least making facial recognition technology occur sooner in the roll-out program than it did?
A: My wishes would have been to roll out facial recognition in 2012/13.
Q: You wanted to do it in 2012 and 2013?
A: I did.
Q: The business wouldn’t spend the money on it?
A: That’s correct.409
- Despite that evidence, Crown Melbourne says that it is unfair to suggest there was a ‘delay’ in the rollout of the technology.410 It says that the only delay was in the creation of the technology.411
- Whatever the true position, two points are clear. First, only now is Crown Melbourne completing its transition to a full digital facial recognition system.412 Second, the time it has taken to roll out the technology is regrettable. Had the technology been in place earlier, fewer excluded persons would have gained access to the casino floor,413 and that may have resulted in less harm being caused.
Crown’s marketing activities
- Crown Melbourne’s marketing activities are a key part of its operations. Mr Emery explained that the marketing activities can be classified into groups:
- Promotional events, activities and associated customer communications led by Crown Melbourne’s Marketing Team. Crown Melbourne orchestrates more than 200 promotions in a given year, ranging from direct-to-member offers to promotions offered to higher tier or general Crown Melbourne members, to red carpet and bingo campaigns.414 There are also events such as sporting competitions, galas and prize draws.415
- The operation of the Crown Rewards loyalty program. In addition to its basic membership, Crown Melbourne has silver, gold, platinum and black tiers.416 Membership in these tiers is determined by ‘status credits’ that are based on the amount of money and time a given player spends gambling.417
- Benefits and enticements offered directly to customers by Crown Melbourne’s gaming business units. These take many forms, including prizes, rebates, credits, tournaments and complimentary items or benefits such as food, beverages, accommodation, transport, tickets and free parking.418
- Mr Emery said that some promotions and benefits are aimed at enticing members to increase their level of spending.419 For example, to be eligible for a cash prize, a person may need to spend a certain amount in a given period, and the promotion may be open to members for whom that amount would represent a significant increase in their spending.420 Equally, members may be incentivised to increase their spending by the promise of attaining a higher membership tier.421
- The following preliminary matters are of note with regard to marketing at Crown Melbourne.
- First, promotions are designed to draw people into the casino so they will gamble.422 If marketing entices customers to gamble more frequently, and to gamble larger amounts, that is a successful outcome.423 Crown evaluates the success of a promotion predominantly on whether it drives visitation and whether or not participants in the promotion spent money while at the casino.424 All of that is unsurprising—the higher the gambling turnover, the higher Crown’s profits would be.425
- Second, the consequences of marketing promotions can be devastating for Victorians. For example, a black tier member came to the casino to collect ‘free’ Phil Collins tickets, and lost $30,000 gambling.426 Nonetheless, Mr Emery accepted that was a ‘good outcome’ from a marketing perspective.427
- Third, before Crown Melbourne invites members to participate in promotions, it does not consider whether they can afford to participate in the promotion,428 nor does it consider any player data analytics relevant to RSG (other than ‘stop codes’—codes applied to individuals subject to self-exclusion, Time Out or Withdrawal of Licence).429 Crown Melbourne only considers loyalty status data to ensure that its high-value customers receive the high-value offers.430
- Fourth, Crown Melbourne has structured its loyalty program so it rewards higher-turnover customers, meaning problem gamblers are more likely to benefit from the program as compared to people who gamble in a safe manner.431
- On the other hand, Crown Melbourne allows customers to opt out of receiving marketing material.432 Further, Crown Melbourne does not send marketing material to those loyalty program members with stop codes on their accounts.433 Mr Emery accepted that the number of persons with RSG-related stop codes is small, meaning this measure is inadequate.434
The Red Carpet Program
- Some promotions targeted potentially vulnerable or financially constrained people. Several witnesses gave evidence about Crown Melbourne’s recently discontinued Red Carpet Program (previously known as the Bus Program).435 This program, which had been in operation since the 1990s,436 was directed towards older people who were members of community organisations, including members of CALD communities.437
- Participants were bussed to the Melbourne Casino.438 The cost was subsidised by Crown Melbourne. Prior to April 2018, in order for their community organisation to qualify for the subsidy, participants were required to stay for between four and six hours.439 They were offered a free musical performance and a buffet lunch.440 They were given other benefits, such as a parking voucher for a future visit, meal vouchers and vouchers for discounts at select outlets within the Melbourne Casino Complex.441 In their time at the casino many participants gambled, particularly playing EGMs.
- Professor Linda Hancock, an experienced gambling researcher and former Chair of the Victorian Gambling Research Panel, filed a submission with the Commission dealing with the vulnerability of older adults to gambling disorders. Professor Hancock identified various factors that may contribute to that vulnerability, ranging from age-related cognitive conditions, fixed incomes and social isolation. Women over 60 years of age were identified as a particular at-risk group, as were CALD groups.442
- Professor Hancock referred to a 2010 survey of Red Carpet Program participants by North East Primary Care Partnership, a metropolitan health service. The survey found that over 42 per cent of participants spent more than they had planned gambling at the casino and almost a quarter planned to return to win back their losses.443
- The VCGLR discussed the Red Carpet Program with the Ethnic Community Council of Victoria in 2017. A note of the meeting records the attendees’ concerns that participants in the Red Carpet Program were overspending, many to the extent that they did not have enough money to purchase their medication.444
- In May 2021, Crown Melbourne decided that the Red Carpet Program would be discontinued because it was inconsistent with its RSG obligations.445 This is a welcome decision. It should have been made years earlier.
Bingo at Crown Melbourne
- The Red Carpet Program is just one example of how Crown Melbourne’s marketing activities have the potential to cause harm to vulnerable people.
- Crown Melbourne conducted a Bingo Program until May 2021.446 Dr Sarah MacLean (an Associate Professor at La Trobe University) and colleagues conducted research into the program.447 According to their work, playing bingo was free, but players were required to become Crown loyalty program members.448 They were given vouchers for table games and EGMs and thereafter received Crown Melbourne promotional material by email.449 Three bingo sessions were held at two to three-hour intervals during the day. People spoken to by Dr MacLean and her colleagues attended more than one session. Each session lasted for around 30 minutes, allowing participants to remain at the casino between sessions.450
- Dr MacLean and her colleagues observed that after the bingo game, most of the participants went directly to the gaming floor.451 They formed the view that: ‘[t]he provision of Bingo at Crown Melbourne is designed to draw people into the venue with the expectation that a significant proportion of visitors will then use other forms of gambling including EGMs’.452
- Dr MacLean and her colleagues spoke to a number of participants. For some it was a ‘pleasant and affordable experience’.453 Others were exposed to significant gambling harms.454 One participant described a friend who was unable to resist gambling on EGMs after attending bingo sessions and suffered significant financial and psychological harms.455
- In May 2021, Crown Melbourne decided that the Bingo Program would be discontinued.456
Other concerns raised by community organisations
- Ms Manorani Guy is the President of the Victorian Working Group on International Student Employability (VicWISE), which provides pastoral care and employment pathways to international students. Ms Guy gave evidence that international students may be unfamiliar with casinos, and so may be especially vulnerable to enticements such as ‘attractive giveaways, free parking, free meals, access to high roller rooms and being treated like a celebrity’.457
- Gambling counsellors working with certain CALD communities gave evidence indicating that members of such communities are susceptible to a range of gambling harms, including mental illness, relationship breakdowns and family violence, and face difficulties effectively self-excluding from Crown Melbourne.458
Supporting research into gambling harm
- There is evidence indicating that Crown Melbourne has been reluctant to support research and evaluation of gambling harms or to supply data to those investigating those harms.459 The Commission heard from researchers who considered that Crown Melbourne was resistant to providing data for research purposes.460
- Mr Shane Lucas, the CEO of the VRGF, voiced those concerns, though he conceded that the VRGF had not, in recent times, sought any data from Crown Melbourne. Mr Lucas suggested that it not having done so reflected ‘an understanding in the research community’ that the response ‘might simply be negative’, or that Crown Melbourne would ‘seek to exercise a degree of control over the ultimate outcomes of the research that you did based on the data’.461
- Whatever may have been the position in the past, Crown Melbourne has indicated that it is now amenable to providing information and assistance to enable independent research to be undertaken into problem gambling and gambling harms.462
Recent initiatives by Crown
- There are two recent RSG initiatives that should be noted.
Crown’s Responsible Service of Gaming Advisory Panel
- As has been observed, in 2019 Crown Resorts established a RGAP, and in August 2020 the RGAP prepared a ‘Review of Crown Resort’s Responsible Gaming Programs and Services’.463 The review made 17 recommendations. In brief, they included:
- changes to staff training programs and staff roles
- the expansion of the RGC to facilitate confidential and sensitive interaction with customers requesting assistance
- sharing and promoting information about self-exclusion and third party exclusion programs and the provision of additional support services to self-excluded persons
- procedures for self-exclusion, revocation and reinstatement
- evaluation of the facial recognition technology to enhance detection of possible breaches by self-excluded individuals
- changes to the Crown Model.464
- Some of the recommendations have been implemented; others are in progress. Crown must be commended for the creation of the RGAP and its work.465
RSG enhancements
- As has been briefly mentioned, in May 2021 Crown Resorts approved a series of RSG enhancements. These involved:
- the employment of a new ‘Manager RG’, ‘RG Administration Officer’, four new ‘RGAs’ and a part time ‘RG Psychologist (Research)’ at Crown Melbourne
- the recruitment of additional RGAs with priority given to those from CALD backgrounds, including language skills that are underrepresented in the staff profile but overrepresented in persons experiencing harm from gambling
- increased remuneration for RSG staff
- new play period time limits for domestic players (12 hours in a 24-hour period, with ‘observation/intervention’ at eight and 10 hours) and for international premium program players
- support for a statewide exclusion register
- the permanent cessation of the Red Carpet Program and of Bingo for Crown’s loyalty program members
- subject to the direction of the Victorian Government, an intention to move to cashless gaming
- controls to ensure that direct-to-member offers do not require customers to exceed historical behaviours (spend or visit frequency) in order to get their first benefit
- replacing gaming vouchers received on sign up to Crown Rewards with a non-gaming/promotional voucher
- undertaking research into whether any aspects of the Crown Rewards loyalty program are causing harm and what measures can be put in place to control that risk
- considering RSG implications of all future employee incentives.466
- It is appropriate to make some comments regarding how these enhancements came about.
- First, and as already observed in this chapter, most of the enhancements were developed urgently,467 between 18 and 24 May 2021. The urgency was driven by the directors, who wanted to ensure that Crown Melbourne had something positive in its statement to the Commission.468
- Mr Blackburn explained the matter:
A: So I met with three members of the Board [on] … the morning of 18 May, to present to them in advance to brief them on the papers I was bringing to the board … And the RG enhancement paper at that stage included only reference to capacity and remuneration …
…
… one of the board members said … are there other things we can change to help uplift our program, and I said I would take that away and discuss it with Sonja [Bauer].
Q: Understand. But you agree with me that somewhere along the line, part of these enhancements were about positioning Crown for the purposes of this Commission?
A: That wasn’t my goal but I agree it may have been part of the broader goal.
Q: Part of the broader goal of the directors and the way Ms Bauer has interpreted things?
A: Yes. Absolutely.469
- Second, and again as earlier observed, the person who proposed the ‘enhancements’, Mr Blackburn, had no experience, training or expertise in RSG.470 To reiterate, that is not a criticism of Mr Blackburn. He only took up his position at Crown Resorts on 24 February 2021, two days after this Commission was announced.471 He was retained for his expertise in financial crime, not to assist in developing and monitoring RSG at the casino.472 He was given the role of head of RSG following the departure of the former Chief Legal Officer.473
- Third, the enhancements are actions that, at a minimum, Crown Melbourne should already have been undertaking. As Mr Blackburn put it, they are common sense changes. They are not a comprehensive set of reforms.474
- Finally, the VCGLR noted in the Sixth Review that changes in Crown Melbourne’s responsible gambling practice have largely been driven by regulatory and other external pressures.475 The development of the enhancements on the fly, in response to the Commission, demonstrates that the position identified by the VCGLR remains true.
- Notwithstanding those observations, the evidence of Mr Blackburn and others indicates the proposals are a well-intentioned effort to address deficiencies obvious in Crown Melbourne’s approach to RSG.476
- Turning to the enhancements, it is appropriate to make some observations about each of them.
The marketing controls and sign-up benefits
- The ‘controls’ with respect to direct-to-member offers are informal assurances from Crown Melbourne’s Marketing Team that direct-to-member offers will henceforth be designed in a particular way.477
- Direct-to-member offers constitute only one of many forms that promotions may take. In addition to direct-to-member offers there are ‘cross-complex campaigns’, which are promotions open to members and sometimes non-members across the main floor and gaming rooms; promotions open to all members, specific tiers of members and specific cohorts of members, including promotions run from the main gaming floor and in members-only rooms; member jackpots; poker tournaments and so on.478 The proposed reform applies only to one form of offer.
- Further, within direct-to-member offers the proposed reform will apply only to ‘first benefits’. A direct-to-member offer may, however, be structured so that a customer is eligible for additional benefits beyond the ‘first benefit’. For example, it may be that if a customer comes to the casino in accordance with an offer made to them they receive a benefit (their ‘first benefit’), such as a voucher; and if they come again, they receive a further benefit.479
- Equally, the replacement of gaming vouchers on signing up with non-gaming or promotional vouchers may make very little difference if, in either case, a person is incentivised by the non-gaming or promotional vouchers to spend more time and money gambling at the casino.
Researching the link between problem gambling and loyalty programs
- Crown Melbourne appears to envisage conducting or commissioning research to determine whether there is a causal relationship between Crown Melbourne’s loyalty program and problem gambling. Crown Melbourne has not, to date, taken any such steps.480
- The following matters are important.
- First, in a supplementary statement to the Commission, Ms Billi referred to research that demonstrated that loyalty programs can be effective in attracting gamblers and facilitating gambling.481 The research suggests that loyalty programs may harm vulnerable individuals by providing rewards to frequent gamblers, so as to link positive reinforcement to the amount of money gambled rather than the outcome of gambling sessions (for example, wins or losses). Broader research also indicated that the desire to engage in an activity, including gambling, increases with proximity to a reward.482
- Ms Billi noted research that had concluded that loyalty programs in the gambling industry ‘may be antithetical to harm minimization strategies’.483 Ms Billi acknowledged, however, that further research was required to determine whether there is a definitive causal link between loyalty programs and problem gambling.484 Nevertheless, she said that people with gambling problems are overrepresented among loyalty program members.485 There is evidence, for example, that loyalty program points and rewards are linked to an increased urge to gamble beyond pre-planned limits;486 and that incentives provided by gambling venues may increase the amount wagered by gamblers and particularly problem gamblers.487 The research also indicated that people with gambling problems perceived that promotions and rewards offered by venues increased their gambling and distorted their perception of their gambling.488
- Second, there are reasons why immediate action on this issue is warranted:
- There is evidence that people who are vulnerable to, or experience, gambling harms are overrepresented in loyalty programs.489
- It is inherently likely that a membership program that requires people to maintain or increase the amount of time and money they spend at a casino, and offers them enticements and incentives to do so, has the potential to cause harm.
- Third, while the research enhancement proposed by Crown is in principle a good initiative, one matter of concern should be mentioned. Crown was asked to respond to the following question: ‘What research (if any) has been undertaken by Crown Melbourne or Crown Resorts to ascertain the effect the loyalty program has on problem gambling?’. Mr Emery provided the response. He said:
To the best of my knowledge the business has not undertaken any research into the effect the Crown Rewards program has on problem gambling. The responsible gaming team do however keep abreast of academic research into problem gambling and this also includes academic research on the above topic.490
- When asked about that answer, Mr Emery gave the following evidence:
Q: If the casino was serious about undertaking research about the link between loyalty programs and problem gambling, it would have been mentioned in paragraph 85 of your statement?
A: Yes, correct.491
- There is a risk that the need for further research could be used to justify continued inaction.
Remuneration
- The proposal that employee incentives consider RSG implications is far from concrete. Merely considering the matter does not tether Crown Melbourne to a particular approach.
- There is a further concern. Presently, Crown Melbourne hosts receive a bonus that is based, at least in part, on customer visitation.492 It is safe to infer a relationship between turnover and visitation.
- It appears this will not change. In a paper dated 19 May 2021, prepared by the General Managers, Responsible Gaming of Crown Perth, Crown Sydney and Crown Melbourne, the following recommendation was made:
- Elimination of Gaming Host Turnover-based Commission/Bonus Rewards.
In whatever form there may still exist bonus payment incentives among Crown management/staff to encourage from our customers, higher stakes and/or longer play periods, these must cease.493
- Elimination of Gaming Host Turnover-based Commission/Bonus Rewards.
- A proposal in that form was not put to the Crown Resorts board or approved as part of the responsible service of gaming enhancements.494
Play periods
- The development of the play periods enhancements raises concerns about the RSG Team. The RSG Team told Mr Blackburn that a 12-hour play period was reasonable.495 There is, of course, no research or academic learning suggesting that a 12-hour play period is reasonable. The following exchange between Mr Blackburn and the Commission took place:
Q: If the 12 hours is absurdly wrong, what does that tell you about your team who were pushing it? They say 12 hours is fine. Let’s say they are wrong … but what would it tell you about the team you have if 12 hours is absurd?
A: That I need to revisit my team.
Q: Yes. And what does that mean. When you use the word ‘revisit’, what do you mean by the word ‘revisit’?
A: I need to understand the expertise they apply in reaching conclusions of that nature. I need to apply judgment to it.496
Cashless gambling
- While the move to cashless gambling is to be encouraged—both as an AML measure (see Chapter 6) and because play periods can be more effectively monitored through carded play—it must be developed and seen through a gambling harm reduction lens. Concerns include the frictionless nature of transactions, where there is less likelihood of time for reflection; and it being potentially difficult for people to track their spending during gambling.497
Observations on the recent initiatives
- Many of the concerns voiced in this chapter were previously raised with Crown Melbourne by the VCGLR. In its Sixth Review, the VCGLR noted that Crown Melbourne’s approach to responsible gaming was ‘essentially unchanged’ since its Fifth Review five years earlier.498 Its Report noted:
- Crown Melbourne’s RGC had no ‘quantified key performance measures’, and outcomes for patrons who interact with the RGC were not systematically measured.499
- Poor use was made of Crown Melbourne’s internally available data, in contrast to its use of data to measure the effectiveness of its responsible service of alcohol practices.500
- RSG staffing levels were inadequate and there was inadequate engagement with people who may be experiencing gambling harms.501
- Crown Melbourne’s RSG strategy relies almost exclusively on Observable Signs and people self-identifying as having gambling problems.502
- Crown Melbourne’s reliance on the wider body of staff to discern Observable Signs was limited by the fact that those staff are busy with their core duties.503
- The amount of time patrons were left unattended before staff intervention as mandated by the Play Periods Policy was not conducive to responsible lengths of play for local players.504
- Crown Melbourne’s use of player data analytics to support interventions was still in a trial phase five years after being recommended as part of the Fifth Review and 10 years after first being raised with Crown Melbourne.505
- ‘Where there has been change in responsible gambling practice, this has largely been driven by regulatory and other external pressure …’.506
- Notwithstanding the above, and in fairness to Crown Melbourne, the Sixth Review made several RSG recommendations, all of which the regulator concluded were satisfactorily implemented (save for those recommendations that have not yet fallen due).507
- It must also be acknowledged that Mr Blackburn genuinely intends to further reform Crown’s RSG program.508
Conclusion
- The problems raised in this chapter are not easily repaired. They reflect a flawed organisational structure, a dysfunctional culture, failures of leadership and an unfavourable regulatory regime.
- There are four areas where, based on current learning, steps can be taken to reduce gambling harms.
Carded play
- As has been shown, it is nearly impossible to monitor uncarded players at the Melbourne Casino. For that reason, it is appropriate that all customers should use a player card for all forms of gambling at the Melbourne Casino. A recommendation to that effect has been made in Chapter 6.
- To enable proper research into problem gambling, it is important that the player card also be used to collect data.
Recommendation 9: Player card data
It is recommended that a direction be given to Crown Melbourne pursuant to section 23(1) of the Casino Control Act that the player card collect, to the extent practicable, data relating to:
- player buy-in (time, amount)
- player buy-out (time, amount)
- play periods (date, start time, end time)
- player turnover
- player losses and wins
- gambling product
- such further information as the regulator reasonably requires for anti-money laundering and Responsible Service of Gaming purposes.
Pre-commitment and time limits
- An important step is to control gambling on EGMs, which is a form of gambling that causes more harm than others.
- Pre-commitment is an obvious area of reform. If a full, mandatory, binding, pre-commitment system is implemented, that will significantly reduce the incidence of problem gambling.
- The State has explained that there are practical difficulties that stand in the way of an immediate implementation of this system. Nonetheless, when these practical difficulties can be overcome such a system should be introduced.509
Recommendation 10: Pre-commitment and time limits
It is recommended that as soon as possible, the YourPlay system be a full, mandatory, binding, pre-commitment system for Australian residents gambling on EGMs at the Melbourne Casino.
The pre-commitment system should operate in the following manner:
- Each player must set a daily, weekly or monthly time limit and a daily, weekly or monthly loss limit.
- If the pre-set time limit or the pre-set loss limit is reached, the player cannot continue to gamble on an EGM and the limit(s) cannot be altered, for 36 hours.
- No player can gamble on an EGM for more than 12 hours in any 24-hour period.
- If a player has gambled for 12 hours in any 24-hour period, the player must take a break for 24 hours.
- A player cannot gamble continuously on an EGM for more than three hours.
- A player must take a break of at least 15 minutes after three hours of continuous gambling.
- A player cannot gamble on EGMs for more than 36 hours per week.
- There should be a default pre-set loss limit that the player can modify.
- The default pre-set loss limit should be set by regulation. It could be calculated by reference to the median income of a wage earner less the standard cost of living. Or it could be calculated by estimating the median losses of a recreational gambler. The pre-set loss limit should be reviewed at least annually.
For the effective operation of a full, mandatory, binding YourPlay system, internal control systems are needed to ensure that a customer is unable to acquire more than one card. The systems need to be approved under section 122 of the Casino Control Act.
Gambling Code
- Another area where reform is desirable is the content of the Gambling Code for casinos.
- The contents of a Gambling Code are set by a Ministerial Direction made under section 10.6.6 of the Gambling Regulation Act.
- Currently there are two Ministerial Directions in force, one for casinos and other gambling licensees (made on 17 September 2018) and the other for EGM venue operators (pubs and clubs) (made on 21 February 2020).510
- There are material differences between the two Ministerial Directions. The differences are set out in the following table.
Subject | Crown Melbourne | Other venues |
Responsible gambling message | Requires a code to include a responsible gambling message that identifies the casino operator’s commitment to responsible gambling (part 2, page 4). Does not specify the level of commitment to responsible gambling a casino operator should have. | Requires a code to include the following responsible gambling message: ‘A venue operator has a duty to take all reasonable steps to prevent and minimise harm from the operation of gaming machines in the approved venue, including by monitoring the welfare of gaming machine players, discouraging intensive and prolonged gaming machine play and intervening when a person is displaying behaviour that is consistent with gambling harm’ (part 2, clause 1). |
Interaction with customers | Provides a code must:
Does not prescribe how the relevant person must interact with customers to foster responsible gambling, or the process for interacting with customers showing signs of distress. Arguably, does not require a relevant person to specify a process for interacting with customers displaying indicators of problem gambling if they did not request assistance or information about problem gambling or self-exclusion. | Requires a code to include provisions regarding:
These provisions set out detailed responsibilities of a venue operator; for example, providing that a venue operator:
|
- It is accepted that there are differences in the operating environment of a casino on the one hand and a local pub or club on the other. This may account for some of the differences in the treatment of casino operators and EGM venue operators. But it does not account for all. Some requirements, appropriately amended, should apply to the casino operator. There are distinct risks that arise from the nature and scale of the Melbourne Casino that should be reflected and addressed in its Gambling Code.
Recommendation 11: Gambling Code
It is recommended that a new Ministerial Direction be made under section 10.6.6 of the Gambling Regulation Act, in respect of a casino operator, which includes the following requirements:
- a duty to take all reasonable steps to prevent and minimise harm from gambling, including by monitoring the welfare of players, discouraging intensive and prolonged play and intervening when a person is displaying behaviour that is consistent with gambling harm
- a duty to take all reasonable steps to ensure that players on the gambling floor are regularly observed to monitor behaviour that is consistent with gambling harm
- a duty to ensure that there is a sufficient number of responsible gambling officers (however called) at the casino.
It is recommended that the Ministerial Direction:
- set maximum play period limits
- prescribe how long a break in play should be
- identify the period at which players should be interacted with, and the form of interaction, while gambling.
Different rules will be needed for different gambling products. For EGMs, the periods of play should mirror those recommended for YourPlay. For other gambling products, the limits should not be less onerous than those approved by Crown Resorts in May 2021 for domestic customers.
- It is appropriate to remind Crown Melbourne that its Gambling Code should be written in plain and unambiguous language. Its current Gambling Code does not satisfy that description as is evident from the discussion about the meaning of some of the Observable Signs.
Access to data
- The final point is access to data. It is generally accepted that data collected by Crown Melbourne and other gaming venues should be made available to researchers.511 This will enable serious research into the causes of problem gambling and gambling harms.
Recommendation 12: Data collection
It is recommended that to facilitate data collection for research purposes there should be established a Gambling Data Committee made up of three persons, one appointed by the regulator, one appointed by Crown Melbourne and one appointed by the Victorian Responsible Gambling Foundation.
The committee should have the following functions:
- to identify the data to be included in a repository
- to ensure the data is up-to-date and comprehensive.
The committee should be required to carry out the following tasks:
- oversee the design and structure of the repository and its user interface
- identify the data that is to be publicly available and data that will have restricted access
- ensure processes and procedures are put in place for the efficient maintenance and updating of the repository
- establish protocols to anonymise data to respect the privacy of gamblers
- establish a register of recognised researchers
- establish a simple process by which a request for data is to be made.
Recommendation 13: Crown Melbourne data
It is recommended that the committee have power to direct Crown Melbourne and the monitoring licensee for the YourPlay system to provide data that is reasonably required and in a particular format.
Recommendation 14: Costs of data collection
It is recommended that the cost of establishment and operation of the committee is paid for by the government, with staff and Secretariat support provided by the Victorian Responsible Gambling Foundation.
Endnotes
1 See Exhibit RC1627 Victoria, Budget Speech, 28 August 1990 (Tom Roper); Exhibit RC1626 Victoria, Budget Strategy and Review 1990–91, Chapter 1: Budget Overview, 5 [Table 1.1]; Exhibit RC1628 Victoria, Budget Strategy and Review 1991–92, Chapter 1: Budget Overview, 3 [Table 1.3]; ‘Victoria: Unemployment Rate: Persons (A84595606K)’ in the spreadsheet titled ‘Table 02. Labour force by state, territory, greater capital city and rest of state and sex’, ‘Labour Force, Australia, Detailed,’ Australian Bureau of Statistics (Web Page, 26 August 2021) < ;.
2 Victoria, Parliamentary Debates, Legislative Assembly, 24 April 1991, 1692 (James Kennan).
3 Xavier Connor, Report of Board of Inquiry into Casinos in the State of Victoria (Report, April 1983) [14.17]–[14.18].
4 Victoria, Parliamentary Debates, Legislative Assembly, 24 April 1991, 1692 (James Kennan).
5 Victoria, Parliamentary Debates, Legislative Assembly, 24 April 1991, 1692–5 (James Kennan).
6 Victoria, Parliamentary Debates, Legislative Council, 6 June 1991, 2311 (JVC Guest).
7 Victoria, Parliamentary Debates, Legislative Council, 6 June 1991, 2311 (JVC Guest).
8 Victoria, Parliamentary Debates, Legislative Council, 6 June 1991, 2312 (JVC Guest).
9 Casino Control Act 1991 (Vic) s 1(a).
10 Casino Control Act 1991 (Vic) s 1(a)–(c), as enacted.
11 VCGA, Third Triennial Review of the Casino Operator and Licence (Report, June 2003) 40.
12 Exhibit RC1621 Article: Kennan Expects $100m Windfall from State Casino, 1 November 1991, 1.
13 Australian Institute for Gambling Research, University of Western Sydney, Australian Gambling Comparative History and Analysis—Project Report for the Victorian Casino and Gaming Authority (Report, October 1999) 205.
14 See Victorian Government, ‘Victorian Government Submission to the Productivity Commission Inquiry into Gambling in Australia’ (March 2009) 22; Australasian Gaming Council, ‘A Guide to Australasia’s Gambling Industries, Facts Figures and Statistics, Chapter Seven: The Contribution of Australia’s Gambling Industries 2017/18’ (February 2020) 12.
15 Victorian Government, ‘Victorian Government Submission to the Productivity Commission Inquiry into Gambling in Australia’ (March 2009) 27.
16 Queensland Government Statistician’s Office, Queensland Treasury, Australian Gambling Statistics, 1993–94 to 2018–19, 36th edition (Report, April 2021) 89, Table Vic 20.
17 See the spreadsheet titled ‘Taxation Revenue—Annual’ in ‘State Taxation Revenue’, Victorian Department of Treasury and Finance (Web Page, 2021) < ;. This spreadsheet details the historical and forecast data published in budget papers (Budget and Budget Update) and the Annual Financial Report. It includes the taxation data series for gambling taxes.
18 Exhibit RC0722 VAGO Reducing the Harm Caused by Gambling Report, March 2021, 11.
19 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 15 [A.33].
20 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 107–10 [6]–[29]; see also ‘Crown Resorts Foundation’, Crown Resorts (Web Page, 2021)
21 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 107–8 [1]–[7]; Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 15 [A.33(d)], 320 [17].
22 Crown Resorts, Submission to Productivity Commission, Australia International Tourism Industry Research Report (15 December 2014) 2, 4–6.
23 State of Victoria, ‘Melbourne’s Top Attractions, Business Victoria’ (Fact Sheet, 2019) 1 < ;. This fact sheet provides an overview of overnight visitors to Victoria who attended places or attractions in Melbourne. This includes both domestic and international overnight visitors and may include those who visit the place/attraction as part of a day trip (this does not include local visitors).
24 See Table 6 in the spreadsheet titled ‘State Tourism Satellite Account 2019–20 data tables’ in ‘State Tourism Satellite Accounts, 2019–20’, Tourism Research Australia (Web Page, 2021) . ‘Direct tourism gross value added’ means the value of direct tourism output before taxes, less the value of the goods and services used to produce these tourism products: ‘Australian National Accounts: Tourism Satellite Account methodology’, Australian Bureau of Statistics (Web Page, 10 December 2020) < ;.
25 See, eg, Exhibit RC1586 Article: An Economic and Social Review of Gambling in Great Britain, 2013, 13–14.
26 Productivity Commission, Australia’s Gambling Industries (Inquiry Report No. 10, 26 November 1999), 5.
27 Productivity Commission, Australia’s Gambling Industries (Inquiry Report No. 10, 26 November 1999).
28 See, eg, Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017); Exhibit RC0127 VRGF Identifying Effective Policy Intervention to Prevent Gambling-Related Harm Report, June 2019.
29 See, eg, Victorian Competition and Efficiency Commission, Counting the Cost: Inquiry into the Costs of Problem Gambling (Final Report, 2012).
30 See, eg, South Australian Centre for Economic Studies, Social Impacts of Gambling: A Comparative Study (Final Report, April 2009); Lenny Roth, ‘Gambling: An Update’ (Research Paper, Parliament of New South Wales, March 2020).
31 See, eg, Exhibit RC1586 Article: An Economic and Social Review of Gambling in Great Britain, 2013, 1; Patrick Basham and Karen White, GamblingwithourFuture?TheCostsandBenefitsofLegalizedGambling (Report, The Fraser institute, 2002); Gerda Reith, Research on the Social Impacts of Gambling (Final Report, Scottish Executive Social Research, 2006); Exhibit RC1593 Article: The Social Costs of Gambling: An Economic Perspective, February 1999; Douglas Walker, ‘Quantification of the Social Costs and Benefits of Gambling’ (Conference Paper, Annual Alberta Conference on Gambling Research, 2006); Douglas Walker, et al, State of the Evidence Review: Societal and Economic Impact of Gambling (Research Report, Gambling Research Exchange Ontario, 2015); Earl Grinols, The Hidden Social Costs of Gambling (Research Report, Centre for Christian Ethics at Baylor University, 2011); Brian Easton, ‘The Benefits and Costs of Gambling: Some Policy Implications’ (Web Page, April 2010) < ;.
32 Productivity Commission, Australia’s Gambling Industries (Final Report No. 10, 26 November 1999) 13–14.
33 ‘Problem Gambling Severity Index (PGSI)’, VRGF (Web Page, 2021) < ;. ;.
34 ‘Problem Gambling Severity Index (PGSI)’, VRGF (Web Page, 2021) < ;.
35 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 47, 5.19.
36 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 45.
37 Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y, 23.
38 Howe et al, Gambling and Problem Gambling in Victoria (Report, VRGF, July 2018) 48.
39 Howe et al, Gambling and Problem Gambling in Victoria (Report, VRGF, July 2018) 48–9.
40 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 4 [34]. The figure in [34] was corrected in evidence by Ms Billi: see Transcript of Rosa Billi, 8 June 2021, 1795.
41 Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y, 1.
42 Gambling Regulation Act 2003 (Vic); Casino Control Act 1991 (Vic).
43 ‘Expenditure on Gambling in Victoria and Australia’, VRGF (Web Page, 13 December 2019) < ;.
44 ‘Expenditure on Gambling in Victoria and Australia’, VRGF (Web Page, 13 December 2019) < ;.
45 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 16–17, 5.33.
46 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 51.
47 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 51.
48 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 51; Queensland Government Statistician’s Office, Queensland Treasury, Australian Gambling Statistics 1992–93 to 2017–18, 35th edition (Report, December 2019) 89, Table Vic 20.
49 Exhibit RC1584 Article: A Pokie-Holic State, 17 June 2008, 1.
50 Submission 59 Australasian Gaming Council, 28.
51 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 26.
52 Browne et al, Assessing Gambling-Related Harm in Victoria: A Public Health Perspective (Research Report, VRGF, April 2016) 75–9.
53 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 26. See also Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y, 107–10.
54 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 65.
55 Exhibit RC0722 VAGO, Reducing the Harm Caused by Gambling Report, March 2021, 3, 11.
56 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 53–4.
57 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 54.
58 Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y, 74–6. The Australian Unity Wellbeing Index has been designed as a barometer of Australians’ satisfaction with their lives and life in Australia.
59 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 57–8.
60 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 73.
61 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 59–61.
62 Women’s Health in the North, Understanding the Link between Family Violence and Gambling: Information for Local Government (Fact Sheet, 2021) 2 (citations omitted).
63 Nicki A Dowling et al, ‘Problem Gambling and Family Violence: Findings from a Population-Representative Study’ (2018) 7(3) Journal of Behavioural Addictions 806, 806–9.
64 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 67–8.
65 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 70–1.
66 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 68–70.
67 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 74–6.
68 Browne et al, The Social Cost of Gambling to Victoria (Research Report, VRGF, November 2017) 76–83.
69 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, [11]–[12].
70 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, [32].
71 Transcript of Nicolas Emery, 4 June 2021, 1529; Exhibit RC0143 Crown Melbourne Average Daily Unique Visitations report, 1 June 2021.
72 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, [52]–[53]; Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y.
73 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, [52.5].
74 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 224–5 [F.185]–[F.203].
75 Submission 08 South Australian Centre for Economic Studies, 202.
76 Victoria, Parliamentary Debates, Legislative Council, 6 June 1991, 2312 (JVC Guest).
77 Submission 32 Australian Vietnamese Women’s Association Inc, 1; Submission 28 Elizabeth Mitchell, 1; Submission 75 School of Public Health & Preventative Medicine, Monash University, 11. See also ‘Evidence given by support workers’ in this chapter.
78 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 7 [39] (citing Parke et al, Key Issues in Product Based Harm Minimisation: Examining Theory, Evidence and Policy Issues in Great Britain (Report, December 2016)).
79 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 7 [39] (citing Parke et al, Key Issues in Product Based Harm Minimisation: Examining Theory, Evidence and Policy Issues in Great Britain (Report, December 2016)).
80 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 7 [40] (citing Parke et al, Key Issues in Product Based Harm Minimisation: Examining Theory, Evidence and Policy Issues in Great Britain (Report, December 2016)); Schottler Consulting, Literature Review of the Impact of EGM Characteristics on Gambling Harm (Report, 2019).
81 Exhibit RC1587 Article: Dark Flow, Depression and Multiline Slot Machine Play, 73, 76, 81, 83.
82 Exhibit RC1587 Article: Dark Flow, Depression and Multiline Slot Machine Play, 76.
83 Exhibit RC1587 Article: Dark Flow, Depression and Multiline Slot Machine Play, 73, 83.
84 Exhibit RC1587 Article: Dark Flow, Depression and Multiline Slot Machine Play, 73–4.
85 Exhibit RC1585 Article: Amplified Striatal Responses to Near-Miss Outcomes in Pathological Gamblers, 27 April 2016, 2614, 2620–1. See also Exhibit RC1589 Article: Gambling Near-Misses Enhance Motivation to Gamble and Recruit Win-Related Brain Circuitry, 2009.
86 Casino Licence granted to Crown Melbourne (then Crown Casino Ltd) under Part 2 of the Casino Control Act 1991 (Vic) dated 19 November 1993, cl 8(c).
87 Victoria, Victoria Government Gazette, No S 510, 9 December 2019. A player must have a pre-set time and loss limit on their YourPlay account, and not have exceeded either limit, to use an EGM in unrestricted mode. Other conditions apply to the operation of EGMs in unrestricted mode; for example, they can only operate in specified areas.
88 Victoria, Victoria Government Gazette, No S 510, 9 December 2019.
89 Transcript of Mark Mackay, 7 June 2021, 1685 [16]–[22].
90 Casino Control Act 1991 (Vic) s 69.
91 Casino Control Act 1991 (Vic) s 20(1).
92 Department of Justice (Vic), Taking Action on Problem Gambling (Report, October 2006).
93 Department of Justice (Vic), Taking Action on Problem Gambling (Report, October 2006) 4.
94 Victoria, Parliamentary Debates, Legislative Assembly, 1 November 2007, 3827 (Tony Robinson).
95 Gambling Legislation Amendment (Problem Gambling and Other Measures) Act 2007 (Vic) ss 56–9.
96 Casino Control Act 1991 (Vic) s 69 inserted by Gambling Legislation Amendment (Problem Gambling and Other Measures) 2007 (Vic) s 57. When originally introduced, the section provided as follows: ‘[I]t is a condition of a casino licence that the casino operator implement a Responsible Gambling Code of Conduct that has been approved by the Commission’.
97 Casino Control Act 1991 (Vic) s 69, inserted by Gambling Legislation Amendment (Problem Gambling and Other Measures Act 2007 (Vic) s 57 and subsequently amended by Gambling Regulation Amendment (Gaming Machine Arrangements) Act 2017 (Vic) s 58.
98 Exhibit RC0508 Ministerial Direction No S 430, 17 September 2018, 4–6, as amended by Exhibit RC0163 Ministerial Direction No S 85, 21 February 2020.
99 Exhibit RC0508 Ministerial Direction No S 430, 17 September 2018, 4–6.
100 Exhibit RC0508 Ministerial Direction No S 430, 17 September 2018, 5.
101 Exhibit RC0712 Crown Melbourne Responsible Gambling Code of Conduct, 26 May 2009, 11–12.
102 Exhibit RC0712 Crown Melbourne Responsible Gambling Code of Conduct, 26 May 2009, 12.
103 Exhibit RC0714 Crown Melbourne Responsible Gambling Code of Conduct, Version 3, November 2012, 11−12.
104 Exhibit RC0714 Crown Melbourne Responsible Gambling Code of Conduct, Version 3, November 2012, 12.
105 Exhibit RC0714 Crown Melbourne Responsible Gambling Code of Conduct, Version 3, November 2012, 12.
106 Exhibit RC0713 Crown Melbourne Responsible Gambling Code of Conduct, Version 4, July 2016, 11, amending Exhibit RC0714 Crown Melbourne Responsible Gambling Code of Conduct, Version 3, November 2012, 11.
107 Exhibit RC0713 Crown Melbourne Responsible Gambling Code of Conduct, Version 4, July 2016, 12.
108 Exhibit RC0713 Crown Melbourne Responsible Gambling Code of Conduct, Version 4, July 2016, 12.
109 Exhibit RC0713 Crown Melbourne Responsible Gambling Code of Conduct, Version 4, July 2016, 12.
110 Exhibit RC0715 Crown Melbourne Responsible Gambling Code of Conduct, Version 5, October 2016.
111 Exhibit RC0715 Crown Melbourne Responsible Gambling Code of Conduct, Version 5, October 2016, 3, 12.
112 Exhibit RC0110 Crown Melbourne Responsible Gambling Code of Conduct, Version 6, July 2019, 16.
113 Exhibit RC0694 Crown Melbourne Responsible Gambling Code of Conduct, Version 7, May 2021.
114 Exhibit RC0712 Crown Melbourne Responsible Gambling Code of Conduct, n.d., 11–12.
115 Exhibit RC0714 Crown Melbourne Responsible Gambling Code of Conduct, Version 3, November 2012, 12.
116 Exhibit RC0713 Crown Melbourne Responsible Gambling Code of Conduct, Version 4, July 2016, 12.
117 Exhibit RC0121 Gambling Research Australia Validation Study of In-Venue Problem Gambler Indicators Report, February 2014.
118 Exhibit RC0968 The University of Adelaide Identifying Problem Gamblers in Gambling Venues Report, 24 August 2007.
119 Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002.
120 Exhibit RC0121 Gambling Research Australia Validation Study of In-Venue Problem Gambler Indicators Report, February 2014, 28–9; Exhibit RC0968 The University of Adelaide Identifying Problem Gamblers in Gambling Venues Report, 24 August 2007; Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, [2.5].
121 Exhibit RC0121 Gambling Research Australia Validation Study of In-Venue Problem Gambler Indicators Report, February 2014, 20; Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, 2.
122 Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, 8 (section 1.2, ‘Length of playing sessions’).
123 Exhibit RC0968 The University of Adelaide Identifying Problem Gamblers in Gambling Venues Report, 24 August 2007, 201 [5.14.2].
124 Exhibit RC0968 The University of Adelaide Identifying Problem Gamblers in Gambling Venues Report, 24 August 2007, 201 [5.14.2].
125 Exhibit RC0968 The University of Adelaide Identifying Problem Gamblers in Gambling Venues Report, 24 August 2007, 285.
126 Exhibit RC0121 Gambling Research Australia Validation Study of In-Venue Problem Gambler Indicators Report, February 2014, 88–9.
127 Exhibit RC0121 Gambling Research Australia Validation Study of In-Venue Problem Gambler Indicators Report, February 2014, 69, 202–3.
128 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 198 [F.77].
129 Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, 8 (section 1.2, under the heading ‘Length of playing sessions’).
130 Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, 9 (section 1.3, under the heading ‘Number of sessions per week’).
131 Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, 34.
132 Transcript of Sonja Bauer, 2 June 2021, 1225.
133 Exhibit RC1622 Gaming Departments and Responsible Gaming Department, Proposal regarding Play Periods Trial, 26 May 2010.
134 Exhibit RC1623 Table regarding Responsible Gambling Initiatives, n.d., 14.
135 Exhibit RC1622 Gaming Departments and Responsible Gaming Department, Proposal regarding Play Periods Trial, 26 May 2010.
136 Exhibit RC0208 Letter from Barry Felstead to Catherine Myers, 30 December 2019, 6.
137 Exhibit RC1624 Play Periods Policy, Version 1.1, February 2018, 1.
138 Exhibit RC0207 Play Periods Policy, Version 1.2, February 2018, 1.
139 Exhibit RC0117 Play Periods Policy, Version 1.3, December 2018, 1–2.
140 Exhibit RC0699 Play Periods Policy, Version 1.4, May 2019.
141 Exhibit RC0698 Play Periods Policy, Version 1.6, December 2019.
142 Exhibit RC0116 Play Periods Policy, Version 1.7, December 2020, 1–2.
143 Transcript of Sonja Bauer, 2 June 2021, 1228, 1269.
144 Exhibit RC0698 Play Periods Policy, Version 1.6, December 2019, 1; Exhibit RC0116 Play Periods Policy, Version 1.7, December 2020, 1.
145 Transcript of Employee 7, 27 May 2021, 1062–3; Transcript of Sonja Bauer, 2 June 2021, 1269.
146 Transcript of Sonja Bauer, 2 June 2021, 1235.
147 Exhibit RC0209 VCGLR Sixth Casino Review recommendations 7, 8 and 9, 16 July 2020, 4–5 [31].
148 Transcript of Steven Blackburn, 1 July 2021, 3041.
149 Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021.
150 Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021, 2.
151 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 199 [F.85].
152 Exhibit RC0309 Statement of Steven Blackburn, 21 April 2021, 1.
153 Transcript of Steven Blackburn, 1 July 2021, 3033–54.
154 Transcript of Steven Blackburn, 1 July 2021, 3038.
155 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 199–200 [F.86].
156 See, eg, Transcript of Employee 7, 27 May 2021, 1068–70; Transcript of Sonja Bauer, 2 June 2021, 1252–4.
157 See, eg, Transcript of BZ, 4 May 2021, 28; Transcript of Employee 7, 27 May 2021, 1067–8. See also the evidence from Crown records, employees and customers, and from community workers and the public, in the section, 'Identifying patrons with gambling problems'.
158 See, eg, Exhibit RC0110 Crown Melbourne Responsible Gambling Code of Conduct, Version 6, July 2019, 15–16; Exhibit RC0694 Crown Melbourne Responsible Gambling Code of Conduct, Version 7, May 2021, 15–16.
159 Exhibit RC0121 Gambling Research Australia Validation Study of In-Venue Problem Gambler Indicators Report, February 2014, 203; Exhibit RC0968 The University of Adelaide Identifying Problem Gamblers in Gambling Venues Report, 24 August 2007, 285; Exhibit RC0550 Report regarding Current Issues Related to Identifying the Problem Gambler in the Gambling Venue, August 2002, 8.
160 Exhibit RC0207 Play Periods Policy, Version 1.2, February 2018; Exhibit RC0117 Play Periods Policy, Version 1.3, December 2018, 1; Exhibit RC0699 Play Periods Policy, Version 1.4, May 2019; Exhibit RC0698 Play Periods Policy, Version 1.6, December 2019; Exhibit RC0116 Play Periods Policy, Version 1.7, December 2020, 1–2.
161 Transcript of Employee 7, 27 May 2021, 1062–3.
162 Transcript of Employee 7, 27 May 2021, 1059–61.
163 Transcript of Employee 7, 27 May 2021, 1059.
164 Transcript of Employee 7, 27 May 2021, 1070.
165 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [58].
166 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [59].
167 RGAs were formerly called ‘Responsible Gaming Liaison Officers’.
168 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [59].
169 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [60].
170 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [62].
171 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [62].
172 Transcript of Sonja Bauer, 1 June 2021, 1153, 1167 [29]–[41].
173 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 15 [63].
174 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 16 [63].
175 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 16 [67].
176 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 16–17 [68]–[70].
177 Transcript of Employee 7, 27 May 2021, 1059–61; Transcript of Sonja Bauer, 21 June 2021, 2188–9, 2191–2, 2201, 2204; Exhibit RC0208 Letter from Barry Felstead to Catherine Myers, 30 December 2019, 7–8. Alerts may be sent at different times under Crown’s new Play Periods Policy, which was approved on 24 May 2021 (Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 199 [F.85]).
178 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 17 [71]–[76].
179 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 26–7 [117(g)]; Exhibit RC0567 Email chain between Michelle Fielding and Rowan Harris, 26 June 2020, 2.
180 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 17–18 [77]–[78], 28 [123]–[124], 49–50 [174]–[175], 50–1 [180]; Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure ee, 5 [4], 6–7 [6].
181 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 18 [79].
182 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 11 [A.23], 181 [F.14].
183 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 7 [32].
184 Transcript of Nicolas Emery, 4 June 2021, 1529; Exhibit RC0143 Crown Melbourne Average Daily Unique Visitations Report, 1 June 2021.
185 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 23–5 [101]–[106].
186 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 57 [198(b)].
187 Transcript of Sonja Bauer, 1 June 2021, 1169.
188 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 24 [108]–[109].
189 Exhibit RC0642 Email from Steven Blackburn to Bronwyn Weir, 20 May 2021, Annexure a.
190 Transcript of Sonja Bauer, 1 June 2021, 1175–6, 1181–4.
191 Exhibit RC0111 Responsible Gaming Advisor Position Description, 3 June 2019; Transcript of Sonja Bauer, 1 June 2021, 1174–5, 1158–9.
192 Exhibit RC0111 Responsible Gaming Advisor Position Description, 3 June 2019, 1; Transcript of Sonja Bauer, 1 June 2021, 1174. The RGA who gave evidence said that they spent approximately 70 per cent of their time walking the gaming floor during their 12-hour shift: see Transcript of Employee 7, 27 May 2021, 1052. They also gave evidence that it took 30 minutes to walk the floor (provided that was limited to walking and observing), which they did more than five, and less than 10 times in a shift: see Transcript of Employee 7, 27 May 2021, 1058. This equates to approximately 20 per cent to 40 per cent of their time spent only walking and observing.
193 Transcript of Sonja Bauer, 1 June 2021, 1174–5.
194 Casino Licence granted to Crown Melbourne (then Crown Casino Ltd) under Part 2 of the Casino Control Act 1991 (Vic) dated 19 November 1993, cl 8(c); Transcript of Sonja Bauer, 1 June 2021, 1204–6. If there were four RGAs on the floor, the ratio would be approximately one RGA to 650 EGMs and 135 gaming tables (including poker and other table games).
195 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure s.
196 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure p.
197 Exhibit RC0113 Responsible Service of Gaming for Senior Managers (advanced) session plan, January 2020.
198 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 33 [151], [154].
199 Transcript of Sonja Bauer, 1 June 2021, 1186.
200 Transcript of Sonja Bauer, 1 June 2021, 1187.
201 Transcript of Sonja Bauer, 1 June 2021, 1179–80.
202 Transcript of Sonja Bauer, 1 June 2021, 1178–9.
203 Hing et al, Responsible Conduct of Gambling Study (Research Report, 2020) 16–19.
204 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 208 [F.121], 209 [F.123].
205 See, eg, Transcript of Employee 1, 21 May 2021, 479; Transcript of Employee 2, 21 May 2021, 489; Transcript of Employee 3, 21 May 2021, 498.
206 See, eg, Transcript of Employee 1, 21 May 2021, 479; Transcript of Employee 2, 21 May 2021, 490; Transcript of Employee 3, 21 May 2021, 499; Transcript of Employee 4, 21 May 2021, 509.
207 See, eg, Transcript of Employee 4, 21 May 2021, 503.
208 See, eg, Transcript of Employee 1, 21 May 2021, 476; Transcript of Employee 2, 21 May 2021, 486.
209 See, eg, Transcript of Employee 1, 21 May 2021, 479–80; Transcript of Employee 2, 21 May 2021, 490; Transcript of Employee 3, 21 May 2021, 499; Transcript of Employee 4, 21 May 2021, 510.
210 See, eg, Transcript of Employee 1, 21 May 2021, 480; Transcript of Employee 2, 21 May 2021, 490–1; Transcript of Employee 4, 21 May 2021, 510–11.
211 See, eg, Transcript of Employee 1, 21 May 2021, 480; Transcript of Employee 3, 21 May 2021, 499–500; Transcript of Employee 4, 21 May 2021, 511.
212 Transcript of Elizabeth Mitchell, 4 May 2021, 3.
213 In oral evidence, Ms Mitchell gave an estimate of $55,000, but subsequently contacted the Commission to correct the estimate.
214 Submission 28 Elizabeth Mitchell, 1; Transcript of Elizabeth Mitchell, 4 May 2021, 5.
215 Submission 28 Elizabeth Mitchell, 1; Transcript of Elizabeth Mitchell, 4 May 2021, 5, 7.
216 Transcript of Elizabeth Mitchell, 4 May 2021, 7.
217 Submission 28 Elizabeth Mitchell, 2–3; Transcript of Elizabeth Mitchell, 4 May 2021, 11.
218 Submission 28 Elizabeth Mitchell, 3; Transcript of Elizabeth Mitchell, 4 May 2021, 11.
219 Submission 28 Elizabeth Mitchell, 3; Transcript of Elizabeth Mitchell, 4 May 2021, 11–12.
220 Transcript of Binbin Du, 5 May 2021, 3–5.
221 Transcript of Binbin Du, 5 May 2021, 3–5.
222 Submission 23 Binbin Du, 1; Transcript of Binbin Du, 5 May 2021, 7, 11–12.
223 Submission 23 Binbin Du, 1; Transcript of Binbin Du, 5 May 2021, 8–10.
224 Transcript of Binbin Du, 5 May 2021, 15–16.
225 Transcript of Binbin Du, 5 May 2021, 20.
226 Transcript of Stuart McDonald, 4 May 2021, 17–18.
227 Submission 22 Stuart McDonald.
228 Submission 22 Stuart McDonald.
229 Transcript of Stuart McDonald, 4 May 2021, 19, 22.
230 Submission 22 Stuart McDonald.
231 Submission 22 Stuart McDonald.
232 Transcript of Stuart McDonald, 4 May 2021, 22.
233 Transcript of Stuart McDonald, 4 May 2021, 22.
234 Transcript of Stuart McDonald, 4 May 2021, 22.
235 Submission 16 Carolyn Crawford, 2; Transcript of Carolyn Crawford, 6 May 2021, 21.
236 Transcript of Carolyn Crawford, 6 May 2021, 21.
237 Submission 16 Carolyn Crawford, 1; Transcript of Carolyn Crawford, 6 May 2021, 22–3.
238 Submission 16 Carolyn Crawford, 2; Transcript of Carolyn Crawford, 6 May 2021, 24–5.
239 Transcript of Carolyn Crawford, 6 May 2021, 22, 36–8.
240 Submission 16 Carolyn Crawford, 1; Transcript of Carolyn Crawford, 6 May 2021, 23.
241 Submission 16 Carolyn Crawford, 1.
242 Transcript of Carolyn Crawford, 6 May 2021, 29; Submission 16 Carolyn Crawford, 1.
243 Submission 16 Carolyn Crawford, 1.
244 Submission 16 Carolyn Crawford, 2; Transcript of Carolyn Crawford, 6 May 2021, 25.
245 Transcript of Carolyn Crawford, 6 May 2021, 26.
246 Transcript of Carolyn Crawford, 6 May 2021, 28.
247 See, eg, Submission 38 Anonymous; Submission 39 Anna Bardsley, 2; Submission 43 Anonymous, 1; Submission 45 Anonymous, 3; Submission 84 Anonymous.
248 Transcript of Sonja Bauer, 1 June 2021, 1143.
249 Transcript of Sonja Bauer, 1 June 2021, 1144.
250 Transcript of Sonja Bauer, 1 June 2021, 1145.
251 Transcript of Employee 7, 27 May 2021, 1059.
252 Transcript of Employee 7, 27 May 2021, 1070.
253 See, eg, Transcript of Sonja Bauer, 2 June 2021, 1264.
254 ‘Gloria’ is the pseudonym given to the witness known as EZ: Transcript of EZ, 20 May 2021, 390–1.
255 Transcript of EZ, 20 May 2021, 391.
256 Transcript of EZ, 20 May 2021, 392–3.
257 Transcript of EZ, 20 May 2021, 393.
258 Transcript of EZ, 20 May 2021, 393.
259 Transcript of EZ, 20 May 2021, 396–7.
260 ‘Ronaldo’ is the pseudonym given to the witness known as EX: Transcript of EX, 20 May 2021, 412–13.
261 Transcript of EX, 20 May 2021, 413–14.
262 Transcript of EX, 20 May 2021, 414–15.
263 Transcript of EX, 20 May 2021, 414.
264 Transcript of EX, 20 May 2021, 414.
265 ‘Prita’ is the pseudonym given to the witness known as FZ: Transcript of FZ, 27 May 2021, 1086.
266 Transcript of FZ, 27 May 2021, 1091.
267 Transcript of FZ, 27 May 2021, 1093.
268 Transcript of EZ, 20 May 2021, 394–6; Transcript of Sonja Bauer, 2 June 2021, 1299–1304; Transcript of Manorani Guy, 8 June 2021, 1851–3.
269 Transcript of FZ, 27 May 2021, 1092; Submission 16 Carolyn Crawford.
270 Transcript of EZ, 20 May 2021, 396–7.
271 Exhibit RC0525 Coroners Prevention Unit Response to Data Request re: Deaths relating directly or indirectly to the Crown Casino Complex, 6 May 2021, 41; Exhibit RC0520 Table of Crown Melbourne related deaths, 29 October 2019, 1–3.
272 Transcript of Employee 7, 27 May 2021, 1048.
273 Transcript of Employee 7, 27 May 2021, 1067.
274 Transcript of Employee 7, 27 May 2021, 1067–8.
275 Transcript of Employee 7, 27 May 2021, 1068–70.
276 Transcript of Employee 7, 27 May 2021, 1066–7.
277 Transcript of Employee 7, 27 May 2021, 1072–3.
278 Transcript of Employee 7, 27 May 2021, 1062–3.
279 Transcript of Employee 7, 27 May 2021, 1062–3.
280 Transcript of Nicolas Emery, 4 June 2021, 1476.
281 Transcript of Mark Mackay, 7 June 2021, 1718.
282 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 13 [83].
283 Transcript of Peter Lawrence, 8 June 2021, 1768.
284 Transcript of AZ, 3 May 2021, 59, 76.
285 Transcript of Ahmed Hasna, 3 May 2021, 6, 33.
286 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 9 [40].
287 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 11 [48].
288 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 11–14 [50]–[54].
289 See, eg, Transcript of Sonja Bauer, 2 June 2021, 1252–6.
290 See, eg, Transcript of Sonja Bauer, 2 June 2021, 1260–2; Exhibit RC0118 Observable Signs Report, n.d., 4–5; Exhibit RC0117 Play Periods Policy, Version 1.3, December 2018, 1; Exhibit RC0715 Crown Melbourne Responsible Gambling Code of Conduct, Version 5, October 2016, 11–12.
291 See, eg, Transcript of Sonja Bauer, 2 June 2021, 1254–61; Exhibit RC0118 Observable Signs Report, n.d., 4–5; Exhibit RC0117 Play Periods Policy, Version 1.3, December 2018, 1.
292 Exhibit RC0699 Play Periods Policy, Version 1.4, May 2019, 1; Exhibit RC0715 Crown Melbourne Responsible Gambling Code of Conduct, Version 5, October 2016, 11.
293 Exhibit RC0599 NOS Report spreadsheet, 2021.
294 Transcript of Sonja Bauer, 21 June 2021, 2204.
295 Transcript of Sonja Bauer, 3 June 2021, 1399, 1436–7, 1439–40.
296 Transcript of Nicolas Emery, 4 June 2021, 1455.
297 Transcript of Nicolas Emery, 4 June 2021, 1527.
298 Transcript of Sonja Bauer, 21 June 2021, 2165.
299 Transcript of Sonja Bauer, 21 June 2021, 2174–5.
300 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 202 [F.95].
301 Blaszczynski et al, Operator-Based Approaches to Harm Minimisation in Gambling: Summary, Review and Future Directions (Report, 2014) 32 [5.1].
302 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 1.3.
303 See Recommendation 10.4: Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 54, 10.44.
304 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 10.20–1.
305 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 10.19–20.
306 Blaszczynski et al, Operator-Based Approaches to Harm Minimisation in Gambling: Summary, Review and Future Directions (Report, 2014) 33 [5.1].
307 Blaszczynski et al, Operator-Based Approaches to Harm Minimisation in Gambling: Summary, Review and Future Directions (Report, 2014) 33 [5.1].
308 See, eg, discussion in Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 10.18; Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d, 32 [1.7].
309 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 10.21–2.
310 Exhibit RC0322 Table of Documents emailed to Steven Blackburn, n.d., Annexure w, 10.44.
311 Blaszczynski et al, Operator-Based Approaches to Harm Minimisation in Gambling: Summary, Review and Future Directions (Report, 2014) 41 [5.1.5].
312 Blaszczynski et al, Operator-Based Approaches to Harm Minimisation in Gambling: Summary, Review and Future Directions (Report, 2014) 36 [5.1.2.2].
313 Blaszczynski et al, Operator-Based Approaches to Harm Minimisation in Gambling: Summary, Review and Future Directions (Report, 2014) 41 [5.1.5].
314 Victoria, Parliamentary Debates, Legislative Assembly, 31 October 2013, 3800 (Michael O’Brien).
315 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 97.
316 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 98.
317 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d, 1, 11 [1.1].
318 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d.
319 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d, 33 [1.7].
320 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 98–9.
321 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d, 59.
322 Transcript of Steven Blackburn, 1 July 2021, 3062, 3064.
323 Transcript of Mark Mackay, 7 June 2021, 1715–17.
324 Transcript of Peter Lawrence, 8 June 2021, 1759–60.
325 Transcript of Mark Mackay, 7 June 2021, 1717; Transcript of Employee 6, 21 May 2021, 550.
326 Transcript of Employee 6, 21 May 2021, 551, 563–4; Transcript of BZ, 4 May 2021, 29–30.
327 Transcript of BZ, 4 May 2021, 45.
328 Transcript of BZ, 4 May 2021, 30.
329 Transcript of BZ, 4 May 2021, 43.
330 Transcript of BZ, 4 May 2021, 42.
331 Transcript of BZ, 4 May 2021, 45.
332 Transcript of BZ, 4 May 2021, 43–4.
333 Transcript of BZ, 4 May 2021, 45.
334 Transcript of BZ, 4 May 2021, 44.
335 Confidential submission.
336 Transcript of BZ, 4 May 2021, 45.
337 Transcript of Ahmed Hasna, 3 May 2021, 6.
338 See, eg, Transcript of Ahmed Hasna, 3 May 2021, 3.
339 Transcript of Ahmed Hasna, 3 May 2021, 35–6.
340 Transcript of Ahmed Hasna, 3 May 2021, 35–6.
341 Transcript of Ahmed Hasna, 3 May 2021, 36.
342 Transcript of Ahmed Hasna, 3 May 2021, 37.
343 Transcript of Ahmed Hasna, 3 May 2021, 37.
344 Exhibit RC0179 Statutory Declaration, 10 April 2021, 1 [6].
345 Transcript of Ahmed Hasna, 3 May 2021, 38.
346 Transcript of Ahmed Hasna, 3 May 2021, 38.
347 Exhibit RC0179 Statutory Declaration, 10 April 2021, 1 [8]; see also Transcript of Peter Lawrence, 8 June 2021, 1781.
348 Transcript of Ahmed Hasna, 3 May 2021, 38.
349 Transcript of Ahmed Hasna, 3 May 2021, 38–9.
350 Transcript of Peter Lawrence, 8 June 2021, 1781; Transcript of Ahmed Hasna, 3 May 2021, 38–9.
351 Transcript of Peter Lawrence, 8 June 2021, 1786.
352 Transcript of Peter Lawrence, 8 June 2021, 1784.
353 Transcript of Peter Lawrence, 8 June 2021, 1784–5.
354 Transcript of Peter Lawrence, 8 June 2021, 1765–6, 1772.
355 Transcript of Peter Lawrence, 8 June 2021, 1769–70.
356 Transcript of Peter Lawrence, 8 June 2021, 1766–7.
357 Transcript of Peter Lawrence, 8 June 2021, 1768.
358 Transcript of Peter Lawrence, 8 June 2021, 1773.
359 Transcript of Peter Lawrence, 8 June 2021, 1789–90.
360 Transcript of Peter Lawrence, 8 June 2021, 1774.
361 Transcript of Peter Lawrence, 8 June 2021, 1760.
362 Transcript of Peter Lawrence, 8 June 2021, 1760–1.
363 Transcript of Peter Lawrence, 8 June 2021, 1765–6.
364 Transcript of BZ, 4 May 2021, 42–3; Transcript of Employee 6, 21 May 2021, 560–1.
365 Transcript of BZ, 4 May 2021, 43; Transcript of Employee 6, 21 May 2021, 568; Transcript of Peter Lawrence, 8 June 2021, 1769. Mr Lawrence gave no evidence as to what an appropriate break was, nor how an appropriate length was determined.
366 Transcript of Peter Lawrence, 8 June 2021, 1773.
367 Transcript of Peter Lawrence, 8 June 2021, 1774–5.
368 Transcript of BZ, 4 May 2021, 43–5; Transcript of Peter Lawrence, 8 June 2021, 1769–70.
369 Exhibit RC0146 Statement of Mark Mackay, 5 May 2021, 8 [24(b)], 9 [26]; Transcript of Sonja Bauer, 1 June 2021, 1135–6; Transcript of Mark Mackay, 7 June 2021, 1686.
370 Transcript of Mark Mackay, 7 June 2021, 1686.
371 Transcript of Mark Mackay, 7 June 2021, 1687.
372 Transcript of Mark Mackay, 7 June 2021, 1692.
373 Exhibit RC1625 Letter from Alex Fitzpatrick to Barry Felstead, 7 March 2019; Exhibit RC1492 Reclaiming Button Picks Policy, 7 March 2019; Transcript of Mark Mackay, 7 June 2021, 1687–8.
374 Transcript of Mark Mackay, 7 June 2021, 1688.
375 Victoria, Victoria Government Gazette, No S 44, 24 April 1997, 381–2, Rule 21. Subsequent amendments to the Rules do not amend Rule 21.
376 Transcript of Mark Mackay, 7 June 2021, 1692.
377 Transcript of Mark Mackay, 7 June 2021, 1690–1.
378 Transcript of Mark Mackay, 7 June 2021, 1690.
379 Transcript of Mark Mackay, 7 June 2021, 1690.
380 Transcript of Mark Mackay, 7 June 2021, 1720.
381 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 9 [40], 10 [46], 11–13 [48]–[54]; Transcript of Sonja Bauer, 3 June 2021, 1389–91.
382 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 4 [34]. Note the figure in [34] was corrected to 0.7 per cent in evidence by Ms Billi: see Transcript of Rosa Billi, 8 June 2021, 1795.
383 Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y, 23.
384 Transcript of Rosa Billi, 8 June 2021, 1802–3.
385 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021 9–10 [52]–[53]; Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y.
386 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 9 [52.5], [52.7].
387 Transcript of Nicolas Emery, 4 June 2021, 1529; Exhibit RC0143 Crown Melbourne Average Daily Unique Visitations report, 1 June 2021.
388 Exhibit RC0322 Table of documents emailed to Steven Blackburn, n.d., Annexure y, 23.
389 Exhibit RC0181 Statement of Rosa Billi, 10 May 2021, 9 [52.7].
390 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 11 [50]; Transcript of Sonja Bauer, 3 June 2021, 1389–91.
391 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 13 [54].
392 Notably, this accords with the reports of a number of people who made public submissions to the Commission. See, eg, Submission 7 Robert Ingmire; Submission 14 Catherine Sommerville; Submission 18 Anonymous; Submission 19 Anonymous.
393 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 36–40 [168]; Transcript of Sonja Bauer, 3 June 2021, 1394–5.
394 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 36–40 [168].
395 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure 4, 77.
396 Transcript of Sonja Bauer, 3 June 2021, 1394–5.
397 Exhibit RC0694 Crown Melbourne Responsible Gambling Code of Conduct, Version 7, May 2021, 9.
398 Transcript of Sonja Bauer, 3 June 2021, 1333; Exhibit RC0110 Crown Melbourne Responsible Gambling Code of Conduct, Version 6, July 2019, 14.
399 Transcript of Sonja Bauer, 3 June 2021, 1341; Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure ee, 2.
400 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure ee, 3; Transcript of Sonja Bauer, 3 June 2021, 1341.
401 Transcript of Sonja Bauer, 3 June 2021, 1341; Exhibit RC0109 Statement of Sonja Bauer, Annexure ee, 3 [1.5].
402 Transcript of Sonja Bauer, 3 June 2021, 1342–3; Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure ee, 3 [1.5].
403 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure ee, 3 [1.4], 4; Transcript of Sonja Bauer, 3 June 2021, 1343.
404 Transcript of Sonja Bauer, 1 June 2021, 1166, 1174.
405 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, 28 [121]; Transcript of Sonja Bauer, 3 June 2021, 1343−4.
406 Submission 22 Stuart McDonald; Submission 25 Peter Jankowski, 2; Submission 46 Anonymous, 1. See also Submission 69 Financial Counselling Victoria, 2.
407 Transcript of Sonja Bauer, 1 June 2021, 1172.
408 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 115; Transcript of Craig Walsh, 25 June 2021, 2582, 2593–8.
409 Transcript of Craig Walsh, 25 June 2021, 2604.
410 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 168 [E.49].
411 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 169 [E.50]–[E.52].
412 Transcript of Craig Walsh, 25 June 2021, 2579.
413 See, eg, Transcript of Employee 7, 27 May 2021, 1052.
414 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 3 [17], 6 [19].
415 See, eg, Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 3–7 [16]–[31].
416 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 11 [66].
417 Exhibit RC1250 Crown Rewards Rules, 1 August 2019, 6 [6], 9 [9].
418 See, eg, Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 2 [11], 3–5 [18]–[19].
419 Transcript of Nicolas Emery, 4 June 2021, 1457, 1461, 1473–5, 1482.
420 Transcript of Nicolas Emery, 4 June 2021, 1482.
421 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 11–12 [66]–[71].
422 Transcript of Nicolas Emery, 4 June 2021, 1460.
423 Transcript of Nicolas Emery, 4 June 2021, 1461.
424 Transcript of Nicolas Emery, 4 June 2021, 1468.
425 Transcript of Nicolas Emery, 4 June 2021, 1458.
426 Transcript of Ahmed Hasna, 3 May 2021, 8–9. ‘[O]n that occasion I got called in to pick up Phil Collins tickets, because you go in and pick them up, I went in to pick them up and I dropped 30,000. So going in to pick up Phil Collins tickets cost me $30,000 for my friends that went to watch him … Nothing is for free, it’s all calculated, it’s pretty smart. They know how to play you and they play you quite well.’
427 Transcript of Nicolas Emery, 4 June 2021, 1474–5.
428 Transcript of Nicolas Emery, 4 June 2021, 1468.
429 Transcript of Nicolas Emery, 4 June 2021, 1468–9; Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 8 [42], [44].
430 Transcript of Nicolas Emery, 4 June 2021, 1468.
431 Transcript of Nicolas Emery, 4 June 2021, 1505.
432 Exhibit RC0146 Statement of Mark Mackay, 5 May 2021, 7 [21].
433 Transcript of Nicolas Emery, 4 June 2021, 1468–9.
434 Transcript of Nicolas Emery, 4 June 2021, 1470–3.
435 Transcript of Sonja Bauer, 3 June 2021, 1377−80; Transcript of Shane Lucas, 4 June 2021, 1577; Transcript of Mark Mackay, 7 June 2021, 1693–708; Transcript of Rosa Billi, 8 June 2021, 1827–8.
436 Transcript of Sonja Bauer, 3 June 2021, 1378.
437 Transcript of Mark Mackay, 7 June 2021, 1695, 1703–5.
438 Transcript of Mark Mackay, 7 June 2021, 1696.
439 Transcript of Mark Mackay, 7 June 2021, 1695–7. From April 2018, no minimum stay on property was imposed.
440 Transcript of Mark Mackay, 7 June 2021, 1704.
441 Submission 79 Deakin University, 7–8.
442 Submission 79 Deakin University, 2, 11–12.
443 Submission 79 Deakin University, 9.
444 Exhibit RC0168 File Note regarding VCGLR meeting with Ethnic Community Council of Victoria, 28 November 2017, 3, [10]. See also Transcript of Mark Mackay, 7 June 2021, 1704–5.
445 Transcript of Mark Mackay, 7 June 2021, 1708–9; Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021.
446 Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021, 2.
447 Submission 09 La Trobe University.
448 Submission 09 La Trobe University, 2–3.
449 Submission 09 La Trobe University, 2–3.
450 Submission 09 La Trobe University, 2.
451 Submission 09 La Trobe University, 3.
452 Submission 09 La Trobe University, 7.
453 Submission 09 La Trobe University, 3.
454 Submission 09 La Trobe University, 7.
455 Submission 09 La Trobe University, 3.
456 Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021, 2.
457 Transcript of Manorani Guy, 8 June 2021, 1849–50.
458 Transcript of EZ, 20 May 2021, 390, 394, 396–7; Transcript of FZ, 27 May 2021, 1087, 1092, 1096.
459 See, eg, Submission 65 Federation University, 5; Submission 79 Deakin University, 14–15.
460 See, eg, Submission 65 Federation University, 5; Submission 79 Deakin University, 14–15.
461 Transcript of Shane Lucas, 4 June 2021, 1565–6.
462 Supplementary responsive submission Crown—Casino gambling data, 13 August 2021, 2–4 [4]–[19]; Transcript of Shane Lucas, 4 June 2021, 1582; Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 191 [F.50].
463 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d.
464 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure d, 8–10.
465 See Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 339–41, Annexure F1.
466 Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021, 2; Exhibit RC0652 Email chain between Steven Blackburn and Helen Coonan et al, 20 May 2021, Annexure a; Exhibit RC0652 Email chain between Steven Blackburn and Helen Coonan et al, 20 May 2021, Annexure b.
467 Exhibit RC0217 Email from Rowan Cameron to Sonja Bauer, 19 May 2021; Transcript of Steven Blackburn, 1 July 2021, 3048–9.
468 Transcript of Steven Blackburn, 1 July 2021, 3049–50. Before 18 May 2021, the RSG paper detailing the proposed RSG improvements being prepared by Mr Blackburn had only included references to capacity and remuneration: Transcript of Steven Blackburn, 1 July 2021, 3041. See also Transcript of Nicolas Emery, 4 June 2021, 1499, 1516; Transcript of Mark Mackay, 7 June 2021, 1708–9.
469 Transcript of Steven Blackburn, 1 July 2021, 3041.
470 Transcript of Steven Blackburn, 1 July 2021, 3019–20.
471 Transcript of Steven Blackburn, 1 July 2021, 2916.
472 Transcript of Steven Blackburn, 1 July 2021, 3019–20.
473 Transcript of Steven Blackburn, 1 July 2021, 3020, 3037.
474 Transcript of Steven Blackburn, 1 July 2021, 3033.
475 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 6.
476 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 11 [A.23].
477 Transcript of Nicolas Emery, 4 June 2021, 1497.
478 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 5 [19].
479 Transcript of Nicolas Emery, 4 June 2021, 1498.
480 Transcript of Nicolas Emery, 4 June 2021, 1515–16. At the time of writing Crown Melbourne had not taken such steps.
481 Exhibit RC0182 Supplementary statement of Rosa Billi, 2 June 2021, 2 [5.1].
482 Exhibit RC0182 Supplementary statement of Rosa Billi, 2 June 2021, 2 [5.2]; Exhibit RC1592 Article: Loyalty Programmes in the Gambling Industry: Potentials for Harm and Possibilities for Harm-Minimization, 13 June 2018, 496.
483 Exhibit RC0182 Supplementary statement of Rosa Billi, 2 June 2021, 2–3 [5.2]; Exhibit RC1592 Article: Loyalty Programmes in the Gambling Industry: Potentials for Harm and Possibilities for Harm-Minimization, 13 June 2018, 496.
484 See, eg, Transcript of Rosa Billi, 8 June 2021, 1823. But see Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 213 [F.136], in which it is asserted that one study has concluded that ‘[l]oyalty programs … have very little to do with problem gambling’ and that ‘loyalty programs have no significant impact on problem gambling’.
485 See, eg, Exhibit RC0182 Supplementary statement of Rosa Billi, 2 June 2021, 3–4 [5.6].
486 Exhibit RC1592 Article: Loyalty Programmes in the Gambling Industry: Potentials for Harm and Possibilities for Harm-Minimization, 13 June 2018, 502; Exhibit RC0732 Article: Factors that Influence Gambler Adherence to Pre-Commitment Decisions, 23 August 2010, 5–6, 12.
487 Exhibit RC1592 Article: Loyalty Programmes in the Gambling Industry: Potentials for Harm and Possibilities for Harm-Minimization, 13 June 2018, 501–2.
488 Exhibit RC1592 Article: Loyalty Programmes in the Gambling Industry: Potentials for Harm and Possibilities for Harm-Minimization, 13 June 2018, 502. See also Exhibit RC0728 Gambling Research Australia Report Regarding the Role of Loyalty Programs in Gambling, January 2016, 202.
489 Exhibit RC0182 Supplementary statement of Rosa Billi, 2 June 2021, 3–4 [5.6].
490 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, 13 [85].
491 Transcript of Nicolas Emery, 4 June 2021, 1516.
492 Transcript of Employee 5, 21 May 2021, 531.
493 Exhibit RC0219 Crown Responsible Gaming Best Practice Recommendations, May 2021, 2 [5].
494 Exhibit RC0122 Letter from Allens Linklaters to Solicitors Assisting, 26 May 2021, 2; Exhibit RC0652 Email chain between Steven Blackburn and Helen Coonan et al, 20 May 2021, Annexure a; Exhibit RC0652 Email chain between Steven Blackburn and Helen Coonan et al, 20 May 2021, Annexure b.
495 Transcript of Steven Blackburn, 1 July 2021, 3407.
496 Transcript of Steven Blackburn, 1 July 2021, 3048.
497 Transcript of Shane Lucas, 4 June 2021, 1554; Responsive submission VRGF, 2 August 2021, 23–24 [10.3]–[10.6].
498 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 6.
499 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 6.
500 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 88.
501 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 90–2, 95.
502 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 93–5.
503 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 95.
504 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 97.
505 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 6.
506 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 6.
507 See Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, Annexure F2.
508 Transcript of Steven Blackburn, 1 July 2021, 3050; Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 11 [A.23].
509 Supplementary responsive submission State of Victoria on Mandatory Pre-Commitment, 12 August 2021.
510 Exhibit RC0508 Ministerial Direction No S 430, 17 September 2018; Exhibit RC0163 Ministerial Direction No S 85, 21 February 2020.
511 Supplementary responsive submission Crown—Casino gambling data, 13 August 2021, 2–4 [4]–[19]; See also Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 191 [F.50]; Responsive submission VRGF, 2 August 2021, 30–1 [12.4]; Supplementary responsive submission VRGF, 10 August 2021; Transcript of Rosa Billi, 8 June 2021, 1821.
Chapter 09
Limitations on government action
Limitations on government action
Introduction
- The implementation of reforms dealing with problem gambling faces a difficulty.
- The Management Agreement imposes obligations upon the State to pay compensation to Crown Melbourne if certain action is taken. The action includes steps that may reduce gambling harms. These steps include introducing any form of mandatory pre-commitment or amending the manner in which Crown Melbourne’s loyalty program operates.
- The cap on the amount of compensation is $200 million (as adjusted) for each Parliamentary term.
- The relevant part of the Management Agreement is part 5A, which is headed ‘Regulatory Certainty’ and was introduced by the Tenth Variation Deed that was made on 3 September 2014.1 It is necessary to describe this part in some detail.
Regulatory certainty
- One principal provision that was introduced by the Tenth Variation Deed is clause 24A.2. Pursuant to that clause, the State and the VCGLR agreed, among other things, that they will not, without the consent of Crown Melbourne:
- cancel or vary the casino licence on the public interest ground in section 20(1)(e) of the Casino Control Act2
- increase the then current rates of casino tax3
- impose any new tax except where such new tax applies generally throughout Victoria, applies to businesses in the Melbourne CBD or applies to businesses in the hospitality industry.4
- The State acknowledged that if clause 24A.2 was breached Crown Melbourne would suffer compensable loss, the amount of which would be determined according to ordinary principles of law applicable to a breach of contract.5
- In addition, it was provided that if the State or the regulator (or any other State body or State authority) takes any of the actions set out in Annexure 1 to the Management Agreement without the consent of Crown Melbourne, Crown Melbourne will be entitled to compensation.6 The actions, called ‘Trigger Events’, include:
- reducing any maximum bets on table games, semi-automated table games or FATGs or gaming machines
- removing, reducing in number or amending or restricting the then current manner in which gaming machines in unrestricted mode are permitted to operate
- introducing any form of mandatory pre-commitment other than the requirement for players of gaming machines operating in unrestricted mode to set time and net loss limits
- restricting or amending the then current manner in which Crown Melbourne’s loyalty scheme is permitted to operate.7
- There is a carve-out.8 No compensation is payable in respect of any action that:
- has an adverse impact on earnings before interest, taxes, depreciation and amortisation of less than $1 million per annum
- arises directly from disciplinary action taken against Crown Melbourne
- advertises or promotes the government’s responsible gambling, responsible service of alcohol or ‘Quit Smoking’ programs, provided such actions are not targeted solely at Crown Melbourne.9
- There is another carve-out. No compensation is payable as a result of any variation to the casino licence that would otherwise constitute a Trigger Event.10
- It is of significant concern that the State or the regulator might be inhibited from suspending or cancelling a casino licence on public interest grounds, or from taking action that would reduce the harm caused by gambling, if that action would oblige the State to pay damages to Crown Melbourne.
- First, if the public interest demands that Crown Melbourne’s casino licence should no longer remain in force because of misconduct on the part of Crown Melbourne, it would be wholly inappropriate for the State or the regulator to be inhibited from taking that action. There is no countervailing public interest that supports the restriction.
- Second, the position is equally problematic if the State or the regulator considers it necessary to implement a Trigger Event to limit gambling harm caused by the failure of Crown Melbourne to carry out its responsible gambling obligations (howsoever imposed). In that circumstance, an obligation to pay damages is both anomalous and contrary to good government.
- Third, it is also contrary to settled principle. It has long been established that a person should not be entitled to recover damages caused by their own wrongful conduct. The principle is so well settled that it has its own Latin maxim: ex turpi causa non oritur actio. A rough English translation is ‘from a dishonourable cause an action does not arise’.
- An example of the application of this principle is the Highwayman’s case.11 The plaintiff sued his partner for his share of the proceeds of the sale of a gold watch that they had stolen from ‘a gentleman’ walking on Hounslow Heath. The action was dismissed. The lawyers were held in contempt. The parties themselves were arrested and later hanged.
- There are two aspects of the Management Agreement that might offend this principle. First, clause 24A.2(a)(i) provides, in effect, that the State and the regulator must not, without Crown Melbourne’s consent, cancel or vary its casino licence relying on section 20(1)(e) of the Casino Control Act (the public interest ground for taking disciplinary action).
- The circumstances in which a casino licence might be cancelled or varied on the public interest ground might arise in two ways. One is when, quite apart from any misconduct by Crown Melbourne, the casino operations cause such harm that it is in the public interest for those operations to be brought to an end. The other is when action is required because of unacceptable conduct on the part of Crown Melbourne.
- In the latter circumstance the State or the regulator should be freed from the obligation to seek Crown Melbourne’s consent. The present requirement that they must do so cannot be justified.
- The same issue arises in relation to the State’s obligation to pay compensation under clauses 24A.3 and 24A.4 if a Trigger Event is implemented. Where a Trigger Event is required to deal with the consequences of Crown Melbourne’s misconduct, it is unreasonable for the State to pay any compensation.
Recommendation 15: Damages payable by the State
It is recommended that the following obligations under the Management Agreement be repealed:
- the obligation on the State or the regulator to obtain the written consent of Crown Melbourne before action is taken to cancel or vary Crown Melbourne’s casino licence pursuant to section 20(1)(e) of the Casino Control Act
- the obligation on the State to pay compensation pursuant to clauses 24A.3 or 24A.4 for action taken by the State or the regulator that is a Trigger Event,
if a reason for the cancellation or variation or action (as the case may be) is the conduct of Crown Melbourne.
Endnotes
1 For further discussion see Chapter 2.
2 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(a)(i).
3 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(a)(ii).
4 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(a)(iii).
5 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(b).
6 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cls 24A.3, 24A.4, Annexure 1.
7 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.4, Annexure 1 cl 1.1(b).
8 A carve-out is a contract provision by which the parties exclude (or carve out) certain claims or remedies.
9 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, Annexure 1 cl 2.3.
10 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.5.
11 Everet v Williams (1725) 104 ER 725. See ‘The Highwayman’s Case (Everet v. Williams)’ (1893) 9(3) Law Quarterly Review 197.
Chapter 10
Crown Melbourne and the regulator
Crown Melbourne and the regulator
Introduction
- The Casino Control Act requires the regulator, the VCGLR, to monitor, investigate, audit and enforce compliance with the laws and regulations that govern the Melbourne Casino’s operations.
- This involves the VCGLR taking action including:
- having a dedicated team that works from the Crown Casino Complex
- having an audit and investigation team that regularly reviews and assesses the casino operator’s licence obligations
- approving junket and premium player programs and ensuring the relevant approved systems of internal controls are in place and are being implemented
- conducting joint operations with the AFP and Victoria Police in a variety of matters including at the Crown Casino Complex.
- The VCGLR is also required to carry out a comprehensive review of the casino’s operations at least every five years to determine whether Crown Melbourne is still a suitable person to hold its casino licence.1
- In performing its functions, the VCGLR expects Crown Melbourne to work with it in an open and cooperative manner and to disclose to it everything that it could reasonably need to be aware of in order to exercise its functions effectively and efficiently.2
- The community has the same expectations because that is appropriate behaviour for a casino operator.
- A failure by Crown Melbourne to meet those expectations is a critical factor in considering whether Crown Melbourne continues to be a suitable person to hold its casino licence. At the very least, a failure to be open and cooperative in its dealings with the regulator will provide insight into Crown Melbourne’s attitude to its obligations as a regulated entity.
- It may also provide some guidance into how Crown Melbourne will behave in the future. This will be relevant, in particular, in assessing whether Crown Melbourne’s reform program will bring about any real change in its behaviour.
- Crown Melbourne’s interactions with the VCGLR will be analysed through three case studies:
- the investigation into the arrest of Crown workers in China
- the Sixth Review
- the examination of Crown Melbourne’s ICSs in dealing with the assessment of junket operators.
VCGLR supervisory role
- The VCGLR has a statutory obligation to maintain and administer the licensing, supervision and control of casinos.
- This will often require the VCGLR to conduct investigations:
- into the suitability of the casino operator and its associates3
- that can be self-initiated or commenced at the direction of the Minister for Gaming4
- to determine whether disciplinary action should be taken against any person.5
- To conduct an investigation, the VCGLR can exercise its coercive powers to require a casino operator or a person associated with the casino operator to:
- provide relevant information
- produce specified records
- attend before the regulator to answer questions.6
- A failure to comply can be punished as a contempt of the Supreme Court of Victoria.7
- The VCGLR also has power to direct a casino licensee to ‘adopt, vary, cease or refrain from any practice in respect of the conduct of casino operations’. Failure to comply with a direction is a criminal offence.8
Case study: China arrests
- The circumstances surrounding the arrests of 19 Crown employees have been recorded in detail in the Bergin Report and in the VCGLR’s China Report. There is a summary in Chapter 3. Though it will involve some repetition, it is convenient here to provide a brief recitation of the background leading to the arrests.9
Crown’s VIP Program and China
- Since its establishment, Crown Melbourne has actively sought to solicit VIP gamblers from overseas to play at its casinos.10 To support this effort, Crown has a VIP International department, which services Crown Melbourne and other Crown casinos.11
- The VIP International department has been essential to Crown Melbourne’s financial success. In the 2013 financial year turnover from overseas gamblers was around $38.9 billion, peaking at $52.3 billion in the 2015 financial year. Between 2014 and October 2016, when 19 members of Crown’s staff were arrested, Crown’s China operations had the strongest year-on-year growth of any market the department was involved in.12
- From 2000, Crown’s activities in China were conducted by staff stationed in Hong Kong and Macau.13 However, by 2012 Crown had a number of China-based staff who were employed by Crown Singapore.14
- This team was made up of administrative assistants and sales staff located in seven regions of China.15 Most worked out of their own homes due to concerns regarding the open promotion of gambling services in mainland China.
- In 2012 Crown established an ‘unofficial’ office in Guangzhou. The office dealt with visa applications for gamblers from Macau, Hong Kong and mainland China.16
- Crown’s China-based staff were overseen by two executives: Mr Michael Chen, President of International Marketing, who was based in Hong Kong, and Mr Jason O’Connor, then Group General Manager VIP International Crown Resorts. Mr Chen was the conduit between staff based in China and his direct report, Mr O’Connor. Mr O’Connor was responsible for the financial performance of domestic and international VIP business, and considered himself the ‘ultimate decision-maker’ in the VIP International department.17
- Two directors had oversight of Crown’s China operations: Mr Barry Felstead, the CEO of Crown Australian Resorts and director of Crown Melbourne and Crown Singapore, and Mr Rowan Craigie, the CEO and Managing Director of Crown Resorts and a director of Crown Melbourne.18
Crackdown in China
- On 6 February 2015, the Chinese Ministry of Public Security (MPS) announced that China was cracking down on the promotion of foreign casinos in mainland China. The statement from the Deputy Bureau Chief of the MPS stated:
A fair number of neighbouring countries have casinos, and they have set up offices in China to attract and drum up interest from Chinese citizens to go abroad and gamble. This will also be an area that we will crack down on.19
- The crackdown was reported in the media. A news article in Reuters published on 6 February 2015 and entitled ‘China’s President Just Declared War on Global Gambling’ (Reuters Article) observed:
Chinese President Xi Jinping has officially declared war on the global gambling industry, warning foreign casinos that Chinese citizens will be gambling much less in China, neighbouring countries, and the US.20
- In June 2015, a number of employees from South Korean casino operators were arrested and detained by Chinese authorities.21 Following the arrests, two China-based Crown staff members were also detained and questioned by Chinese authorities.
- On 9 July 2015, a VIP International staff member based in Wuhan was questioned by Chinese authorities regarding his activities in China. The employee informed the Chinese authorities that he worked for Crown, that his role was to assist customers in their visa applications and that he did not know whether those customers gambled in Australia.22 At the Bergin Inquiry Mr O’Connor and Ms Jan Williamson (Senior Lawyer at Crown Melbourne) acknowledged that these were not truthful answers.23
- The employee was required to provide a ‘certificate of employment’ to the Chinese police by the next day. A letter recording his employment was authorised to be written by Mr Felstead and provided on Crown Singapore letterhead.24 The letter stated that the staff member was employed by Crown Singapore and that Crown Resorts was ‘one of the leading hotel, resort and entertainment companies in Australia …’.25
- A second Crown employee was also questioned by Chinese authorities in July 2015. According to the VCGLR’s China Report, the employee informed the regulator that he was questioned by police. No further action was taken against this employee, though the employee informed Mr Chen of the questioning.26
Arrests and convictions
- On 13 and 14 October 2016, Chinese police conducted a series of raids at the homes of Crown’s China-based staff, arresting 19 employees. Among them was Mr O’Connor, who was visiting China at the time as part of a VIP International roadshow. All 19 employees were charged with breaching Article 303 of the Chinese Criminal Law.27
- Article 303 provides that it is illegal that a person ‘for the purposes of profit [to gather] a crowd to gamble, or [undertake] gambling as a business …’. The Supreme People’s Court of China has ruled that this article applies to a person who organises 10 or more Chinese citizens to go abroad to gamble when kickbacks or referral fees are collected.28
- Ultimately the arrested employees pled guilty to the charges. Sixteen of the 19 employees were sentenced to terms of imprisonment and were fined the equivalent of $1.67 million, which Crown paid.29
- Upon their release, the employees and Crown entered into deeds of settlement pursuant to which they received some form of compensation.30 The Commission has not sought to obtain, nor is it aware of, the terms of those deeds. Most of the employees who were detained no longer work for Crown. Mr O’Connor, however, is currently the Director of Innovation and Strategy at Crown Melbourne.31
VCGLR investigation
- In July 2017, the VCGLR Compliance Division Probity Team opened an investigation into the arrests of the China-based staff.32 The purpose of the investigation was to examine the circumstances surrounding the detention and conviction of the employees, to determine whether there was any corporate governance failure arising out of those circumstances, and to collect information that may have been relevant to the assessment of the suitability of the employees (as some were subject to suitability requirements as Casino Special Employees under the Casino Control Act) in the event that they continued to be employed.33
- The investigation moved through four phases between its commencement in 2017 and the delivery of the Final Report to the Minister in February 2021.
Phase 1
- On 13 July 2017, Mr Jason Cremona (Manager of Licence Management and Audit (LMA) in the Licensing Division) notified Ms Michelle Fielding (Crown’s Group General Manager, Regulatory and Compliance) that the VCGLR would not take immediate action regarding the detention and conviction of the Crown employees but would review the matter and determine whether any action should be taken once the statement of reasons from the Chinese Court had been released.34
- On 31 August 2017, Mr Joshua Preston (Chief Legal Officer, Australian Resorts) attended the VCGLR’s offices and gave a presentation regarding the background to the China arrests (Crown China Presentation).
- Following the Crown China Presentation, on 25 September 2017, Mr Ben Considine, an investigator with the VCGLR’s Investigations Team, emailed Ms Fielding requesting various documents. The documents included minutes from Crown Resorts’ board and board subcommittees regarding Crown Resorts’ operations in China; Crown’s Risk Management Committee materials, such as charters, plans and policies; and communications between Crown and its international employees regarding the steps they should take in conducting their operations.35
- Mr Considine did not receive a response to his email. He sent a follow-up email to Ms Fielding on 5 October 2017, repeating his request and seeking further information, including copies of advices received from Crown’s legal advisors WilmerHale and its external risk advisors, the Mintz Group, and any other information that addressed Crown’s China operations, in particular any advice regarding the prohibitions on gambling in the Chinese Criminal Law.36
- Mr Considine’s requests did not specify a deadline for the production of the documents. Ms Fielding left a telephone message for Mr Considine saying that Crown Melbourne would provide the material ‘by the end of November or first week of December’. On 8 November 2017, Mr Considine emailed Ms Fielding and asked that the documents be provided by 4 December 2017.37
Phase 2
- The second phase began in November 2017, when Mr Timothy Bryant, a Team Leader (Investigations) in the Compliance Division assumed oversight of the investigation.38
- On 27 November 2017, Mr Preston sent Mr Considine material relating to Crown’s risk management systems and some communications between Crown and its China-based employees. In his covering letter, Mr Preston referred to the existence of, but claimed privilege over, legal advices received from WilmerHale. He did provide some advice received from the Mintz Group.39
- Upon reviewing the investigation file and a memorandum prepared by Mr Considine, Mr Bryant decided that he needed more information from Crown Melbourne. Mr Bryant was also concerned about the time Crown Melbourne had taken to provide documents that had been informally requested. Accordingly, he decided to issue formal notices under section 26 of the Casino Control Act to produce the documents he was after.40
- On 4 January 2018, the following section 26 notices were issued:
- a notice requesting records of verdicts, decisions, pleas, findings and details of fines paid regarding the trial of the China-based staff; specific internal audit, financial and risk compliance documents; the letter provided by Crown Singapore regarding the Crown employee questioned by Chinese authorities; and correspondence between Crown Resorts or Crown Melbourne and the Mintz Group.41
- a notice requesting unredacted versions of all documents provided to the VCGLR in November 2017.42
- Between 19 January and 1 February 2018, Mr Preston provided a number of documents to the VCGLR. They included communications between Crown entities and the Mintz Group.43
- On 2 February 2018 the VCGLR issued a further section 26 notice requesting the production of:
Any other records which contain information regarding any identification, assessment or treatment of risks conducted by Crown Melbourne Limited and/or Crown Resorts Limited and/or Crown Resort Pte Ltd (Hong Kong) [Crown Singapore] regarding operations within mainland China from 1 January 2015 to the present, excepting any records or documents which have already been provided to the Commission.44
- In response, on 16 February 2018 Mr Preston wrote to the VCGLR stating that Crown had been unable to locate any documents that contained information about various Crown entities’ identification of risk regarding the conduct of their employees in China other than those already provided or that were subject to claims of privilege.45
- Critically, the letter written by Mr Preston identified, for the first time, the existence of backup tapes that Crown was restoring for the purpose of discovery in a class action that had been commenced against it relating to the China arrests and their effect on the price of Crown shares (Crown Class Action).46 Mr Preston indicated that in the course of reviewing those tapes, further documents might come to light.
- Mr Bryant did not want to wait months to receive further documents. So, between 21 February and 14 March 2018, notices to attend for examination were served on several Crown employees, including Mr Craigie, Mr O’Connor, Mr Felstead and Mr Chen.47
- Mr Bryant conducted the examinations between March and May 2018. During the examinations each witness was accompanied by Mr Preston and Mr Richard Murphy, a senior partner of Crown’s external lawyers MinterEllison.
- The examinations will be discussed in more detail later in this chapter. At this point it is only necessary to mention that during Mr Craigie’s and Mr O’Connor’s examinations, it became apparent that there existed VIP department plans (VIP Presentations) that contained an analysis of the risks of Crown’s operations in China. During Mr O’Connor’s examination, the VCGLR requested that Crown Melbourne produce the plans.48
- Following the examinations, the VCGLR issued a further section 26 notice seeking information about the letter provided by Crown Singapore to the Chinese police. It also sought documents that identified who prepared the letter and any documents relating to the letter or similar letters provided in relation to Crown employees.49
- On 27 March 2018, Mr Murphy provided the VIP Presentations. Mr Murphy advised that the documents had been redacted to ‘mask information of Crown that is not relevant to the matters the subject of the VCGLR’s China investigation’, though he offered the VCGLR the opportunity to review the unredacted documents at Crown’s premises.50
- The VIP Presentations included the ‘F16–F20 Strategic Business Plan Executive Review VIP International’. That plan contained the following statement:
The most recent development was an announcement that authorities are taking a stand against foreign casinos seeking to attract business out of China. This announcement was made about 1 month ago (and likely contributed to the softer than expected CNY period).51
- Mr Bryant told this Commission that, in his view, Crown Melbourne should have provided the VIP Presentations either in response to Mr Considine’s request for information on 5 October 2017 or in response to the section 26 notice issued on 2 February 2018.52
- On 14 May 2018, the VCGLR wrote to Crown Melbourne referring to its failure to produce the VIP Presentations in response to the February notice. It sought reasons why it should not conclude that Crown failed to comply with the notice without reasonable excuse.53
- Mr Preston responded by letter dated 23 May 2018. He submitted that the documents did not fall under the February notice. In particular, Mr Preston wrote:
Crown Melbourne did not produce the Presentations because they are relevantly concerned with market outlook, and do not record risks that were identified as attaching to or arising in connection with activity on the ground in China, or the conduct of any risk assessment in relation to those operations.54
- Mr Preston also provided an update on the restoration of tapes as part of the discovery process in the Crown Class Action.
- A short time later, MinterEllison wrote to the VCGLR advising that a small number of additional documents had been identified as falling within the section 26 notices. On 7 and 8 June 2018 those documents were provided to the VCGLR (June 2018 Materials).
- Prior to receiving the June 2018 Materials, the VCGLR had finalised a summary report of its investigation. The Summary Report was provided to Crown Melbourne for comment on 8 June 2018.55
- The Summary Report recorded that Crown Melbourne’s corporate governance and risk assessments failed to identify and assess the risks associated with the crackdown in China. It noted a number of failings on Crown Melbourne’s part, including an overreliance on Mr Chen and a failure to escalate key incidents and risks to the Crown board.56
- On 26 June 2018, Mr John Alexander (Chairman of Crown Melbourne) wrote to the VCGLR’s CEO, Ms Catherine Myers, with Crown Melbourne’s response to the Summary Report. In his letter, Mr Alexander rejected any suggestion of wrongdoing, writing: ‘To the extent that the Summary Report contains purported findings and conclusions of VCGLR Compliance Division staff which are adverse to Crown Melbourne, they are strongly disputed’.57
Phase 3
- This phase involved consolidating the work previously done and ensuring that Crown Melbourne had produced all documents that fell within the section 26 notices.
- On 23 August 2018, a further section 26 notice was served. Among the documents requested were those that had been the subject of previous notices but had not been produced and those that had previously been redacted for confidentiality purposes.58
- On 21 September 2018, MinterEllison produced four lever arch folders of documents.59 On the same day, Mr Murphy wrote to the VCGLR stating that ‘the whole episode of the detention and conviction of Crown Group staff does not warrant any regulatory action’ and urged the VCGLR to close its investigation. Mr Murphy also advised that additional documents may be made available as the discovery process in the Crown Class Action was ongoing.60
- Mr Bryant was frustrated with Crown Melbourne’s approach to document production. He was particularly offended that Crown Melbourne took its discovery obligations more seriously than its obligation to produce documents under the Casino Control Act.61
- On 14 November 2018, the VCGLR wrote to Crown Melbourne advising that the obligation to provide documents pursuant to the section 26 notices was wholly separate from the discovery process in the Crown Class Action. The letter stated that the VCGLR expected Crown Melbourne to fully comply with all notices and requests for information by 5 December 2018.62 Crown Melbourne did provide additional materials on 5 December 2018 and again on 18 March 2019.63
- After reviewing the additional material, the VCGLR finalised a draft report of its investigation and sent it to Crown Melbourne on 19 May 2019. The Draft Report concluded:
[T]he risk management systems and processes that form the [risk management] framework were never engaged to assess the warning signs and address the risk of Crown staff being detained in China.64
- The Draft Report stated that despite the risk management failures and, in particular, the failure of senior management to appreciate and address the changing regulatory environment in China, Crown Melbourne was still a suitable person to hold a casino licence. The Draft Report also contained a number of recommendations for Crown to adopt.
- On 26 June 2019, MinterEllison informed the VCGLR that Crown Melbourne accepted in principle the conclusion as to its suitability. Critically, and in a departure from the tone of its previous communications, MinterEllison wrote that Crown Melbourne ‘accepted in principle that their risk management framework could deal more directly with the risk of adverse legal action in a foreign jurisdiction, and appropriate mitigation strategies’.65
Phase 4
- On 28 July 2019, Channel 9 aired a segment on 60 Minutes that brought to light new information relevant to the China investigation. The segment included an interview with Ms Jenny Jiang, one of the China-based staff who had been convicted and imprisoned.66 Ms Jiang made a number of allegations, including that:
- Crown had assisted Chinese nationals to obtain visas
- consulate officers in China had helped rubber stamp the visa applications
- despite the crackdown, Crown directed its employees to promote the business
- Crown directed its employees not to cooperate with authorities in the event they were detained.67
- Following the airing of the program, on 23 September 2019, the VCGLR wrote to MinterEllison informing it that due to the new allegations it was not in a position to finalise its report. It sought the contact details of the China-based staff members to determine whether they would be willing to provide information to the VCGLR.68
- MinterEllison ignored the letter.
- On 9 October 2019, the VCGLR issued a section 26 notice seeking production of documents relating to China-based staff.69
- On 16 October 2019, MinterEllison provided the requested documents, though it noted the duty of confidentiality that each employee owed to Crown and stated that Crown was prepared to waive compliance with that duty on condition that it be involved in any interviews with the employees.70
- On 15 January 2020, after filing witness statements in the Crown Class Action, MinterEllison wrote to the VCGLR informing it that by filing the statements, it had waived legal privilege regarding the advices Crown received from WilmerHale.71 The VCGLR then issued a section 26 notice requesting the production of the witness statements.72
- Between August and September 2020, several Crown executives gave evidence at the Bergin Inquiry. The VCGLR reviewed that evidence and the material tendered and issued the following further section 26 notices:
- on 1 October 2020, a notice seeking certain exhibits and documents referred to during the hearing
- on 24 November 2020, a notice seeking the Statement of Issues and Contentions and the closing submissions of Crown Resorts and CPH
- on 26 November 2020, a notice seeking the closing submission of Counsel Assisting the Bergin Inquiry.73
- Crown’s closing submissions made several concessions regarding the arrests of staff in China, including that:
- Crown’s risk management structures and processes were not utilised
- key developments in the operating environment in China were not escalated to either board-level committees or the wider board
- a small group of executives, rather than the board, set the risk appetite of Crown in relation to China.74
- On 22 December 2020, the VCGLR wrote to Crown Melbourne asking for acknowledgement of certain propositions, including that:
- the totality of the events that occurred in China constituted a failure of Crown’s risk management, corporate governance, ethics and culture
- most executives and directors employed or involved in the events that culminated in the arrests, convictions and sentencing in China remained at Crown
- not all directors in the period between 2010 and 2016 were aware, prior to the arrests, that Crown employed staff who lived and worked in China
- the risk appetite of the board would have been zero had the board been informed of certain escalation events, including the crackdown, arrest of South Korean casino staff and questioning of China-based Crown staff by police
- copies of legal advice obtained by Mr Chen or by internal lawyers at Crown Melbourne were not made available to the board prior to the arrests, were not considered as part of Crown’s risk management structures and had never been provided to the VCGLR.75
- Further, the VCGLR noted that having reviewed material from the Bergin Inquiry and the material provided by Crown Melbourne, it was ‘concerned about the degree of candour that Crown had displayed in its dealings with the VCGLR’.76
- Following Crown Melbourne’s response to the propositions put to it, the VCGLR finalised its report and on 19 February 2021 delivered it to the Minister.77
Crown Melbourne’s behaviour during the China investigation
- The investigation was hampered by a deliberate lack of cooperation and candour on the part of Crown Melbourne and its senior executives. The failures were:
- providing incorrect or inaccurate information to the VCGLR
- failing to produce documents when required
- the unnecessary redaction of information
- belatedly conceding matters that should not have been in dispute.
Inaccurate or incorrect information
- On several occasions during the investigation, Mr Preston, Mr O’Connor and Mr Felstead provided incorrect or inaccurate information to the VCGLR and its investigators.
Crown China Presentation
- Prior to the commencement of the formal investigation, Crown sought to downplay its knowledge of the risks associated with the crackdown against gambling in China. This was done in two ways. First, in the Crown China Presentation given by Mr Preston to the VCGLR on 31 August 2017 it was asserted that Crown had sought advice from the Mintz Group regarding the risks associated with operating in China and that the advice given did not indicate there were any substantial risks regarding the activities of Crown’s employees.
- The Crown China Presentation omitted key information from the Mintz Group advice. For example, the Mintz Group had warned Crown that the Public Security Bureau (PSB) was monitoring people working in the gaming business. Crown’s presentation suggested that the monitoring was focused only on those engaged in gambling. The presentation and the advice are set out below side by side:
Crown China Presentation78 | Mintz Group advice79 |
According to sources working in the Public Security Bureau (PSB) in China, most provincial levels of the PSB had intelligence units that routinely monitored people engaged in gambling (emphasis added). | According to sources working in the Public Security Bureau (PSB) system … most provincial levels of the PSB had intelligence units that routinely monitor people who work in the gambling business (emphasis added). |
- The Crown China Presentation omitted other information from the Mintz Group advice. One omitted portion read:
In essence, we learned that the Guangdong PSB had recently received instructions from central PSB to step up monitoring of foreign gambling companies marketing activities throughout China ...80
- The selective use of the Mintz Group advice has not been explained. Perhaps there was no intention to mislead the regulator, as Crown Melbourne submits.81 Whether intended or not, does not matter. Mr Bryant believed that the PSB was monitoring people who gambled, not people who worked in the gambling business. He would not have been under that mistaken belief if the Mintz Group advice had been accurately presented.
- Second, the Crown China Presentation suggested that Crown had taken active steps to ensure that it was not in breach of Article 303 of the Chinese Criminal Law. One slide in the Crown China Presentation stated:
Crown instructed its staff to conduct themselves in China in a manner which it understood would not involve breaching Article 303.
Crown staff were instructed to:
…
Not hand out promotional materials that referred to gaming facilities or terms of play (Crown did not produce such materials for distribution in China) ...82
- The statement that Crown did not produce promotional materials for distribution in China and that staff in China were instructed not to hand out promotional materials was false. In March 2019, the VCGLR received material that included an email from the Group Marketing Executive at VIP International to members of the VIP International Team, including those based in Hong Kong and China. The email described the gambling promotional material that Crown had shipped to its international offices, and included instructions for the distribution of that material in mainland China.83 The promotional material included material inviting patrons to attend Crown Casino and participate in competitions, including one with $1 million prize money.84
- It is possible that Mr Preston was not aware that promotional material was being provided for use in China.85 Certainly that is how Crown Melbourne puts the position. Nonetheless, if Mr Preston was unaware of the true facts he should have made proper enquiries to ensure that misleading information was not given to the regulator.
- Plainly, the Crown China Presentation gave the false impression that Crown had done all it could to not contravene Article 303 of the Chinese Criminal Law.
VCGLR interviews
- Between 7 March and 10 May 2018, Mr Bryant conducted the examinations of Crown executives including Mr Felstead and Mr O’Connor.86 During each interview Mr Preston and Mr Murphy were present.
- Mr O’Connor’s examination took place on 8 March 2018. He was asked about the arrests of Crown’s employees in China. During the questioning, Mr Bryant showed Mr O’Connor the Reuters Article. The following exchange then took place:
Q: Okay. And what was your business strategy at the time that article came out?
A: I wasn’t aware of that, that’s what I’m saying.
Q: Okay, but you’re aware that a crackdown occurred about that time in China, a general anti-corruption crackdown?
A: Yes. A specific crackdown on the casino industry, no.
…
Q: Okay, and who would—as your direct report would have you discussed with your direct report?
A: Yes. Yes, at the time discussed it with my direct reports and probably other senior people in the organisation as well. Can I stress, though, at the time it was understood to be a crackdown on corruption generally. I don’t recall any discussions about crackdowns specifically on casinos or gambling operators.87
- Mr O’Connor’s answers are inconsistent with the contemporaneous communications between himself and other Crown executives about what was occurring in China in 2015. The answers are also different from the evidence Mr O’Connor gave at the Bergin Inquiry.
- On 7 February 2015, the day after the Reuters Article was published, Mr O’Connor had received several emails about the crackdown. The emails make it clear that Mr O’Connor knew about the crackdown and that it was concerned with the activities of foreign casinos.
- For example, on 7 February 2015, Mr Howard Aldridge (Managing Director at Crown Aspinalls) sent the Reuters Article to Mr O’Connor and asked:
Are you guys in Melbourne making any adjustments to the FY16 business plan based upon what is happening across China. Also, is there any concerns for the Crown staff working in China. Maybe we can add this to the topics for discussion when I am in Melbourne.88
- Mr O’Connor responded:
These issues will, undoubtedly bring considerable discussion during the planning process (which is yet to commence).
…
As for the staff, we are always very concerned for their wellbeing and Michael is consulting our lawyers to get a clearer view of what this really means. In the meantime, we all need to take extra care.89
- The effect of the crackdown had also been discussed by Mr O’Connor and other Crown executives. On 7 February 2015, Mr Chen sent an email to Mr Felstead, copying in Mr O’Connor, that referred to a different Reuters article about the crackdown. Mr Felstead responded that it was ‘another good challenge for you both’. Mr Chen wrote:
For us.
This suggests we may need to delay our plans on establishing physical office presence in China.
Also, this raises the alert level on the safety of our staff.90
- Concerns about the events in China were also raised at a meeting between several Crown executives, including Mr O’Connor, Mr Felstead and Mr Chen, on 11 February 2015. An agenda for the meeting was distributed by Mr O’Connor. The following was an agenda item:
2. Industry chatter re marketing crackdown
Avoid travel to Mainland [China] for a while ...91
- Mr O’Connor gave the following evidence at the Bergin Inquiry about the crackdown:
Q: Now, in early February 2015 did you become aware of an announcement by the Chinese authorities that they were cracking down on foreign casinos recruiting Chinese citizens to gamble in other countries?
A: Yes, I was aware of that announcement.
…
Q: So you appreciated, I assume, that this announcement by the Chinese authorities had the potential to create a risk to Crown’s existing business operations in China?
A: Yes, I ... I interpreted this to represent a risk to our business, that’s right.
Q: Yes. And it was a matter that you needed to treat seriously as a senior executive responsible for the VIP international business, I’m sure.
A: Yes.92
- It is clear that what Mr O’Connor said during his examination by Mr Bryant was not correct.
- Mr O’Connor now says that at the time of his examination he was suffering from emotional trauma following his arrest and detention in China. He was also suffering from an unspecified ‘serious infectious disease’. This, he says, caused a memory lapse and he did not intentionally provide false information to Mr Bryant.93
- It is worth pointing out that Mr O’Connor had been asked by Mr Bryant whether he had a medical clearance for his examination and replied that he had. Nonetheless, it may be accepted that the factors that Mr O’Connor identified may have affected his memory.94
- That, however, does not absolve Mr O’Connor of blame. He did not, when he recovered his memory, attempt to correct the false statements he made during his examination. Nor, for that matter, did the lawyers, Mr Preston or Mr Murphy, who were present at both examinations.
- Mr Felstead also provided answers to questions put by Mr Bryant about his knowledge of the crackdown that were inconsistent with the evidence he gave at the Bergin Inquiry. During his examination, Mr Felstead said:
My recollection from the time, and this is in relation to what information’s come from talking to the customers and the like, was that there was certainly a ... certainly a move from the Chinese government to restrict some of the activities of its citizens in terms of ... and a lot of that ... well certainly my understanding was based about Macau, which was evidenced in the drop off in the business in Macau. And a lot of it was and this is once again information from customers and what you hear in the industry, a lot of it was a crackdown on government officials engaging in gambling, which was ... always seemed a bit of a sore point for the Chinese government. That was certainly made loud and clear to us from customers who we would converse with and talk to, and there was certainly a large degree of trepidation about business in Macau for some of our customers, because a lot of the crackdowns were occurring around that. So that was probably the ... that was probably the key thrust that I took from that period.95
- Mr Felstead gave this evidence notwithstanding that he had received emails regarding the crackdown and how that might affect the VIP business.
- Mr Felstead was more forthcoming in his evidence to the Bergin Inquiry:
Q: Now, would you agree that the Chinese government crackdown on foreign casinos seeking Chinese gamblers seems to have been widely published in the media and in industry publications in February 2015?
A: I would agree with that, Mr Bell.
…
Q: And you would agree, would you not, that this announcement, appearing to come from the Chinese government, had the potential to create a serious risk to Crown’s existing operations in China; correct?
A: I think it had the ability to do that if it wasn’t managed correctly.96
- During his examination by Mr Bryant, Mr Felstead was also asked about the questioning by the Chinese authorities of one China-based employee and the letter by Crown Singapore regarding the terms of that person’s employment. Mr Felstead said he could not recall the letter but observed that it ‘rings a bell’.97
- Mr Felstead said that he knew that staff had been questioned, but was under the impression that the questions concerned a customer rather the recruitment of gamblers in China:
Q: Can you recall how that was relayed to you?
A: Look, I think it was ... yeah, I think it was in relation to we’ve had a staff member who’s been ... who’s been questioned and my understanding, it was in relation to a particular ... it could have been in relation to a particular patron but I don’t recall a lot of details about it but I definitely remember there was an incident where a staff member was questioned by a government agency, whether it was the police, I can’t remember.
Q: Can you recall it being in the context of a patron?
A: That was my understanding.98
- Those answers are inconsistent with contemporaneous correspondence to which Mr Felstead was a party. On the day after the employee was questioned, Mr O’Connor emailed Mr Felstead explaining the reason for the questioning and the need for a letter from Crown. The email read:
Hi Baz,
FYI
We had another employee questioned by the Chinese police yesterday.
He seems to have been accused of organising gambling operations or something. He explained that he works for a hotel resort company and helps with visas and travel arrangements etc. They asked for a letter from his employer verifying this.99
- On the same day, Mr Felstead received from Ms Williamson a draft of the proposed letter. Mr Felstead responded ‘Fine by me thanks Jan.’100
- Mr Felstead’s answers to Mr Bryant are also inconsistent with the evidence he gave at the Bergin Inquiry.101 The following exchange highlights the difference:
Q: Were you aware, in July 2015, that the Chinese police had said to this person that they could not tell him who had informed them, but that the issue was that he had organised people to gamble in Australia?
A: I was aware of that.102
- Mr Felstead has proffered an explanation for the apparent inconsistency in his statements. He said he answered Mr Bryant’s questions to the best of his ability. However, by the time he gave evidence during the Bergin Inquiry, Mr Felstead had prepared himself properly and had a better grasp of the facts.103
- Assuming that to be so, Mr Felstead cannot be excused for failing to correct the inaccurate statements made to Mr Bryant. Mr Felstead knew that the investigation being undertaken by the VCGLR was important. It is reasonable to infer that he appreciated the importance of correcting the record.
- It is fair to say that in his evidence before the Commission Mr Bryant was reluctant to criticise Mr O’Connor or Mr Felstead. When asked to explain his reaction to Mr O’Connor’s evidence regarding the crackdown at the Bergin Inquiry, Mr Bryant said:
A: Mr O’Connor was being very forthright in his answers at the ILGA inquiry and at my interview with Mr O’Connor he hadn’t been as forthcoming. I was quite ... having said that, the interview I conducted with Mr O’Connor unfortunately I hadn’t been provided with a lot of material from Crown at that time which would have clearly showed his level of understanding I think of the crackdown.
Q: Mr Bryant, you are being charitable. I want to suggest to you that this was an email that you had shown Mr O’Connor at the interview in 2018, wasn’t it?
A: Yes, it was.
Q: And Mr O’Connor, through Crown, could have had access to all of the documents that you later came to see during the investigation; don’t you agree?
A: Yes, I do.
Q: And you were annoyed, weren’t you?
A: I was very frustrated with how the course of the investigation had played out based on Crown’s level of cooperation through the interviews and the provision of the material.104
- By contrast, in a memorandum to Mr Scott May, General Counsel of the VCGLR, Mr Bryant was less circumspect and described his concerns about ‘possible misleading statements at VCGLR interviews’ by Mr O’Connor and Mr Felstead.105
- While it is understandable that Mr Bryant did not wish to openly accuse Mr O’Connor or Mr Felstead of misleading the VCGLR, where there is a difference between Mr Bryant’s evidence to the Commission and the manner in which he expressed his concerns in his memorandum to Mr May, the latter is preferred.
The production of material
- The manner in which Crown provided documents to the VCGLR in response to informal requests and to section 26 notices deserves criticism. Mr Bryant told the Commission that Crown was ‘not forthcoming’ with disclosure and that when it did provide documents it did so in a piecemeal way.106 Not wishing to be unfair to Mr Bryant, this downplays the true position.
- It is clear from the sequence of events and the correspondence that Crown Melbourne took divergent approaches to the production of documents sought under section 26 notices and the production of documents in the Crown Class Action. As the MinterEllison correspondence shows, many documents were produced to the VCGLR simply because a search for their existence only took place to meet the discovery obligations in the litigation.
- Crown Melbourne did inform the VCGLR and this Commission that it took its obligations under section 26 seriously, and that it had ‘provided considerable focus and resources to respond to the VCGLR’s requests for documents and information’.107 Plainly the ‘focus and resources’ provided were insufficient.
- Not only was the search for documents deficient, but Crown Melbourne’s production of documents to the VCGLR was haphazard. On many occasions, it took Crown Melbourne months to respond to a section 26 notice. For example, documents produced in March 2019 were in response to section 26 notices served in February and August 2018.108 The explanation proffered was that the documents only came to light when meeting the Crown Class Action discovery obligations. Presumably if there had not been a class action the documents would never have been provided to the VCGLR.109
- To state the obvious, Crown Melbourne’s approach to meeting its statutory obligation to produce documents was unsatisfactory. It was particularly unsatisfactory given the important inquiry that was being undertaken by the VCGLR.
- Crown Melbourne puts the blame on Mr Preston, who was in charge of document production.110 No doubt particular individuals bear responsibility for the inadequate response to the section 26 notices. Mr Preston may be one of the individuals at fault. None of that really matters. The point is that it was Crown Melbourne to whom the notices were addressed and it was its responsibility to ensure there was proper compliance with those notices.
- Crown Melbourne also excuses its non-compliance by referring to delays caused by problems with the backup tapes where most of the documents were stored. The reality is that the backup tape searches were undertaken to meet Crown Melbourne’s discovery obligations in the Crown Class Action. Those searches were not carried out to satisfy the section 26 notices. Crown Melbourne had sufficient time to comply with those notices but did not do so.
- Further, representatives of Crown Melbourne and MinterEllison interviewed several staff members in Australia and overseas to find out what had happened in China. The VCGLR was not informed of those interviews. Nor was it provided with details of the information that had been obtained.111
- Crown Melbourne’s unsatisfactory approach gives some insight into the attitude of Crown to its regulatory responsibilities. It shows that those responsibilities were not taken particularly seriously.
- It is also appropriate to refer to the effect Crown Melbourne’s approach had on the VCGLR investigation. The delay in the production of documents had an adverse impact on the VCGLR’s resources. Its investigation took far longer than it should have and that, in turn, delayed the implementation of important remedial action.
Redactions
- Prior to August 2018, Crown Melbourne produced many documents to the VCGLR with redactions based on alleged lack of relevance or claims for legal privilege.
- This also frustrated the investigation. In due course the VCGLR insisted that the documents be provided without redaction. And, ultimately, they were.
- If Crown Melbourne had the mindset to cooperate with the VCGLR it would have taken a different approach. Perhaps some information might have been withheld on the basis of legal privilege. But, in most instances, Crown Melbourne would have provided the documents in unredacted form.
- It speaks ill of Crown Melbourne’s culture that it did not adopt that approach.
Crown Melbourne’s attitude to the investigation
- From the outset, Crown Melbourne positioned itself to advance the proposition that it had acted in accordance with its risk management protocols and done everything it could to ensure its staff observed Chinese law. The Crown China Presentation was only the first step. Crown continued to resist any suggestion that its systems failed to adequately assess the risk the crackdown posed to its staff in China.
- Crown Melbourne was explicit about this in its response to the VCGLR’s Summary Report. The main conclusion in the Summary Report was:
Crown’s corporate governance and risk assessment failed to identify and assess risks stemming from a change in the Chinese government’s approach, in 2015 relating to Chinese citizens being enticed to gamble overseas.112
- The Summary Report also detailed Crown Melbourne’s delays in the provision of documents to the VCGLR and its preference to favour discovery in the Crown Class Action:
The above matters suggest that Crown did not undertake a thorough and diligent search for documents matching the terms of the VCGLR’s notices until the discovery process required by the Federal Court. Crown ought have conducted a thorough and diligent search for documents earlier. This aspect is ongoing and will require a further detailed report however it is considered prudent to bring to the attention of the Commission at this stage.113
- Crown Melbourne’s response was swift and dismissive. In June 2018, Mr Preston instructed Mr Murphy to ‘push back hard on a range of comments, findings and conclusions in the extract and no doubt the report itself’.114 Mr Murphy obliged.
- Mr Murphy informed the VCGLR that Crown Melbourne ‘strongly disputed’ any adverse findings or conclusions. He submitted that there were ‘several fundamental errors which pervade the Report’, making the remarkable statement that the Summary Report failed to ‘identify any specific conduct of any of the detainees (prior to their detentions) which they knew or ought to have known was in breach of China law’.115
- This was simply an attempt to divert attention away from the facts. Those facts were that Crown Melbourne had significant concerns regarding the crackdown and the possibility that Crown’s China-based activities would attract the attention of the Chinese authorities. And it did nothing to protect its staff.
- Crown Melbourne rejected the VCGLR’s criticisms regarding its document production. It contended that Crown had sought to expedite the process where possible and had engaged in a ‘painstaking and expensive document retrieval process involving the restoration of backup tapes’.116 That process, however, was undertaken to meet Crown Melbourne’s discovery obligations in the Crown Class Action, not its statutory obligation to comply with the section 26 notices.
- Crown Melbourne also made efforts to resist further investigatory steps being taken. On 21 September 2018, Mr Murphy wrote to the VCGLR asserting that ‘the whole episode of the detention and conviction of Crown Group staff does not warrant any regulatory action’. He went on:
Crown respectfully submits that it is appropriate in all the circumstances for the VCGLR to close its investigation on the basis that no disciplinary or other action is warranted.117
- The Crown Resorts board also considered a number of ways to prevent the Summary Report being provided to the Minister or being made public. The minutes of its June 2018 meeting record:
The Board discussed the draft China investigation report in detail and, having regard to the content of the draft report, endorsed the recommendation to seek to request that the VCGLR not provide the full report to the Minister, and instead provide a much shorter executive summary, together with a response from Crown Melbourne.
The Board recommended that, if the VCGLR refused the Company’s request to provide a summary to the Minister, the matter be brought back to the Board for further consideration, including whether an injunction be sought.118
- Although there was no basis for any court intervention, either Mr Preston or Mr Murphy contemplated bringing proceedings against the VCGLR. There may have been a meeting where this was discussed. That is not clear. What is clear is that notes were prepared for a possible meeting. Those notes indicate that either Mr Preston or Mr Murphy should implore the VCGLR not to finalise its report or provide a draft to the Minister in order to avoid a public fight between Crown Melbourne and the regulator and avoid:
…
the risk of court action to restrain finalisation or publication of the report, including the possibility of Michael Chen taking such action, either in Victoria or the US, to protect his reputation
…
any challenge to the power of the VCGLR to promulgate a gratuitously damaging report outside the statutory framework of its 5 yearly review reports ...119
- Crown Melbourne’s position softened after the VCGLR got its hands on incriminating documents. In response to the Draft Report, Crown Melbourne accepted that its risk management framework could have more directly dealt with the risk of adverse action against the China-based staff.120 By that time, however, Crown Melbourne had no alternative but to face the reality of the situation.
Conclusion
- In stark contrast to its approach to the VCGLR, Crown Melbourne did acknowledge its failings during the Bergin Inquiry. It accepted that:
- ... failings occurred in relation to China. Risk management structures and processes were not utilised. Important developments in the operating environment in China were not escalated to board-level committees and to the wider board. They should have been. The failure to escalate those developments meant that a small group of individuals made the decision about how to respond to them. The board should have made those decisions. That small group, and not the board, set the risk appetite of Crown in relation to China. This should not have happened.
- ... the management of the external advice obtained in connection with the China operations was inadequate. All of that advice should have been provided to and assessed by Crown’s internal lawyers. That Crown’s internal lawyers obtained copies of much of the advice only after the China arrests was a failing.121
- Crown Melbourne’s repeated insistence to the VCGLR that it had done nothing wrong was wholly unjustified. It was only when all the incriminating information was unearthed and Crown Melbourne became the subject of even more intense scrutiny that it had no other option than to concede that its processes were insufficient to meet the risks on the ground in China.
- If Crown Melbourne had properly appreciated its obligation to be cooperative and forthcoming, and acted in accordance with that obligation, the VCGLR’s investigation would have been over much sooner. Crown Melbourne’s failings would have been more quickly identified and repaired.
- Regrettably, Crown Melbourne’s culture did not allow it to take that course.
Case study: VCGLR Sixth Review implementation
- Pursuant to section 25 of the Casino Control Act, the VCGLR is obliged to conduct regular reviews to assess whether a casino operator remains a suitable person to hold its casino licence.
- The VCGLR conducted its Sixth Review of Crown Melbourne and released its report in June 2018. As a result of that review, the VCGLR found that Crown Melbourne continued to be a suitable person to hold its casino licence. Nonetheless, its Sixth Review made several recommendations for Crown Melbourne to adopt.
- There were 20 recommendations in all.122 One recommendation (Recommendation 17) concerned the risk of money laundering through the Melbourne Casino by junket operations. Another was in relation to a review of Crown Melbourne’s risk management (Recommendation 3). Crown Melbourne’s response to both recommendations will be discussed below.
Recommendation 17
- Recommendation 17 was made because the VCGLR was concerned that Crown Melbourne did not have sufficiently robust controls in place to reduce the risk of money laundering by junket players.
- Crown Melbourne was required to have, and did have in place, ICSs for junkets.
- The ICSs for junkets did not adequately deal with junket players. In particular, the ICSs did not require that Crown Melbourne determine what proportion of front money put up by the junket operator had been contributed by each junket player.123
- The Sixth Review picked up this point. It recorded:
[T]he VCGLR observes that to assist in mitigating the risks associated with junkets, the current internal control statements for junkets could be strengthened with the inclusion of more robust controls in relation to the identification of individual junket players and their associated gaming transactions when participating in junkets.124
- Recommendation 17 was made to overcome this gap. The recommendation was:
that, by 1 July 2019, Crown undertake a robust review (with external assistance) of relevant internal control statements, including input from AUSTRAC, to ensure that anti-money laundering risks are appropriately addressed.125
- Before finalising the Sixth Review, the VCGLR provided a draft (containing Recommendation 17) to Crown.126 Crown Melbourne responded to the draft. As regards Recommendation 17 the response simply noted: ‘Recommendation supported’.127
- Following the publication of the Sixth Review, Mr Alex Fitzpatrick, the VCGLR’s Director of Licensing, asked Mr Cremona to oversee the implementation of the recommendations.128
Crown Melbourne’s response to Recommendation 17
- Representatives of Crown Melbourne and the VCGLR met on a quarterly basis.129 The quarterly meeting held on 25 September 2018 was attended by Mr Cremona, Mr Rowan Harris (from the VCGLR), Mr Xavier Walsh of Crown Melbourne and Mr Preston. One of the agenda items was the report of the Sixth Review. The minutes record:
Recommendation 17. Crown noted that it had spoken to senior managers from AUSTRAC regarding this recommendation. The VCGLR will provide greater clarity of the recommendation and consult with AUSTRAC.130
- Mr Cremona told the Commission that at the meeting the discussion centred around the reasons for the recommendation and how the VCGLR expected Crown Melbourne to satisfy the recommendation. The Crown Melbourne representatives said they were unclear what was required. Mr Cremona said that he informed those present he was surprised that Crown sought any ‘clarity’ as the matter had been clearly explained in the Sixth Review.131
- On 31 October 2018, there was another meeting between representatives of the VCGLR and Crown Melbourne to discuss the recommendation. Those present included Mr Harris, Mr Cremona, Ms Fielding and Ms Sonja Bauer (then Group General Manager Responsible Gaming, Crown Resorts). Ms Fielding wanted to know what the VCGLR expected by Recommendation 17. The minutes record the VCGLR’s unequivocal response:
The VCGLR advised that in their view part of this recommendation is about ensuring greater visibility of individual junket players and their gaming activity to ensure that Anti Money Laundering risks are appropriately addressed. Therefore, it is expected that the review of the appropriate ICS, which will include the Junkets and Premium Player Programs ICS, will vary the applicable ICS to enable the same level of transparency for individual junket player activity as there is for premium players … In reviewing the ICS, Crown would need to seek input from the VCGLR in conjunction with AUSTRAC regarding record keeping in relation to individual junket players (which Crown noted is not required by the Recommendations) and this should inform reporting of any suspicious matters by Crown (which Crown notes is not required by the Recommendations).132
- On 9 November 2018, Mr Cremona wrote to Ms Fielding. He referred to the discussion at the meeting and asked that if Crown needed any further clarification, it inform the VCGLR as soon as possible.133
- Mr Cremona told the Commission that his purpose in writing was to ensure there was ‘clarity’ regarding the recommendations.134 No response was received.135
- On 18 January 2019, Crown Melbourne provided a table to the VCGLR outlining its progress on all the recommendations made in the Sixth Review. In relation to Recommendation 17, the table recorded:
Crown has met with AUSTRAC to discuss this recommendation. A new joint AML Program across Crown’s Australian Resorts is being developed and will be reviewed by an external party. AUSTRAC is being kept informed of progress.
Internal controls are being reviewed.136
- It would have been obvious to Crown Melbourne that a new AML program was not what was required by Recommendation 17.
- To check on Crown Melbourne’s progress on the implementation of Recommendation 17, representatives of the VCGLR, including Mr Cremona and Mr Harris, met with the Director of Regulator Operations and Acting Manager of Regulator Operations at AUSTRAC on 20 February 2019.
- The AUSTRAC representatives explained that there had been discussions with Crown Melbourne but they were not about AUSTRAC reviewing Crown Melbourne’s ICSs. Rather, Crown had ‘raised [with AUSTRAC an alleged] “uncertainty” in relation to the recommendation’.137
- On 12 March 2019, representatives of Crown Melbourne and the VCGLR again met to discuss the progress of implementing the recommendations in the Sixth Review. In relation to Recommendation 17, the minutes record:
...
- JP [Joshua Preston] advised that the joint (Crown Perth/Crown Melbourne) AML program will be reviewed by an external party and is a ‘significant piece of work’ which may not be completed by 1 July 2019. The VCGLR believes that the joint AML program is not linked to recommendation 17.
- JP advised that Crown consults with AUSTRAC on its ICSs and that the strongest control is the joint AML program. In addition, the strengthening of internal controls would be somewhat limited to the AML internal program/processes and ‘framework documents’. JP believes the fundamental issue re AML/CTF is the internal AML/CTF program, not the ICSs.138
- Mr Cremona told the Commission that he viewed Mr Preston’s statements as an attempt to persuade the VCGLR that Recommendation 17 would be satisfied if Crown’s joint AML/CTF Program appropriately ensured AML risks were addressed.139
- The minutes show that Mr Cremona and/or Mr Harris made it clear that this was not acceptable:
...
- ... JC advised that although the AML/CTF program was important, it was not the key consideration in line with the recommendation.
- JC advised that the ICSs should support the AML program, and the ICS review as required by the recommendation, in particular the Junkets and Premium Players ICS, needed to be subject to Crown’s review and AUSTRAC’s input re its suitability.
- RH [Rowan Harris] referred to the central issue of lack of transparency of individual junket players and referred to page 138 of the Sixth Casino Review report which states ‘mitigating the risks associated with junkets could be strengthened with the inclusion of more robust controls in relation to the identification of individual junket players and their associated gaming transactions when participating in junkets’. JP noted that this was an observation and would not ‘drive’ the recommendation review outcomes.
- The VCGLR made clear its expectations re consultation with AUSTRAC and the review of the ICS for junkets.
- JC advised of his concern that Crown’s response and the discussion in the meeting does not appear to specifically address the recommendation.140
- As the VCGLR had repeatedly pointed out, the AML/CTF Program was not the object of their concern. The ICSs needed reform so that the VCGLR (as opposed to AUSTRAC) had ‘visibility’ regarding junket front money and who contributed to it. That would then satisfy the VCGLR that the casino was taking necessary steps to be operating free from criminal influence.141
- On 23 May 2019, Mr Fitzpatrick wrote to Mr Preston advising that the VCGLR was of the view that Crown may not meet Recommendation 17. In the letter he wrote:
Recommendation 17 requires Crown, by 1 July 2019, to undertake a robust review (with external assistance) of relevant internal control statements (ICSs), including input from AUSTRAC, to ensure that anti-money laundering risks are appropriately addressed. Based on discussions with Commission staff and Crown’s written updates, Crown appears reluctant to undertake a review of any relevant internal control statements (ICSs) with input from AUSTRAC.
At a minimum, to implement this recommendation, the Commission expects that Crown provides AUSTRAC with the relevant ICSs, including the Junkets and Premium Player Programs ICS, to inform the review and assist Crown in ensuring that AML risks are appropriately addressed through its AML program as well as the ICSs.142
- Later the same day Ms Fielding called Mr Cremona. She told him she thought the letter misrepresented Crown Melbourne’s position. She said Crown Melbourne had not indicated it would not seek input from AUSTRAC. She said Mr Preston was furious and would most likely call the Minister.143 Ms Fielding told the Commission she passed on this threat at the direction of Mr Chris Reilly (Director of Corporate Affairs, Crown Resorts). She did say she was uncomfortable doing so.144
- There is no evidence that the threat to call the Minister was carried out. However, Mr Fitzpatrick’s letter did have the effect of forcing Crown Melbourne to engage with Recommendation 17.
- On 14 June 2019, Mr Preston wrote to Mr Fitzpatrick. He refuted several observations made in the letter of 23 May 2019. He then set out the steps Crown Melbourne had taken to comply with the recommendation. They were that Crown Melbourne had:
- reviewed all the ICSs
- identified the ICSs with potential relevance to AML risks
- considered those ICSs against the backdrop of Crown Melbourne’s existing AML/CTF Compliance Framework
- prepared proposed amendments to those ICSs, where appropriate
- recently submitted those ICSs, and the proposed changes, to AUSTRAC, and requested that AUSTRAC provide:
- its view on the changes proposed by Crown
- any other input or commentary from AUSTRAC regarding the relevant ICS
- also recently submitted these ICSs, and the proposed changes, to an independent AML/CTF expert, and asked the expert to provide:
- his view on the changes proposed by Crown Melbourne
- any other input or commentary he had regarding the relevant ICSs.145
- It later transpired that Crown Melbourne had only provided the draft ICSs to AUSTRAC on 30 May 2019—that is, the week after the VCGLR’s letter of complaint to Crown.146
- The independent expert was Mr Neil Jeans of Initialism. The letter requesting Initialism to act was sent on 4 June 2019.147 This was approximately three weeks before the deadline for implementation of the recommendation and some 11 months after the recommendation was made.
- On 1 July 2019, Mr Felstead wrote to the VCGLR asserting that Crown Melbourne had implemented Recommendation 17. The letter stated that:
- Crown Melbourne had completed a robust review of the ICSs
- Crown Melbourne had made changes to its ICS and engaged Initialism and AUSTRAC to review the changes
- AUSTRAC had declined to comment on the changes.148
- Crown Melbourne also advised that it had amended the relevant ICSs by:
- including Crown’s AML/CTF Program as a control in the ‘Minimum Standards and Controls’ section of each relevant ICS
- including a specific risk of ‘Criminal influence and exploitation’ (which captures potential money laundering or terrorism financing activities) in each relevant ICS Risk Assessment where that risk is not already directly or indirectly included.149
The true position
- Recommendation 17 required Crown Melbourne to:
- conduct a robust review of existing ICSs
- to do so with external assistance
- to do so with input from AUSTRAC to ensure that AML risks were appropriately addressed.
- Not one requirement was met by Crown Melbourne.
- As to the first requirement, although Crown Melbourne asserted that it conducted a ‘robust review’, if it conducted any review at all (which it may have) it was not the review required by the recommendation.150
- As to the second requirement, Initialism was engaged by Crown Melbourne to perform a limited task that was premised on Crown Melbourne itself having undertaken a thorough review of all ICSs. The relevant portion of Initialism’s engagement letter reads:
Crown has thoroughly reviewed all ICSs to assess:
- which ICSs are potentially relevant to the assessment and management of money laundering risks (specifically, those ICSs of Business Units directly or indirectly involved in the provision of designated services to patrons); and
- with reference to these relevant ICSs, whether any amendments are appropriate to reflect how Crown identifies, mitigates and manages its money laundering risks under its AML/CTF Program. In so doing, Crown had reference to relevant Internal Control Manuals considered and approved by the NSW Regulator (Liquor and Gaming NSW).151
- It is clear that this is not the work that was required by Recommendation 17.
- The second requirement was that the review be conducted with external assistance. Crown Melbourne said that this assistance was provided by Mr Jeans. However, Crown Melbourne had only sought a limited review by Mr Jeans. The following exchange during Mr Jeans' evidence is illustrative:
Q: The approach you took to Recommendation 17 was the subject to criticism last week in the Commission by Mr Cremona of the VCGLR. In particular, he said that your opinion letter was not a proper response to Recommendation 17 and did not address the substance of Recommendation 17. Is there any response you would like to make to that?
A: Mr Cremona is correct. That was not the scope of the work I was asked to do. I was asked to simply do a limited review of documents provided to me, to then provide an opinion to Crown. That review was limited in the fact that I actually did not provide a statement of work, I did not issue a proposal in relation to this piece of work and actually did not charge Crown for this piece of work. That is because the work was very limited. This was literally less than half a day’s work that I undertook for them to produce this letter.152
- Crown Melbourne went on to say that this is all that was required of it.153 This is not so. Recommendation 17 required more, as is plain from the wording of the recommendation itself. Contrary to Crown Melbourne’s assertion, the second requirement had not been met.154
- The third requirement was for AUSTRAC to be involved. Crown Melbourne did not provide the ICSs to AUSTRAC until 30 May 2019. Previously Crown Melbourne had informed the VCGLR that it had sought AUSTRAC’s assistance much earlier. For example, Crown Melbourne’s update of 18 January 2019 recorded:
Crown has met with AUSTRAC to discuss this recommendation. A new joint AML Program across Crown’s Australian Resorts is being developed and will be reviewed by an external party. AUSTRAC is being kept informed of progress.155
- The update of 2 May 2019 repeated this and added that the ICSs had been reviewed and that ‘preliminary discussions with AUSTRAC have taken place’.156
- That was misleading. Contrary to the submission by Crown Melbourne that the statement simply meant that a meeting had taken place between it and AUSTRAC, when read in context, the statement clearly implied that AUSTRAC was playing a role in reviewing the junket ICSs. That was not correct. The best that can be said is that there had been a brief discussion with AUSTRAC about the ICSs. But nothing AUSTRAC said to Crown Melbourne indicated it would review the ICSs.
- In any event, AUSTRAC decided that it was not appropriate for it to comment on the ICSs.157
Finalisation of Recommendation 17
- On 1 July 2019 the VCGLR considered whether Crown Melbourne had complied with Recommendation 17.
- Mr Cremona told the Commission that the VCGLR had three options:
- accept that Crown Melbourne had satisfied the recommendation without qualification
- accept that Crown Melbourne had satisfied the recommendation, but with the qualification that the VCGLR was not happy with the outcome and would conduct its own review
- find that Crown Melbourne had not met the recommendation and require it to further review the ICSs under guidance.158
- Mr Cremona was of the view that Crown Melbourne had not satisfied the substance of Recommendation 17. Nevertheless, he said that the second option was the best way to proceed. He explained:
[T]he issue we had was if we determined ‘had not met the recommendation’ that would have required Crown to conduct a further review. And that’s where we had a little bit of a sticking point, because in discussions with my team we agreed that that wasn’t an acceptable outcome. We had made Crown fully aware as to what we expected to be the outcome of that review, which comes across through my whole statement, and I didn’t think it was an acceptable outcome, and I don’t believe I could put faith in Crown to deliver the outcomes if we were to require a second review.159
- Mr Harris sent a memorandum to Mr Fitzpatrick outlining Crown Melbourne’s implementation of Recommendation 17. It concluded:
In summary, LMA staff are of the view that Crown has met the specific requirements of recommendation 17. However, the shortcomings in Crown’s proposed amendments to ICSs do not go far enough to provide the sort of transparency to the Commission of individual junket participants and their gaming transactions as intended by the Sixth Casino Review report.160
- In his memorandum Mr Harris recommended that the VCGLR accept Mr Cremona’s second option. The VCGLR adopted the recommendation.
- Crown Melbourne contends that it did comply with Recommendation 17, notwithstanding Mr Cremona’s doubts. It contends that it complied with the recommendation, first, by focusing on its AML/CTF Program, which was the primary mechanism by which money laundering risks were addressed. The second basis for compliance was that, in the end, it stopped dealing with junket operators.
- The problem with each contention is that it fails to grapple with what was required by the recommendation. A particular ICS needed investigation. Crown Melbourne resisted that task.
- The VCGLR was perhaps wrong to find that Crown Melbourne had satisfied Recommendation 17. On the other hand, the approach that it adopted led to a satisfactory outcome.
- Following its decision, the VCGLR obtained a report from Senet Legal.
- The report stated that Crown Melbourne’s suggested changes were high level and raised concerns that they did not adequately address all of the key risks and other areas of concern.161
- The report went on to recommend several changes to the ICSs, which satisfied the regulator’s concern. The changes included a requirement that Crown Melbourne introduce enhanced due diligence measures on an initial and an ongoing basis in respect of junket players.162
- The suggested changes were put in place by Crown Melbourne. Shortly thereafter, Crown announced its intention to suspend junket operations.
Recommendation 3
- The VCGLR’s third recommendation was:
that, by 1 July 2019, Crown assess the robustness and effectiveness of its risk framework and systems, including reporting lines in the chain of command, and upgrade them where required. This assessment should be assisted by external advice.
- As discussed in Chapter 5, in order to satisfy this recommendation, Crown Melbourne engaged Deloitte to ‘review Crown’s risk management program and provide observations and where appropriate, recommendations for improvement’.163
- The engagement did not require Deloitte to assess whether Crown Melbourne’s risk framework was embedded into the organisation, whether it was operating correctly or even whether it was appropriate for Crown Melbourne’s operations.164 Deloitte was only requested to conduct a ‘desktop review’. Deloitte did not interview any relevant members of staff such as the Chair of the RMC or persons responsible for the external audit.165
- Deloitte prepared a report and provided it to Crown Melbourne. The report noted that Crown Melbourne’s risk management framework was consistent with accepted risk management standards and set out certain recommendations regarding future areas of development.166
- Ms Cara Hartnett, who led the review team from Deloitte, acknowledged that the review did not determine or assess the robustness or effectiveness of Crown Melbourne’s risk management framework.167
- On 1 July 2019, Mr Felstead wrote to Ms Myers at the VCGLR stating that Crown Melbourne had complied with Recommendation 3. In his letter, Mr Felstead noted that a number of internal steps had been taken by Crown Melbourne in relation to its risk management systems, including action taken in response to an assessment conducted by PwC Australia that the VCGLR had initiated. The letter also noted that Crown Melbourne was satisfied that its systems were effective and properly embedded into the business following a review of its framework.168
- In relation to the external assistance required by the recommendation, Mr Felstead’s letter stated:
To further ensure the robustness of the enhancements being introduced within the risk management framework, Crown Melbourne sought advice from an external advisory firm on the major elements of the program. The third party review considered that ‘Crown’s risk management framework and its design is consistent with the risk management standard ISO 31000:2018 Risk Management’ and that ‘Crown has a risk management program with the key elements for effective risk management either in place or under development.’ A number of their recommendations were incorporated into the Risk Management Strategy document that was presented to the Crown Resorts Board and approved in June 2019.169
- Ms Anne Siegers is the Chief Risk Officer at Crown Resorts. She was responsible for dealing with Recommendation 3. It was Ms Siegers who determined the nature and scope of Deloitte’s engagement. Ms Siegers was also involved in settling the letter Mr Felstead sent to the regulator.
- Ms Siegers explained why she had not engaged Deloitte to carry out a full and comprehensive assessment of the robustness and effectiveness of Crown Melbourne’s risk management framework. The reason she gave was that ‘a lot of the elements were not in place yet, so doing an assessment of how well it was implemented would not have been done … able [sic] at that stage’. Ms Siegers added that, in any event, ‘the risk management strategy document itself had not yet been approved by the board’.170
- Ms Siegers was asked why the VCGLR was told that the review undertaken by Crown Melbourne had involved ‘an extensive assessment of the depth of understanding and management of risk across the operation’ and that steps were being taken to ensure ‘the robustness of the enhancements being introduced within the risk management framework’.171
- Ms Siegers responded that she was able to assess the robustness of the risk management design.172 She could not explain how that could be done when not all the relevant ‘elements’ were in place to enable Deloitte to assess the robustness of the design. Nor did Ms Siegers keep any record of her work. In these circumstances, it is unlikely that she carried out the robust assessment that was called for.
- It follows that the information Mr Felstead provided in his letter to the VCGLR was incorrect. Perhaps he was given the incorrect information by Ms Siegers. Perhaps he failed to make appropriate enquiries to find out the true position. Whatever be the reason, it does not justify giving inaccurate information to the regulator.
Conclusion
- Crown Melbourne’s approach to the implementation of Recommendation 17 reflects a dismissive and uncooperative attitude towards the VCGLR. A review conducted under section 25 of the Casino Control Act is a serious process. Recommendations made following a review are matters the VCGLR considers important in order to ensure that the casino operations are conducted appropriately.
- Recommendation 17 was driven by a concern about criminal influences and possible money laundering by junket players. The VCGLR was of the view that junket players should be treated in the same way as junket operators and premium players. Crown Melbourne knew this but adopted an approach that was designed to avoid imposing transparency over junket players.
- It is not difficult to discern its reasons. Requiring junket players to provide their personal details and details about the source of their funds would likely see some take their business elsewhere. This was a risk that Crown Melbourne was not prepared to run. Instead, it accepted the risk of money laundering taking place at the casino rather than lose business.
- Recommendation 3 resulted from the VCGLR’s view that Crown Melbourne had failed in relation to risk management. Those failings included non-compliance with its junket internal control requirements and varying the operation of several EGMs without consent.
- That Crown Melbourne falsely claimed compliance with such an important recommendation is extremely troubling.
Case study: Junket ICS investigation
Background
- An approved ICS with which Crown Melbourne was required to comply concerned how it should deal with junket operators, junket players and premium players. The Junket ICS obliged Crown to conduct appropriate probity checks of those persons.
- On 2 October 2020, the VCGLR served a notice on Crown Melbourne under section 20(2) of the Casino Control Act requiring it to show cause why disciplinary action should not be taken against it. The notice alleged that Crown Melbourne had breached the Casino Control Act by not dealing with three junket agents or operators in accordance with the Junket ICS.173 This was later amended to four agents or operators.
- In summary, it was alleged that:
- Crown Melbourne had failed to identify issues relating to Mr Pan (a junket agent). It was alleged that Mr Pan was associated with a legal brothel that had been prosecuted for breach of Victoria’s sex worker laws and that Mr Pan was involved in serious criminal activity with suspected links to organised crime. Crown Melbourne had been advised by the AFP and Victoria Police about Mr Pan’s possible links to human trafficking, illegal brothels and money laundering.
- Crown Melbourne failed to verify open-source media reports that Mr Song (a junket operator) had been convicted of being part of a large illegal gambling syndicate and that it failed to have proper regard to Mr Song’s involvement in a proceeds of crime case that was before the Supreme Court of Victoria.
- Mr Wong (a junket player who was also known as Mr Prawira) had been subject to United Nations imposed travel bans and had his assets frozen because of his links to the former President of Liberia. He was allowed to gamble at Crown Melbourne under the name Yoseph Prawira until 2 March 2015 when his licence to enter the casino was withdrawn. It was alleged that by allowing Mr Wong to gamble, Crown Melbourne failed to conduct sufficient probity checks of Mr Wong, including into his conviction for his failure to disclose asset information in Singapore, which led to his imprisonment for six months in 2005.
- Crown Melbourne failed to have proper regard to certain matters relating to Mr Chau (a junket operator) and his Suncity junket. Those matters included Mr Chau’s connections to the 14K Triad, AUSTRAC inquiries regarding large cash transactions involving Mr Chau and Suncity, and Suncity’s non-compliance with cash controls imposed by Crown Melbourne, which led to the discovery of $5.3 million in cash in Mr Chau’s junket operation desk and a further $300,000 in cupboards in the junket operation room.174
- When the show cause notice was served, Crown Melbourne was aware of several deficiencies in its process of checking the background of junket operators. In August 2019, Crown Melbourne (through MinterEllison) had engaged FTI to conduct a review into its junket program.175 The draft FTI report identified deficiencies in the program. They included that the quality of the staff who conducted the due diligence should be improved, that the staff should be appropriately trained and that the due diligence process should be enhanced.176
- On 11 September 2019, Mr Preston received the draft FTI report from MinterEllison.177
- On 17 December 2020, Ms Helen Coonan (former Executive Chairman of Crown Melbourne and Crown Resorts), Mr Walsh and other Crown executives met with VCGLR representatives. During that meeting, Ms Coonan expressed a desire to work collaboratively with the regulator, saying:
I think it’s absolutely critical that we have lines of communication open and that as we negotiate what I would call perhaps some of our shortcomings we’re able to work through them together so that we do get a good outcome.178
- Mr Walsh spoke about Crown Melbourne’s dealings with ‘top’ local and domestic patrons, stating that Crown Melbourne intended to have direct communications with those patrons to ensure they provided details of matters such as their source of wealth. He said that the onus was now on patrons who had been excluded from the casino to demonstrate why Crown Melbourne should reconsider their exclusion.179
- The impression sought to be given was that Crown Melbourne was now willing to adopt a more cooperative approach with the regulator. Mr Walsh’s comments also suggested that Crown Melbourne appreciated that its previous practices (at least in relation to premium players) were deficient.
- However, this is not how Crown dealt with the show cause notice. Crown Melbourne’s approach was to differentiate between its decision to allow the four individuals to operate or play at the casino, which it conceded should not have been allowed, and the probity processes it had in place, which it asserted were ‘robust’.
- There was a hearing on the show cause proceeding on 21 January 2021. Mr Walsh, Mr Murphy and counsel all addressed the VCGLR on behalf of Crown Melbourne.180
- During the course of the hearing Mr Walsh had accepted ‘that we [Crown] should not be dealing with the four persons noted in the particulars’, having noted ‘Crown does not concede that we have breached our ICSs as articulated in the show cause notice’.181
- Mr Walsh argued that the allegation concerning Mr Pan did not constitute a breach of section 121(4) of the Casino Control Act because Mr Pan was a junket agent and the Junket ICS only applied to junket operators.182
- Mr Walsh said that Crown Melbourne’s probity processes conformed to industry standards and community expectations at the time of the alleged breaches and that Crown Melbourne had adhered to those standards. He provided no evidence to support this claim.183
- Mr Walsh submitted that Crown Melbourne’s probity processes were robust, and that Crown Melbourne reviewed probity information that it obtained from third parties.184 His submission ignored Crown Melbourne’s critical failure, which was that it had not sought any probity information directly from the persons concerned.
- Importantly, the submission was inconsistent with the draft FTI report. It was also inconsistent with the review undertaken by Deloitte into Crown Melbourne’s Due Diligence and Persons of Interest processes. While it is unclear whether Mr Walsh had reviewed the draft FTI report, both reviews identified significant flaws in the probity assessment process for junkets and were provided to executives at Crown Melbourne.185
- Not only was the submission inconsistent with the draft FTI report and the Deloitte review, but Mr Walsh and Crown Melbourne’s legal representatives made no mention of either document.186
- Crown Melbourne argued that its approval process was sound because it was based on decisions made by senior managers such as Mr Preston and Mr Felstead. For example, it was put that Mr Preston had been provided with detailed material about Mr Chau (a politically exposed person) and assessed him to be a suitable person to operate junkets.187
- On 27 April 2021, the VCGLR handed down its decision. It found that Crown Melbourne had breached section 121(4) of the Casino Control Act and imposed a fine of $1 million. It directed that Crown Melbourne refrain from conducting junket operations until it received permission from the VCGLR to do so.188
- The VCGLR said there was real uncertainty about who was responsible for assessing probity information. The VCGLR formed the view that the decision-making process was ad-hoc. It also found that Crown Melbourne’s arguments were inconsistent with the evidence given to the Bergin Inquiry that Crown Melbourne had a Persons of Interest Committee that determined whether a politically exposed person should be allowed into the casino.189
- Finally, despite Crown Melbourne’s assertion that an applicable probity assessment had been made, the VCGLR found that there was no record of the basis upon which probity decisions were made. As noted in its decision:
The evidence and submissions Crown made to the [VCGLR] are bereft of any suggestion that Crown’s relevant probity processes included contemporaneously recording the reasons why probity decisions were made, or the basis upon which they were made.190
Conclusion
- Crown Melbourne’s approach to the disciplinary proceeding can be described as obstructionist, aggressive and involving submissions that had little or no evidentiary support or were inconsistent with positions taken elsewhere.
- Mr Walsh agreed that Crown Melbourne’s approach to the disciplinary hearing was inappropriate. He said:
If we had our time again, I’m not sure we would have adopted that position … We took a position, we had legal advice on that position, and I argued that position. It didn’t serve us very well. In fact, if anything, all it did was raise the ire of the Commission.191
- The directors of Crown Melbourne also accept that the company’s approach was inappropriate. Ms Halton described the approach as ‘deeply regrettable’.192 Ms Coonan said that the correspondence sent in relation to the disciplinary proceeding was ‘very regrettable’.193
- Crown Melbourne and Ms Coonan both said that Crown Melbourne’s approach was that mandated by the then board, which was still dominated by CPH appointees. Ms Coonan went so far as to say that at board meetings she disagreed with that approach.194 She said that it was also the approach recommended by MinterEllison.
- It may well be—indeed, it is likely—that the Crown Melbourne board and Crown Melbourne’s lawyers were responsible for the manner in which the show cause notice was handled. That is not an excuse. It merely identifies the persons for whose conduct Crown Melbourne is responsible. At least in the case of the lawyers, the company was not obliged to go along with their approach. It does seem that it willingly did so.
What should be done
- While Crown Melbourne submitted to this Commission that its relationship with the regulator is now in the hands of new personnel who are committed to a new and transparent relationship,195 the conduct described in this chapter is unacceptable. It is unacceptable for several reasons. If it is allowed to continue:
- the regulator will be unable to properly and efficiently carry out its duties, particularly when confronted with an uncooperative casino operator
- the regulator’s task of overseeing casino operations will be impeded when the casino operator does not make a full and frank disclosure of the information the regulator requires to carry out its functions.
- Chapter 16 recommends a number of reforms to the Casino Control Act. Some of those recommendations are designed to deal with the problems identified in this chapter.
Endnotes
1 Casino Control Act 1991 (Vic) s 25.
2 Responsive submission VCGLR, 2 August 2021, [64].
3 Casino Control Act 1991 (Vic) s 25.
4 Casino Control Act 1991 (Vic) s 24.
5 Casino Control Act 1991 (Vic) s 20.
6 Casino Control Act 1991 (Vic) s 26.
7 Casino Control Act 1991 (Vic) s 27.
8 Casino Control Act 1991 (Vic) s 23.
9 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 239–97; Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the CasinoControlAct1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d.
10 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 21 [73].
11 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 241.
12 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 22 [77].
13 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 252.
14 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 252.
15 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 253. According to the Bergin Report, at September 2014, approximately 20 staff lived and worked in mainland China.
16 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 253–4.
17 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 25 [101]–[102].
18 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 26 [107]–[109], 27 [114]–[115].
19 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 55 [306].
20 Exhibit RC1578, Article: China’s President Just Declared War on Global Gambling, 6 February 2015.
21 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 261 [127].
22 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 283–4, 286.
23 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 286; Bergin Inquiry Transcript (O’Connor), 3 September 2020, 2031 [42]–[46]; Bergin Inquiry Transcript (Williamson), 9 September 2020, 2222 [1]–[4].
24 Exhibit RC0007 Email chain between Barry Felstead and Jan Williamson, 10 July 2015.
25 Exhibit RC1549 Letter from Crown Resorts to whom it may concern, re employee in Hong Kong, 9 July 2015.
26 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 73 [424]–[425].
27 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 291.
28 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 255–6.
29 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 291–2; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure j, [7].
30 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 19 [55]–[56].
31 Exhibit RC1512 Statement of Jason O’Connor, 15 June 2021, 1 [1].
32 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 5 [18]; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure b.
33 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 5 [19].
34 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure b.
35 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure e.
36 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure f.
37 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure h.
38 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 1 [1], 2 [8], 10 [34].
39 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure i.
40 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 10–11 [37]–[38]; Transcript of Timothy Bryant, 17 May 2021, 52–3.
41 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure k.
42 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure l.
43 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure m; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure n.
44 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure o, 2.
45 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure p.
46 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure p.
47 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 13–14 [44].
48 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure cc [18]–[19].
49 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aa.
50 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bb.
51 Exhibit RC1579 Crown F16–F20 Strategic Business Plan Executive Review, VIP International, n.d., 4.
52 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure cc.
53 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure dd.
54 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ff, 2.
55 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure kk.
56 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ll.
57 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure rr, 2 [5].
58 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ss.
59 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure tt.
60 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure uu.
61 Transcript of Timothy Bryant, 17 May 2021, 92, 95.
62 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ww.
63 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure xx; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aaa; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbb.
64 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure eee, 9 [26].
65 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure hhh, 4 [26].
66 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 34 [96]–[97].
67 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 34–5 [97].
68 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure kkk.
69 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure lll.
70 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure mmm.
71 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure sss.
72 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure uuu.
73 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure www; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbbb; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure cccc.
74 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure dddd, 17 [59], 19 [69].
75 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure eeee.
76 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure eeee.
77 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 2.
78 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure d, 6.
79 Exhibit RC0004 Email from Michael Chen to Jason O’Connor, 26 March 2015, 2.
80 Exhibit RC0004 Email from Michael Chen to Jason O’Connor, 26 March 2015, 2.
81 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 293 [I.17].
82 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure d, 12.
83 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 31–2 [88(d)]; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbb, [23(B)].
84 Exhibit RC1559 Crown Resorts Explore VIP Magazine Issue 14, Melbourne, Perth & London, July–September 2016, 8.
85 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 293–4 [I.18]. Joshua Preston filed a submission to the Commission, but did not address this issue. See Responsive submission Joshua Preston, 2 August 2021.
86 Mr Bryant was assisted by other members of the VCGLR, including Mr Jarrod Wolf and Mr Stephen Brown.
87 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure w, 55.
88 Exhibit RC1550 Email chain between Jason O’Connor, Michael Chen and Howard Aldridge, 10 February 2015.
89 Exhibit RC1550 Email chain between Jason O’Connor, Michael Chen and Howard Aldridge, 10 February 2015.
90 Exhibit RC1551 Email chain between Michael Chen, Barry Felstead and Jason O’Connor, 7 February 2015.
91 Exhibit RC1580 Email chain between Jason O’Connor, Barry Felstead et al, 11 February 2015.
92 Exhibit RC0005 Bergin Inquiry Transcript (O’Connor), 3 September 2020, 2011–13.
93 Exhibit RC1512 Statement of Jason O’Connor, 15 June 2021, 3 [22]; Responsive submission Jason O’Connor, 2 August 2021, 2–3 [9]–[11].
94 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure w, 3–4.
95 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure y, 15–16.
96 Bergin Inquiry Transcript (Felstead), 17 August 2020, 1166–8.
97 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure y, 33.
98 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure y, 32.
99 Exhibit RC0006 Email chain between Jason O’Connor and Barry Felstead, 10 July 2015.
100 Exhibit RC0007 Email chain between Barry Felstead and Jane Williamson, 10 July 2015.
101 Bergin Inquiry Transcript (Felstead), 18 August 2020, 1215.
102 Bergin Inquiry Transcript (Felstead), 18 August 2020, 1217.
103 Exhibit RC1581 Supplementary Statement of Barry Felstead, 26 July 2021, [4]–[6], [8], [12]–[16], [35]–[37], [39]–[41], [43]–[44].
104 Transcript of Timothy Bryant, 17 May 2021, 73.
105 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aaaa, 1.
106 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 47 [138(b)]; Transcript of Timothy Bryant, 17 May 2021, 83.
107 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure xx, 8; see also Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 294–5 [I.24].
108 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 31 [87]; see also Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbb, 1.
109 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aaa.
110 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 295 [I.25].
111 Transcript of Richard Murphy, 29 June 2021, 2767, 2795.
112 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ll, 4.
113 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ll, 21 [9.2].
114 Exhibit RC0273 Email from Joshua Preston to Barry Felstead et al, 8 June 2018.
115 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure rr, 3.
116 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure rr, 7.
117 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure uu.
118 Exhibit RC0278 Crown Resorts Limited board meeting minutes, 12 June 2019, 7.
119 Exhibit RC0279 File Note regarding meeting with the VCGLR, 19 June 2019, 4.
120 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure hhh.
121 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure dddd, 17 [59]–[60].
122 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018.
123 Transcript of Jason Cremona, 18 May 2021, 132.
124 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 138.
125 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 138.
126 Exhibit RC1582 Confidential Draft of VCGLR Sixth Review of the Casino Operator and Licence, Version to Crown for Comment, 21 May 2018.
127 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure b, 10.
128 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 9 [28]; Transcript of Jason Cremona, 18 May 2021, 139.
129 Transcript of Jason Cremona, 18 May 2021, 139.
130 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure d, 3.
131 Transcript of Jason Cremona, 18 May 2021, 141.
132 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure f, 3.
133 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure i.
134 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 17 [57].
135 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 17 [59].
136 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure n, 8.
137 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 21–2 [65]–[67].
138 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure y, 4.
139 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 25 [81].
140 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure y, 5.
141 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 25 [81]; Transcript of Jason Cremona, 18 May 2021, 164.
142 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure mm, 1.
143 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 36 [106]; Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure nn, 1.
144 Transcript of Michelle Fielding, 28 June 2021, 2665.
145 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure pp, 2.
146 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 37–8 [107]; Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure qq.
147 Exhibit RC0071 Letter from Louise Lane to Neil Jeans, n.d.; the letter is undated but Neil Jeans’ evidence noted the date he received it as 4 June 2019: Transcript of Neil Jeans, 25 May 2021, 804.
148 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure tt, 1–2.
149 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure tt, 3–4.
150 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 308 [I.75(a)] (n 1796); RC0009 Statement of Jason Cremona, 15 April 2021, Annexure tt, 1.
151 Exhibit RC0071 Letter from Louise Lane to Neil Jeans, n.d., 3; the letter is undated but Neil Jeans’ evidence noted the date he received it as 4 June: Transcript of Neil Jeans, 25 May 2021, 804.
152 Transcript of Neil Jeans, 25 May 2021, 807–8.
153 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 307–9 [I.74]–[I.75].
154 Transcript of Neil Jeans, 25 May 2021, 809.
155 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure zzz, 8.
156 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure gg, 9.
157 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure rr.
158 Exhibit RC0011 Email from Jason Cremona to Steve Thurston, 2 August 2019.
159 Transcript of Jason Cremona, 18 May 2021, 195.
160 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure vv, 4.
161 Exhibit RC0463 Letter from DLA Piper to Solicitors Assisting, 31 May 2021, Annexure j, 9.
162 Exhibit RC0463 Letter from DLA Piper to Solicitors Assisting, 31 May 2021, Annexure j.
163 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, Annexure h, 1.
164 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, 1 [4]; Transcript of Cara Hartnett, 9 June 2021, 1881–2.
165 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, 1 [5]; Transcript of Cara Hartnett, 9 June 2021, 1879.
166 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, 3 [16]–[18].
167 Transcript of Cara Hartnett, 9 June 2021, 1883.
168 Exhibit RC0189 Letter from Barry Felstead to Catherine Myers, 1 July 2019, 3.
169 Exhibit RC0189 Letter from Barry Felstead to Catherine Myers, 1 July 2019, 3.
170 Transcript of Anne Siegers, 9 June 2021, 1979.
171 Transcript of Anne Siegers, 9 June 2021, 1984, 1986.
172 Transcript of Anne Siegers, 9 June 2021, 1988.
173 Exhibit RC1523 Letter from VCGLR to Barry Felstead, 2 October 2020.
174 Exhibit RC1552 Letter from Ross Kennedy to Ken Barton, 17 November 2020.
175 Exhibit RC0430 Crown Resorts Brand Committee meeting minutes, 22 August 2019, 2; Transcript of Anne Siegers, 10 June 2020, 2009–10.
176 Exhibit RC0192 FTI Consulting Review of Due Diligence Procedures for Operators and Premium Players Crown Resorts Ltd Report, 10 September 2019.
177 Exhibit RC1619 Letter from Richard Murphy to Joshua Preston, 11 September 2019.
178 Exhibit RC0438 Transcript of Proceedings—VCGLR Record of Meeting, 17 December 2020, 2.
179 Exhibit RC0438 Transcript of Proceedings—VCGLR Record of Meeting, 17 December 2020, 11–12.
180 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021.
181 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021, 5, 6.
182 Exhibit RC1525 Letter from Ken Barton to Cameron Warfe, 30 October 2020, 8.
183 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021, 5, 12.
184 See, eg, in relation to Mr Song, Exhibit RC1526 Letter from Ken Barton and Xavier Walsh to Scott May and Cameron Warfe, 5 February 2021, 5.
185 Exhibit RC0192 FTI Consulting Review of Due Diligence Procedures for Operators and Premium Players Crown Resorts Ltd Report, 10 September 2019.
186 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021.
187 Exhibit RC1553 Letter from Ken Barton to Cameron Warfe, 4 December 2020, 7–8; Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021, 38.
188 Exhibit RC0292 VCGLR Decision and Confidential Reasons for Decision, 27 April 2021, 2.
189 Exhibit RC0292 VCGLR Decision and Confidential Reasons for Decision, 27 April 2021, 15–16.
190 Exhibit RC0292 VCGLR Decision and Confidential Reasons for Decision, 27 April 2021, 17.
191 Transcript of Xavier Walsh, 5 July 2021, 3333.
192 Transcript of Jane Halton, 7 July 2021, 3586.
193 Transcript of Helen Coonan, 8 July 2021, 3766.
194 Responsive submission Helen Coonan, 2 August 2021, 19 [93].
195 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 290, 314–15 [I.102]–[I.106].
Chapter 11
Casino tax
Casino tax
Introduction
- Crown Melbourne, as the casino operator, is obliged to pay a casino tax and other moneys to the State. The obligations are not imposed by the Casino Control Act.1 Rather, they are found in the Management Agreement made between Crown Melbourne (then known as Crown Casino) and the State on 20 September 1993.2
- The Management Agreement was ratified by the Parliament by passage of the Management Agreement Act. That Act provides that the Management Agreement ‘takes effect as if it had been enacted in [the] Act’.3 That is to say, the agreement has the force of a statutory enactment.
- The Management Agreement has been amended by 10 Deeds of Variation. Each deed has also been ratified by an Act of Parliament.4
- This chapter describes the amounts Crown Melbourne is required to pay to the State under the Management Agreement, with particular emphasis on the casino tax.
Casino tax
- The Management Agreement in its original form provided that Crown Melbourne was to make the following payments to the State:
- a Premium Payment ($10 million) and a further payment of $190 million, in consideration for the grant of the casino licence5
- a Casino Supervision and Control Charge ($5 million) to be paid each financial year from 30 June 1994 until 30 June 1997, in respect of the regulator’s expenses of supervising the establishment of the temporary casino and the Melbourne Casino6
- an additional casino tax of $2,400,000 each month from 1 July 1994 until 30 June 1996 (in aggregate $57,600,000)7
- for each month until 30 June 1997, 20 per cent of the GGR for that month and from 1 July 1997, 21.25 per cent of the GGR for each month8
- a community benefit levy of 1 per cent of the GGR each month9
- an additional casino tax calculated by reference to the amount by which the GGR exceeds what is called the Base Amount.10
- ‘Gross Gaming Revenue’ was defined as:
the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) less the total of all sums paid out as winnings during that period in respect of such conduct or playing of games.11
- The payment obligations have changed over time. It is not necessary to describe each change. Reference will only be made to those changes that relate to Crown Melbourne’s obligation to pay casino tax.
Second Variation
- The Management Agreement was varied by the Second Variation Deed made on 12 October 1995. This variation amended Crown Melbourne’s obligations in relation to the construction of the southern tower of the hotel that was originally required to be completed as part of the original Melbourne Casino Complex. The variation imposed an obligation on Crown Melbourne in respect of revenue from Commission Based Players.
- A ‘Commission Based Player’ is a player who participates in a premium player arrangement or a junket.12
- The variation also imposed obligations on Crown Melbourne:
- to pay a casino tax of 9 per cent of the Commission Based Players’ Gaming Revenue (CBPGR) each month13
- to pay a community benefit levy of 1 per cent of the CBPGR each month14
- if the casino tax on the CBPGR and the community benefit levy for the year commencing on 1 January 1996, or the six-month period commencing on 1 January 1997, was less than $5 million, to pay an additional casino tax to bring the amount paid up to $5 million15
- if the casino tax on the CBPGR and the community benefit levy for any financial year commencing on or after 1 July 1997 was less than $10 million, to pay an additional casino tax to bring the amount paid up to $10 million16
- to pay an additional casino tax if the CBPGR exceeded the Commission Based Players’ Base Amount17
- to pay as an additional tax a monthly guaranteed minimum base tax of $2.8 million from 1 January 1996 and ending 31 December 199818
- to pay $5 million to Tourism Victoria in five equal annual payments of $1,000,000.19
- There was also an obligation to pay interest for any unpaid amounts under clause 22 (tax on GGR and other payments), clause 22A (tax on CBPGR) or clause 22B (guaranteed minimum base tax).20 Interest is at the rate set under the Penalty Interest Rates Act 1983 (Vic).21
- ‘Commission Based Players’ Gaming Revenue’ was defined as:
the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period after 31 December 1995 by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) by Commission Based Players less the total of all sums paid out as winnings during that period to Commission Based Players in respect of such conduct or playing games.22
- In addition, the definition of ‘Gross Gaming Revenue’ was varied by including the words ‘but excluding any Commission Based Players’ Gaming Revenue’ at the end of the definition.23
Sixth Variation
- In June 1999, the Commonwealth, States and Territories entered into the Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations. That agreement requires each State or Territory to adjust their gambling tax arrangements to take account of the GST on gambling operations.24
- The Intergovernmental Agreement was given effect by the Sixth Variation Deed to the Management Agreement made on 3 April 2000. By that variation, the total amount of casino tax payable under clauses 22 and 22A was reduced by the State Tax Credit, being an amount equivalent to the amount determined under division 126 of the GST legislation.25
Ninth Variation
- The Ninth Variation Deed was made on 4 June 2009. It made a number of changes to the rate of casino tax payable to the State:
- The rate of casino tax payable from 1 July 1997 until the day before the commencement of the Ninth Variation Deed was set at 21.25 per cent of the GGR for the relevant month.26
- From the commencement of the Ninth Variation Deed the casino tax became:
- 21.25 per cent of the GGR attributable to the operation of Table Games; plus
- 22.97 per cent of the GGR attributable to the operation of gaming machines.27
- The casino tax on the GGR attributable to the operation of gaming machines was to increase by 1.72 per cent on 1 July 2010 and each year thereafter with the final increase to be in the year commencing 1 July 2014.28
Tenth Variation
- The Tenth Variation Deed was made on 3 September 2014. By that time Crown Casino had changed its name to Crown Melbourne Ltd and the VCGLR had become the casino regulator.
- The Tenth Variation Deed led to several important changes. First, the deed recorded that the Casino Control Act would be amended to permit an increase in the maximum number of gaming machines (from 2,500 to 2,628) that could be located at the Melbourne Casino.29 Second, it was agreed that the term of the casino licence would be extended by 17 years until 18 November 2050.30 Third, it was noted that the casino licence would be amended to increase the maximum number of gaming tables for playing Table Games (from 400 to 440) and to increase the number of stations connected to FATGs (from 200 to 250) at the Melbourne Casino.31
- In return, Crown Melbourne agreed to make the following further payments to the State:
- $250 million within seven days32
- $250 million on 1 July 203333
- if the annual growth of the Normalised Gaming Revenue for the financial year ending 30 June 2014 to the financial year ending 30 June 2022 exceeds 4 per cent, a payment of $100 million, on 1 September 202234
- if the annual growth of the Normalised Gaming Revenue for the financial year ending 30 June 2014 to the financial year ending 30 June 2022 exceeds 4.7 per cent, an additional $100 million, on 1 September 202235
- if the casino tax paid to the State in respect of GGR and CBPGR from New Gaming Product in any year from 1 July 2015 to 30 June 2021 is less than $35 million, an additional casino tax to bring the amount paid up to $35 million.36
- Three new definitions were introduced:
Normalised Gaming Revenue means Gross Gaming Revenue, plus Normalised Revenue from Commission Based Play.37
Normalised Revenue from Commission Based Play means the total turnover from Commission Based Players, multiplied by 1.35%.38
New Gaming Product means the new gaming products permitted to be installed as a consequence of the amendments to the Casino Licence referred to in clause 2.2(b) of the Tenth Deed of Variation and does not include any gaming product installed at the Melbourne Casino as at the Tenth Variation Commencement Date.39 - There was also an obligation to pay interest for any unpaid amounts under clause 21A (the two payments of $250 million) and the casino tax payable under clause 21B (the uplifts if the rate of growth of the Normalised Gaming Revenue exceeded 4 per cent and 4.7 per cent, respectively, in the relevant years).40 Interest is at the rate set under the Penalty Interest Rates Act.41
Conclusion
- Crown Melbourne has acknowledged that since at least 2012 it has been underpaying casino tax owed to the State.
- In July 2021, Crown Melbourne paid approximately $61.5 million to the State on account of unpaid casino tax (including penalty interest).42
- There is an unresolved question as to whether the underpayment of casino tax was far greater. The details of that issue are dealt with in the next chapter.
Endnotes
1 Casino Control Act 1991 (Vic) s 81J.
2 The State and the proposed casino operator were required to enter into the Management Agreement before the casino licence could be granted. See Casino Control Act 1991 (Vic) s 15(1).
3 Casino (Management Agreement) Act 1993 (Vic) s 6(1).
4 Casino (Management Agreement) Act 1993 (Vic) ss 6A–6J, schs 2−11.
5 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 21.1; Casino Control Act 1991 (Vic) s 112A(1)(a).
6 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 22.1(a); Casino Control Act 1991 (Vic) s 112A(1)(b).
7 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 22.1(c).
8 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 22.1(b).
9 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 22.1(d).
10 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 22.2.
11 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 2.
12 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(a), amending Management Agreement cl 2 (inserting the definition of ‘Commission Based Player’).
13 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(x), inserting Management Agreement cl 22A.1(a).
14 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(x), inserting Management Agreement cl 22A.1(b).
15 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(x), inserting Management Agreement cl 22A.2.
16 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(x), inserting Management Agreement cl 22A.3.
17 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(x), inserting Management Agreement cl 22A.4.
18 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(y), inserting Management Agreement cl 22B.
19 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(w), substituting Management Agreement cl 20.3.
20 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(z), inserting Management Agreement cl 22C.
21 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 2 (definition of ‘Default Rate’).
22 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(a), amending Management Agreement cl 2 (inserting the definition of ‘Commission Based Players’ Gaming Revenue’).
23 Casino (Management Agreement) Act 1993 (Vic) sch 3 cl 3.1(e), amending Management Agreement cl 2 (amending the definition of ‘Gross Gaming Revenue’).
24 Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations, signed June 1999 (entered into force 1 July 1999) cl 5(viii).
25 Casino (Management Agreement) Act 1993 (Vic) sch 7 cl 3(b), inserting Management Agreement cl 22C.2; Casino (Management Agreement) Act 1993 (Vic) sch 7 cl 3(a), amending Management Agreement cl 2 (inserting definition of ‘State Tax Credit’); A New Tax System (Goods and Services Tax) Act 1999 (Cth) ch 4 pt 4-4 div 126.
26 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.2(b), amending Management Agreement cl 22.1(b)(ii).
27 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.2(c), inserting Management Agreement cl 22.1(b)(iii).
28 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.2(f), inserting Management Agreement cl 22.1(f).
29 Casino (Management Agreement) Act 1993 (Vic) sch 11 cl 2.1(b).
30 Casino (Management Agreement) Act 1993 (Vic) sch 11 cl 2.1(c).
31 Casino (Management Agreement) Act 1993 (Vic) sch 11 cl 2.2(b).
32 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21A(a).
33 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21A(b).
34 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21B(a)(i).
35 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21B(a)(ii).
36 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(e), inserting Management Agreement cl 22.10(b).
37 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21B(b)(ii).
38 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21B(b)(iii).
39 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(e), inserting Management Agreement cl 22.10.
40 Casino (Management Agreement) Act 1993 (Vic) sch 10 cl 3.1(d), inserting Management Agreement cl 21C.
41 Casino (Management Agreement) Act 1993 (Vic) sch 1 cl 2 (definition of ‘Default Rate’).
42 Crown Resorts, ‘Victorian Casino Tax—Update’ (ASX Media Release, 27 July 2021).
Chapter 12
Unpaid casino tax
Unpaid casino tax
Introduction
- Crown Melbourne is required to pay casino tax to the State. The amount of tax is a percentage of GGR and a percentage of CBPGR, each then adjusted for GST. There is also an uplift (called super tax) if the GGR or CBPGR exceeds a certain amount.
- GGR is defined to mean:
the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) less the total of all sums paid out as winnings during that period in respect of such conduct or playing of games but excluding any Commission Based Players’ Gaming Revenue.1
- CBPGR has an equivalent meaning but is confined to revenue received from Commission Based Players. These are players who participate in premium player arrangements or junkets.2
- Stripped down to their essential elements, both GGR and CBPGR are the difference between ‘sums … received … from playing games’ and ‘sums paid out as winnings’. The underpayment of casino tax has engaged each element.
- To understand the issues raised, it is necessary to explain some background matters regarding Crown Melbourne’s operations, including its loyalty program.
The loyalty program
- Members of Crown’s loyalty program, Crown Rewards, receive various benefits and privileges.
- Members accrue Crown Rewards points based on the amount they gamble at Crown Melbourne and how much they spend at Crown Melbourne participating hotels, and retail and food and beverage outlets, such as restaurants and clubs.3
- Crown Rewards points can be exchanged for goods or services from many outlets at the Melbourne Casino Complex. The outlets include those operated by Crown Melbourne as well as those operated by third party retailers.4 The retailers include high-end stores such as Bvlgari, Hugo Boss, Omega and Rolex, as well as restaurants such as Nobu and Rockpool Bar & Grill.5 If a member elects to use their points at one of the outlets, Crown Melbourne pays the supplier the cost of the goods or services.6 Points can also be exchanged for car parking, meals and hotel accommodation.7
- Separately, benefits are also awarded to members simply based on their type of membership. For example, platinum tier members will, by virtue of that membership, be entitled to free car parking, hotel accommodation or discounted meals.8 On occasion, Crown staff will provide those benefits to selected members as a sign of goodwill.9
Crown’s promotional activities
- Crown Melbourne also offers benefits to its members as part of its promotional activities. The benefits include:
- category 1: Pokie Credit Rewards (Welcome Back/Free Credits Program)
- category 2: Mail Outs (Bonus pokie offers)
- category 3: Pokie credits (Matchplay)
- category 4: Random Riches (Carded Lucky Rewards)
- category 5: Jackpot Payments
- category 6: Consolation
- category 7: Pokie Credit Tickets
- category 8: Bonus Jackpots (dining, hotel accommodation and parking).10
- Most benefits (apart from some in category 5 and all of categories 3, 6 and 8) are provided in the form of pokie credits that can be used to gamble on an EGM.11
- There is an important distinction between the types of member benefits that are provided. The benefits in categories 1, 2, 4 and 7 are provided in the form of pokie credits to be used to gamble on an EGM.12 They cannot be converted to cash and are non-transferable.13
- Category 3 is different. Matchplay are Crown Rewards points that a patron has converted to pokie credits to gamble on an EGM.14
- Category 5 benefits (Jackpot Payments) are also different. A jackpot is defined in the Casino Control Act, in substance, as the ‘winnings … payable’ from money that accumulates as contributions are made to a special prize pool.15 The benefits in category 5 are time-based jackpots. That is, members can win prizes distributed at random by playing on participating EGMs during scheduled promotional times. The prizes include pokie credits, cash, food and beverage vouchers (redeemable at participating Crown Melbourne restaurants) and third party gift cards (for example, for use at David Jones, Coles or BP service stations).16
- Category 6 benefits (Consolation) allow a member to double the amount they would otherwise win on an EGM.17
- An important feature of each of the benefits in categories 1 to 7 is that (except for fixed prize category 5 promotions such as cash or gift cards), in its calculation of GGR and CBPGR, Crown Melbourne has accounted for the benefits when redeemed as a sum received and has deducted the value of the benefits as a sum paid out as winnings. By this method, the benefits had no effect on the calculation of the casino tax.18
- It is worth emphasising that although categories 1 to 7 were often referred to by Crown Melbourne as ‘Bonus Jackpots’, none (apart from possibly categories 5 and 6) were jackpots in accordance with the statutory definition or with ordinary parlance.
The category 8 promotion
- Turning to category 8 Bonus Jackpots (dining, hotel accommodation and parking), the manner in which Crown Melbourne treated this category for the purpose of calculating GGR and CBPGR was different to how it treated the other categories.
- From at least 2000, one of Crown Melbourne’s promotions was its gaming loyalty food program.19 The program allowed a member to earn points based on gambling turnover. The member could purchase a meal or obtain a discount on a meal at participating Crown restaurants based on points accrued on EGMs and table games.20
- In late 2011, Crown Melbourne investigated whether it could treat the cost of its loyalty food program as a sum paid out as winnings for the purposes of GGR.
- The concept was set out in a presentation titled ‘Gaming Machines Food Program Initiative’, prepared in October 2011. The following are extracts from the presentation:
Change Gaming Machines Food Program to be controlled by the Linked Jackpot Equipment to reduce costs and increase profit/margin.
‘If anyone in this country doesn’t try to minimise their tax they want their heads read’ (Kerry Packer 1991—House of Representatives Select Committee).
…
Proposal
- Transfer the Issuance control of the Gaming Machine Food Program from Syco to Dacom
- Classify the Gaming Machines Food Program to be a Bonus/Jackpot as per Welcome Back (earn X receive Y)
- Allow the Gaming Machine Food Program Costs to be a Gaming Machine Tax Deduction
Reduce
- Gaming Machines Total Revenue
- Reduce Marketing Costs
- Reduce Tax
Increase:
- Gaming Machines Profit
- Gaming Machines Margin
…
Legal/Compliance Approval
VCGR/Treasury Questions on Tax Deductible Item
- Focus on Bonusing and Jackpots.21
- Two points should be noted about the proposal. First, it intended to treat the category 8 benefits differently to the category 1 to 7 benefits. The category 8 benefits, when used, were not to be treated as sums received for the purposes of calculating GGR. If they were, then there would be no tax advantage. Second, although it was to be styled as a ‘jackpot’, the program did not have any of the characteristics of a jackpot.22 Treating the Gaming Machines Food Program as a jackpot would mask its true character.
- On 6 March 2012, Crown Melbourne decided to go ahead with the proposal.23 There was, however, concern that the regulator might query the addition of the benefits to the sums paid out as winnings. This was for good reason. No aspect of the food program initiative was a sum paid out for a win by the member. So, Crown Melbourne decided to conceal what was about to take place.
- On 22 March 2012, Mr Edwin Aquino, Revenue Audit Manager, sent a memorandum to Mr Peter Herring, now the Group General Manager, Product, Strategy and Innovation. The memorandum stated:
I refer to your proposed reclassification of Gaming Machines Food program to be part of the Bonus Jackpot and allow the promotional cost to be a Gaming Machine Tax deduction.
…
Factoring in the refurbishment, economic environment, impacts from negative publicity and the increase in Gaming Machines Gaming Tax by 1.72% in 1 July 2012, we are of the opinion that the proposed change will not be noticed by the VCGLR.
We would recommend the Gaming department prepares a roll forward style explanation in the event that the VCGLR questions the budgeted gaming tax once our budgets are eventually submitted. We are happy to assist in this process.24
- Ms Debra Tegoni, Crown’s then in-house counsel, considered the permissibility of treating the food program as a sum paid out as winnings. She recorded her views in a memorandum dated 28 March 2012.25
- Ms Tegoni’s memorandum did not definitively say the cost of the food program could be treated as winnings. All Ms Tegoni did was to set out potential arguments for and against that view. She said:
As there is no definition of ‘bonus jackpots’ one can argue that these types of rewards are a ‘bonus’—an unexpected reward in the ordinary meaning of that word and in any event is correctly described as a ‘winning’ to justify a deduction from Gross Gaming Revenue …
An alternative argument on this point may be that the reward or bonus is not a ‘sum paid out as winnings’ … to be properly calculated as a deduction. The bonus/reward or prize … does not arise in respect of the playing of games …
[W]e would also rely on a course [of] conduct that such deductions have been allowed in the past ... [t]his is not a strong argument for us …26
- Ms Tegoni said that proceeding with the deductions ‘is aligned with what we have done in the past and so puts us in no worse a situation, other than if any dispute were to arise, the potential for claw back quantum obviously increases’.27
- In a section of her memorandum headed ‘Opinion and Risks’, Ms Tegoni wrote that the doubts she raised about the permissibility of the deduction would be:
… of course only relevant if the change [were] picked up; hence Finance and Revenue Audit’s view on how likely it is that the change will be obvious and assessing this risk in making this decision is critical.
Provided extending the reclassification of the gaming machine’s [sic] food program does not alert anyone’s interest and so a review in tax payable, the risk appears fairly low and if required a reasonable argument can be put to justify our position. The risk may increase as and when more deductions are included over time …28
- The idea was to conceal the new deduction from the regulator. Crown Melbourne initially proposed to implement the deductions gradually, over a period of time. This was a risk management strategy to conceal the deductions from the regulator.29
- Crown submits that the ‘unchallenged evidence is that the staged rollout occurred for “technical” reasons’.30 That is not correct according to Mr Herring’s evidence:
Q: The March 2012 Gaming Food Program Initiative proposed that the roll out of dining awards … be staged … Was that proposal designed to ensure, or expected to have the effect that, the regulator did not become, or would not become, aware of the deductions? …
A: … the initial staged roll-out discussion was technical, staged to ensure the systems operated as designed but I do recall a request via Mr [Richard] Longhurst wanting to see a staged roll-out in the presentation as a risk management strategy which I presume was relating to the regulator becoming aware but I cannot be sure (emphasis added).31
- The cost to Crown Melbourne of implementing the deductions in stages was estimated to be $950,000 in additional casino tax.32 The implementation timetable was subsequently accelerated.33
- In April 2013, Crown Melbourne decided to add the benefits that members received for hotels and parking to the food program deductions.34 This included benefits to which a member was already entitled because of their membership status (for example, a black tier member was entitled to free parking, regardless of the outcome of any gambling event). The effect of this further change would be that a proportion of the deductions were in respect of benefits not based on gambling turnover.35 The same is likely to be true of the dining rewards deducted as part of the food program.36
- The extension of the deductions and the risk of detection were recorded in another note by Ms Tegoni. She wrote:
Basically they are saying that parts of the Crown Signature Club Program, which have been a cost of doing business for the program will be allocated as a deduction where it can be linked with play.
Essentially it is an internal adjustment whereby where [sic] the reward, wining [sic] in terms of deduction under the Casino Management Agreement (can be linked to play) than [sic] a transfer price deduction will be deducted. If there is no link to play eg silver members who are entitled to general free car parking, Crown will in its discretion continue to offer, as a benefit of membership, car parking. We may be forced to defend this at some point with the Regulator but it is agreed that it is the issue of ‘winnings’ like the other deductions that will potentially be an issue and also this with an additional element of us providing a member benefit and deducting it when it is linked to play, which on one view is appropriate.
This also applies to the hotel benefits.37
- The evidence indicates that car parking was treated as a sum paid out as a winning in late 2013 and that hotel deductions were treated that way from 2014.38
- The most likely inference is no one at Crown Melbourne who knew of the deductions believed that the category 8 deductions were legitimate. They nonetheless proceeded with the changes because they believed the chance of the deductions being discovered was limited, and sufficiently limited to warrant Crown Melbourne running the risk of detection.
- The evidence given by both Mr Mark Mackay, Executive General Manager of EGMs, and Ms Michelle Fielding, Group Executive General Manager and a qualified lawyer,39 supports this inference.40 The labelling of category 8 benefits as jackpots was confined to discussions regarding GGR. In no other context were the benefits of meals, accommodation and parking referred to as jackpots. The benefits were described as jackpots in a GGR context to mask their true character.
External legal advice in 2014
- In December 2014, Crown Melbourne sought advice from senior and junior counsel on whether its premium player commissions were winnings for the purposes of calculating GGR.41 The premium player commission was an amount paid to a player calculated as a percentage of the player’s turnover in the casino or as a percentage of the player’s losses at the casino. In addition, a complimentary allowance covering accommodation, food, drinks and airfares, also calculated on the player’s turnover, was provided.42
- Counsel said that the complimentary allowances were not ‘winnings’. Their reasons are worth setting out:
Such allowances do not bear the character of a ‘sum paid out as winnings’ but are in the nature of gifts or gratuities, albeit Crown calculates the value of the gift or gratuity based on a player’s turnover. Allowances may only be applied to accommodation, food and beverage and airfare costs, and may not be redeemed for cash. We accept that a ‘winning’ may be a non-monetary prize, but we do not see that a gift whose size is calculated by reference to turnover or losses is capable of being a ‘prize’. Complimentary Allowances are not awarded to the winner of a game.43
- The conclusion about the complimentary allowances is plainly correct. The reasons for that conclusion also make clear, and it would have been clear to Crown Melbourne, that the category 8 benefits (dining, hotel accommodation and parking) were not winnings to be taken into account for the purposes of calculating GGR.
- Notwithstanding the advice received from senior counsel, Crown Melbourne continued to treat the value of category 8 bonuses as sums paid out as winnings.
VCGLR’s inquiries in 2017 and 2018
- In mid-2017, the VCGLR looked at the Bonus Jackpot issue.
- On 29 June 2017, there was a meeting between representatives of Crown Melbourne and the VCGLR. At that meeting, Ms Tracy Shen of the VCGLR raised the impact of the different jackpot types on the EGM revenue calculation. She requested ‘a breakdown of Bonus Jackpot[s] for one day’. Mr Matthew Asher, Strategy and Innovation Manager, Gaming Machines, said he would provide that information.44
- The VCGLR subsequently met with Mr Asher to discuss the issue.45
- On 31 May 2018, Mr Jason Cremona of the VCGLR emailed Ms Fielding and asked a number of questions about the Bonus Jackpots. These included a request for confirmation that the Bonus Jackpots treated as winnings were specific to amounts earned or awarded on an EGM. He also sought details of each type of Bonus Jackpot.46
- Mr Cremona’s enquiry provoked a flurry of activity at Crown Melbourne. It involved directors of Crown Melbourne, Mr Ken Barton and Mr Barry Felstead; and senior executives Mr Xavier Walsh, Crown Melbourne’s COO, and Mr Alan McGregor, Crown Resorts’ CFO. Mr Herring, in-house counsel Mr Joshua Preston, and Ms Fielding, then Crown Resorts’ Group General Manager, Regulatory and Compliance, were also involved.47
- The result of this activity was agreement as to the form of response to be given to the VCGLR.48 The response was sent by Ms Fielding on 5 June 2018. It provided the following information:
- Pokie Credit Rewards (Welcome Back/Free Credits Program)
- Based on Pokie Points earned on a Gaming Machine during a patron’s last visit, will determine the patron’s reward value
- Senior Pokie Credit Reward receive a bonus $3 at specific levels
- Mail Outs
- These are Bonus Pokie Credit Offers sent via mail to Crown Reward Members for varying amounts
- Pokie Credits (Matchplay)
- These are Pokie Credits received by exchanging Crown Rewards points for Pokie Credits at any gaming machine
- Random Riches (Carded Lucky Rewards)
- Rewards based on earning Pokie Points on a gaming machine for specific groups of Crown Rewards Members
Miscellaneous
- Jackpot Payments
- Pokie Credit payments as Pokie Credits from Lucky Time Jackpots
- Consolation
- Consolation payments e.g. issued from Lucky Time Jackpots or Lucky Numbers
- Pokie Credit Tickets
- Promotional Pokie Credit Game Tickets issued to players for redemption at Gaming Machines
- Bonus Jackpots
- Based on Pokie Points earned on Gaming Machines
- Carpark 25 Pokie Points in a day
- Valet Parking for Black and Platinum Crown Rewards—1,000 Pokie Points
- Hotel Night Benefits Crown Rewards Rewards [sic] Black—1,000 Pokie Points
- Hotel Night Benefits Crown Rewards Rewards [sic] Platinum—1000 Pokie Points
- Dining Rewards, the amount issued is based on Pokie Points earned on Gaming Machines during a visit example:
- Receive $7.50 Dining Reward by earning 150 points on gaming machines in a day.49
- Based on Pokie Points earned on Gaming Machines
- Pokie Credit Rewards (Welcome Back/Free Credits Program)
- Ms Fielding also addressed the specific questions raised by Mr Cremona. The answers are in italics:
Just to clarify my understanding of the discussion, I noted the following dot points. Can you please advise if I am correct in my interpretation:
- Bonus Jackpots deducted from Gaming Revenue are specific to amounts earned or awarded on a gaming machine. No amounts earned outside of the gaming machine, such as hotel rewards (if applicable) can be redeemed on a gaming machine and/or deducted from Gaming Revenue; That is correct, but for exceptions noted at points 2, 3 & 7 above;
…
- Bonus jackpots are only accumulated and deducted from gaming tax AFTER being redeemed/used and NOT when earned. All bonusing is only deducted at the time of redemption.
- A patron cannot redeem ‘loyalty points earned’ for credits on a gaming machine. This is incorrect—note point 3 above. Bonuses must be earned or provided with a specific condition to earn the bonus, ie; returning to Crown to earn X bonus credits. That is correct;
A couple of action points too:
- Peter said that bonus prize/points are not ‘linked to signature club’. Can you get him to expand on this? Neither Pete or I recall this—however, to clarify, they generally are related.
- Can I also get an explanation of each of the ‘Bonus Jackpots’ outlined on the Bonus Jackpot Analysis Report. These include Free credits Program, Mail Outs, Matchplay, ‘Jackpot Payments’, Random Riches Promotion, Consolation BJ and each of the bonuses under the ‘Bonus Jackpots’ banner. Essentially with the explanation I am looking for information regarding a brief description of the bonus, how prize earned, how prize redeemed, etc. See listing above ...50
- There was one important matter that Ms Fielding did not disclose to Mr Cremona. She did not explain that many members were entitled to category 8 benefits because of their loyalty program membership status (black, platinum, gold and silver) and not because of an EGM gambling event. It is unclear who was aware of this at the time,51 though Mr Herring appears to have known about it.52
- It is not clear whether the failure to disclose the true nature of the category 8 benefits was inadvertent. This was not investigated during the Commission’s hearings so no findings can be made. Nonetheless, what is clear is that Mr Cremona was not told all the relevant facts.
- In any event, Crown accepts that it should have been more open in the disclosure it made to the VCGLR in 2018.53
External advice in 2018 and 2019
- Despite the exchange of correspondence, Crown Melbourne was concerned that the VCGLR was ‘digging around’ about the category 8 benefits.54 Mr Preston and others were concerned because Crown Melbourne ‘weren’t on solid ground’.55 This could be described as a mild understatement.
- So, on 17 October 2018, Mr Preston sought advice from Mr Glen Ward, a partner of MinterEllison, regarding the permissibility of Crown Melbourne’s practice in relation to the deductions.56
- Mr Preston informed Mr Ward that the deductions had been made for several years.57 Mr Ward was not informed that some members were already entitled to certain of the benefits based on their membership status.
- A solicitor assisting Mr Ward recorded the instructions obtained from Mr Preston, Mr Herring and Ms Fielding. Her note reads:
- Health check re food + hotel + carpark program
…
- bonus jackpots not broken down into types of jackpots
…
- belief that VCGLR would know that credit rewards are being deducted
…
- Item 8 does not meet def of bonus jackpot b/c not using ICT
…
- evidence over time where we can show [the VCGLR had] clear visibility.5
- Mr Ward provided a draft advice to Mr Preston on 25 October 2018.59 The following paragraphs are important:
…
- The VCGLR:
- was not advised of this change in the treatment of Gaming Machine Food program costs;
- has not approved the Gaming Machine Food Program as a ‘Bonus Jackpot’.
- Documents issued at the time of the introduction of these changes to the Gaming Machine Food Program speak of, among other things, the benefit to the bottom line of including these Bonus Jackpots, and the likelihood of the VCGLR detecting this change in treatment.
…
- On a strict interpretation of Gross Gaming Revenue, to constitute a deductible, the amounts must be ‘won’ by the punter or otherwise paid out as winnings. On its terms, this definition would not seem to capture credits earned simply by repeat play, which is what the Gaming Food Program involves.
- The concept of loyalty credits accruing based on level of play does not logically fit within the concept of a jackpot, either as that term is commonly understood, or as it is defined in the [Casino Control Act] (which is a very narrow, technical definition).
- On the other hand, paragraph 1.03 of the [internal control statement] (sanctioned by the VCGLR) provides a helpful statement of intention … It provides that ‘Crown will include as winnings to its patrons any prize paid out to its patrons on the level of play and in accordance with the rules of the game’. This appears to recognise that turnover based incentives, such as the Gaming Machine Food Program may be able to be treated as ‘winnings’ for the purposes of Gross Gaming Revenue.
- According to the Technical Criteria, all Bonus Jackpots need to be approved. The changes to the Gaming Machine Program were not so approved.60
- The VCGLR:
- Crown Melbourne says Mr Ward’s draft advice did not make clear that the deductions were improper.61 If that is a fair reading of the draft advice, the reader would have at least understood there was a serious risk that the deductions were not permitted.
- Following receipt of the draft advice, Ms Fielding and Mr Herring made some amendments to it (by providing extra information) and returned it to Mr Ward to see whether he would change his mind.62 The amendments were largely rejected.63
- Mr Preston forwarded the draft advice to Mr Walsh.64 It was also provided to Mr Mackay and other senior executives. Mr Mackay, who reviewed the advice,65 said he thought that the directors also knew of the advice.66
- On 9 July 2019, Ms Fielding sought further advice from Mr Ward. She asked whether a new draft Technical Requirements Document proposed by the VCGLR changed Mr Ward’s advice on Crown’s tax treatment of its Bonus Jackpots.67
- Mr Ward provided a second advice. That advice accurately identified that ‘the question of whether deductions made in respect of the Gaming Machine Bonus Jackpot Program meet the statutory definition of sums “paid out as winnings” is a question of statutory construction, and not to be resolved by reference to other documents’.68
- Despite this, the second advice can be read as suggesting that if the Technical Requirements Document was altered to reflect the way the Bonus Jackpot promotion program operated, that change may provide some basis for a contention that the Bonus Jackpot could be treated as a winning.
- The document Technical Requirements for Gaming Machines in the Melbourne Casino, dated 10 July 1996, sets out the technical requirements and the criteria against which approval will be given for EGMs to be used for gambling in the Melbourne Casino.69 The technical requirements cover matters such as machine access, monitoring and software integrity. The technical requirements have nothing at all to do with the calculation of GGR under the Management Agreement.
- Mr Ward must have appreciated that even if the new draft Technical Requirements Document endorsed or reflected the operation of the Bonus Jackpot program, this would have no impact on the GGR definition. In fact, Mr Ward had already made that point explicit. His suggestion to the contrary makes no sense.
- Mr Ward’s final advice also contained the following paragraph:
We understand in this respect that the VCGLR has made certain enquiries during the course of 2018 in relation to Crown Melbourne’s treatment of Bonus Jackpots, but to date the VCGLR has not raised any specific issue about the composition of Bonus Jackpots or the treatment of Gaming Machine Bonus Jackpot Program costs as a deductible. Helpfully, under the New [Technical Requirements Document], there is less scope for the VCGLR to raise issues with Crown’s treatment of the Gaming Machine Bonus Jackpot Program.70
- It is difficult to understand the last sentence. As Mr Ward had earlier explained, the meaning of GGR could not be affected by some other document, such as a new draft Technical Requirements Document. It is likely that Mr Ward was attempting to convey the possibility that once the VCGLR dealt with the technical requirements issue, it may not return to the manner in which GGR was calculated.
- Mr Ward sent his final advice to Ms Fielding on 18 November 2019.71 She passed it on to Mr Walsh and Mr Herring.72 According to Mr Mackay, the directors and Mr McGregor were informed of the advice, and may have been given a copy.73
- Despite Mr Ward’s advice, the costs of the category 8 promotions continued to be treated as sums paid out as winnings.
The GST dispute
- In 2020, there was a dispute between Crown Melbourne and the Commissioner of Taxation regarding how GST should be calculated in relation to the commissions and rebates Crown paid to junket operators.74
- The dispute was litigated in the Federal Court and was resolved at first instance in Crown Melbourne’s favour on 10 September 2020.75
- A week later Mr Chris Reilly, General Manager of Tourism at Crown Resorts, emailed a number of people at Crown Melbourne, including Mr Walsh, Mr Herring, Ms Fielding, Mr Barton and Mr Felstead, asking for ‘a chat … to go through some outstanding and historical tax and regulatory matters …’.76
- This caused Mr Herring, on 21 September 2020, to raise the Bonus Jackpot deductions with Ms Fielding. He emailed her that, in his view, Crown Melbourne had been ‘very specific and clear on all deductions’ with the VCGLR. 77
- The next day, Mr Walsh invited a number of senior executives, including Mr Barton, Mr McGregor, Mr Preston, Mr Felstead, Ms Fielding and Mr Herring, to attend a meeting regarding ‘GST judgment—DFT—Next Steps’.78 A file note of the meeting records:
Bonus Jackpots 2012—$4 million
…
$40 million
…
Is it deductable—what are the components
Has it been approved …
1994—no one looked at it
90% ok going forward.79
- Mr Walsh gave evidence about the meeting. He said that ‘everybody at the meeting understood that there was a residual risk’ as to the deductions by the end of that meeting.80 Mr Walsh also said Mr Barton ‘had a view that perhaps [Crown had] taken too narrow a view to what was winnings’,81 and that Mr Barton was looking to ‘wrap up all the historical tax matters … in a single agreement’ with the State.82
- Ms Fielding gave evidence that, prior to February 2021, Mr Walsh told her he intended to escalate the tax treatment of Bonus Jackpots to the Crown Melbourne board and ensure the regulator was clear about the issue.83 It does not appear he raised the issue with the board, and he certainly did not raise it with the regulator.
- The category 8 benefits continued to be treated as sums paid out as winnings.
- Crown Melbourne contends that this was the fault of Mr Barton and Mr Felstead, both of whom are no longer employed by a Crown company.84 Mr Walsh makes the same point.85 The contention, however, ignores the fact that other senior executives were involved, to a far greater degree than Mr Barton and Mr Felstead. Some still hold important positions within the organisation.
Meeting between Mr Walsh and Ms Coonan
- On 22 February 2021, the Victorian Government announced that there would be a royal commission to inquire into the suitability of Crown Melbourne to continue to hold its casino licence.
- A meeting between Mr Walsh and Ms Helen Coonan, then Chairman of Crown Resorts, was scheduled for the next day. Mr Walsh prepared an agenda for the meeting. Relevantly, it read:
6. Compliance
Legacy issue86
- Mr Walsh gave the following evidence about the meeting. He said he raised with Ms Coonan what he described as a ‘legacy issue’, being the ‘tax issue’.87 Apparently, he did not go into any detail with Ms Coonan regarding the nature of the ‘legacy issue’. He said Ms Coonan told him to ‘pull the information together’ because she was ‘concerned regarding the matter to, you know, establish a position’.88 Mr Walsh was to ‘pull the information together’ and give it to the lawyers for advice and disclosure.89 Mr Walsh said that Ms Coonan was ‘definitely going to consider the matter’.90
- Confirmation of this last statement appears in a note taken by Mr Walsh. He wrote in hand on the agenda, adjacent to the words ‘legacy issue’:
Helen [Coonan] to consider
XW [Mr Walsh] to think about how best to communicate.91
- Mr Walsh explained that the words ‘how best to communicate’ were a reference to how best to disclose the matter to the regulator.92
- Ms Coonan also gave evidence about the meeting. Her evidence is, in a minor respect, different to that of Mr Walsh.
- Ms Coonan said that Mr Walsh told her that, in the ‘interests of transparency, there was a legacy matter he wanted to bring to [her] attention’; ‘[i]t related [to] the deductions or calculations of the jackpot tax’; and that ‘there was a memorandum … which … suggested … the VCGLR had not been informed and probably wouldn’t notice’. She said that Mr Walsh was worried about it as a ‘transparency issue’, but that the VCGLR had taken a ‘thorough look at it’ and it had now been approved.93
- Ms Coonan agreed that she had directed Mr Walsh to ‘pull the information together’ and give it to Crown’s lawyers.94 However, Ms Coonan disagreed that she was to consider the issue. Her evidence was:
Q: When he [Mr Walsh] met with Mr Mackay, Mr Mackay took a note of his instructions from Mr Walsh … and Mr Mackay’s note of what Mr Walsh told him was ‘Helen to consider.’
A: I understand that, but I had nothing to consider. Nothing was given to me, ever brought back to me. I known, [sic] I don’t know what Mr Walsh meant by that note.95
- Nothing turns on the differing recollections. The conversation between the two on this topic was not long. It is not surprising that their recollections of what was said differs in some respects. In the end, Mr Walsh’s recollection is likely to be more accurate, it being supported by his notation. This is not to suggest that Ms Coonan’s account is inaccurate. It is simply an instance of a short conversation about which recollections differ.
- Perhaps it could be said that Ms Coonan should have followed up the issue to discover what it was about, as it related to a potential underpayment of casino tax, an obviously important matter. On the other hand, Mr Walsh described it, incorrectly as it turned out, as a ‘legacy issue’, implying that it only related to the past. Taking into account all the problems which, at that moment, Crown Resorts and Crown Melbourne were facing, it is not surprising Ms Coonan thought (even if incorrectly) she had left the matter for others to deal with.
- The other possibility is that Mr Walsh should have squarely raised the potential underpayment of tax with Ms Coonan.96
The spreadsheet
- On the morning of 24 February 2021, a day after his meeting with Ms Coonan, Mr Walsh spoke to Mr Mackay about the Bonus Jackpots deductions. He instructed Mr Mackay to ‘prepare or pull together the impact of those deductions made under the loyalty program’.97 Mr Mackay’s file note of the discussion, which described the matter as a ‘latent’ tax issue, noted that Ms Coonan was ‘reviewing [it] to revert to [Mr Walsh]’.98
- Following the meeting, Mr Mackay asked Mr Herring to send him ‘any detail he had on the Bonus Jackpots in regards to the breakout of each of them’.99
- Mr Mackay subsequently instructed Mr Jose Machado, Finance and Commercial Manager—Gaming, to prepare a spreadsheet setting out the ‘tax impact’ of the Bonus Jackpot deductions.100 The ‘tax impact’ meant the amount of casino tax Crown Melbourne saved by making the deductions.101
- The spreadsheet that was prepared only covered the years 2014 to 2019. It indicated that:
- if all Bonus Jackpots (that is, categories 1 to 8) were not deductible, Crown Melbourne had underpaid casino tax by $167,829,413
- if category 8 Bonus Jackpots were not deductible, Crown Melbourne had underpaid casino tax by $22,872,944.102
- The calculations were broken down into various categories (namely, category 8 Bonus Jackpots, the Welcome Back deductions and the remainder of the Bonus Jackpots). According to Mr Mackay, this categorisation reflected the different risks as to whether the amounts were deductible.103
- The calculations in the spreadsheet did not make any adjustment for GST. Nor did the calculations take into account super tax or penalty interest payable on any unpaid casino tax.
- At about 11.30 am on 26 February 2021, Mr Mackay met with Mr Walsh and Mr Herring to discuss the spreadsheet.104 Mr Mackay knew the spreadsheet was sensitive105 and he did not email the document to Mr Walsh.106
- According to Mr Mackay, he and Mr Walsh understood the potential exposure was about $170 million, excluding super tax and penalty interest.107 Mr Walsh’s evidence was that he was only concerned with the category 8 deductions.108
Mr Walsh raises the casino tax issue
- On 1 March 2021, there was a meeting attended by Mr Walsh, Ms Fielding, Ms Jan Williamson (General Manager Legal, Crown Melbourne), Mr McGregor and Ms Anne Siegers.109 The unpaid casino tax issue was discussed. Mr Walsh said that most of the attendees were familiar with the issue that was raised in 2018.110
- The attendees discussed whether unpaid casino tax could be offset against other taxes where there might have been overpayment; whether Crown could rely on the draft Technical Requirements Document to bolster its position; and what would be the public perception of the disclosure of the underpayment of gaming tax.111
- On 3 or 4 March 2021, Mr Walsh discussed the Bonus Jackpot issue with Ms Jane Halton, a director of Crown Resorts and Crown Melbourne.112 According to Mr Walsh, he told Ms Halton about the legal advice that had been received in 2012 and 2018. He described those advices as ‘equivocal’.113 He also told Ms Halton that the VCGLR had a ‘very close look at it in 2018’ and that the draft Technical Requirements Document would ‘cure’ any issues going forward, but it would not resolve the issue historically.114
- Ms Halton’s account of the discussion differs somewhat. Her evidence was:
Q: [C]an you tell the Commission what [Mr Walsh] said to you on that topic on 4 March?
A: Yes, I can. My memory is that he told me, and it is in the context of a ‘bring out your dead’ broader admonition. This wasn’t a discussion about all of the things … it was a discussion about operation of the business, et cetera, et cetera, but he said to me, ‘One thing that I’ve become aware of, it reflects badly on culture, it is an issue from two thousand’ ��� and I believe he said ‘12’ … ‘in respect of something that wasn’t fulsomely disclosed and there is a note, a document, that talks about not telling the VCGLR something.’
I believe he said ‘jackpot’, he didn’t say ‘tax’, and he said that, however this matter was disclosed to the VCGLR in … subsequently in 2018. And that was about the extent of it.Q: I see. So did he describe it as a tax, an unpaid tax issue?
A: No.
Q: He just described it as something that reflects badly on culture that happened in 2012 that was not disclosed fulsomely …
A: Correct.
Q: … but it was fixed up in 2018?
A: That was what I took from that conversation. Correct.
Q: His evidence was he talked about advice that had been received in 2012 and 2018 which he described as equivocal. You don’t recall that?
A: No, I don’t, I’m sorry.
Q: He said that there was a presentation; you don’t recall him referring to a presentation although you recall him saying something?
A: A document. He did say a document.
…
Q: And he certainly didn’t tell you that was something he’d been aware of since at least 2018, did he?
A: No, I don’t believe so.115
- Ms Halton agreed she was ‘concerned’ that Mr Walsh downplayed the tax issue, knowing Mr Walsh was ‘in the midst of it’ in 2018.116
- Mr Walsh said that he met Mr Nigel Morrison and Ms Antonia Korsanos, both directors of Crown Resorts, on 9 March 2021. He said he provided to them the same information he had given to Ms Halton.117
- Ms Korsanos’ evidence about the meeting is different:
Q: Just focusing on the underpayment of gaming revenue tax, what do you remember Mr Walsh telling you in that meeting on 9 March?
A: The discussion was focused on more a cultural issue. Mr Walsh mentioned that he’d come across a presentation from 2012 that made some references that represented the poor culture and lack of transparency in a change that was made to the tax calculation at the time. The focus was about the comment in the presentation and what … and how that would be looked upon. He did mention that there was a reference … an internal advice.
Q: Yes.
A: And also that the situation had been … sorry, the calculation had been audited a few years ago, about three years ago, and full transparency had been made and then also subsequently cured through a technical requirements document update. So the conversation was about the lack of transparency, the lack of engagement and openness with the VCGLR, and again representative of poor culture. Focused on the comment more than anything …
Q: You said that he mentioned internal advice. Did he also mention external advice?
A: No, he didn’t.
Q: Did he tell you what that advice said or the effect of the advice?
A: Along the lines of ‘It can be done but the VCGLR could argue against it.’ Something along those lines.
Q: What did you take away as the concern that he was raising with you at that point? Was it the issue about non-disclosure to the VCGLR or transparency to the VCGLR?
A: It wasn’t an issue … it was definitely a culture and lack of transparency and poor engagement with the VCGLR. It wasn’t an issue on whether there was a concern on that calculation.
Q: So he didn’t mention it was an issue about underpayment of tax?
A: Correct. I did not walk away from that meeting believing that there was a concern that tax had been underpaid.
Q: You had no idea about the quantum in mind either?
A: No […]118
- Ms Korsanos said it was ‘a concern’ that Mr Walsh did not disclose to her all he knew about the unpaid casino tax issue.119
- Mr Morrison did not give evidence about the meeting with Mr Walsh on 9 March 2021. Mr Morrison said he had a very brief conversation with Mr Walsh in a corridor on 19 or 22 March 2021.120 Although he could not recall much of the detail, Mr Morrison said he was left with the impression that Mr Walsh had recently come across an issue through a document review,121 within the past few weeks.122 Mr Morrison did not understand that the issue concerned the underpayment of casino tax.123
- Mr Morrison expressed concern that he had not been informed of the potential underpayment of casino tax even though it was known to Ms Coonan and Mr Walsh.124 He said that would particularly be the case if Mr Walsh had known about the issue for years.125
The Commission’s request for information
- On 10 March 2021, Solicitors Assisting the Commission wrote to Crown Resorts and Crown Melbourne requesting them to disclose, relevantly, conduct that would or might breach any provision of the Management Agreement Act or the Management Agreement.126
- On 18 March 2021,127 Mr Walsh, Mr McGregor, Ms Williamson and Mr Robert Meade (Crown Melbourne’s in-house counsel) and Mr Herring met Crown Melbourne’s solicitors, Allens Linklaters, to discuss whether the tax treatment of Bonus Jackpots should be disclosed to the Commission. Mr Andrew Maher, a senior partner of the firm, attended the meeting.128 He was the solicitor principally responsible for acting on behalf of the Crown companies in relation to the Commission’s inquiries.
- The unpaid tax issue was outlined by Mr Walsh. The issue was described to Mr Maher as potentially involving $40 million and that it related to Bonus Jackpots comprising hotel accommodation, dining and car parking.129 According to Mr Maher, his ‘primary impression’ was that the issue concerned a lack of approval from the VCGLR in the period 2012 to 2018.130
- A file note taken at the meeting by one of the solicitors present relevantly says:
XW [Mr Walsh]: things I’m worried about being explored. When we calculate gaming tax—deduct amounts as winnings. Difference between collection and paying out. Over the journey add ons to that in terms of what we deduct.
…
Normally relate to things like—free play in gaming machines.
However in 2012, the company realised we could deliver through our systems the ability to award customers things like hotel rooms, carparks or meals.
Idea is—you play so much—you get free meal. We have the ability to do that through the system approved.
Internal legal advice as to whether we needed approval or not, and also whether constitutes winnings paid out. No definition on winnings paid out in the act. Universally in the world—get winnings gets paid out. Food, hotels and carparks potentially different though.
In a business preso and the legal advice with senior execs in 2012, eg ken barton, rowan Craigie, greg Hawkins, word to the effect—given economic movements, vcglr won’t notice. Gives impression we won’t inform vcglr. That we wouldn’t tell them—in the slide deck and also internal legal advice [initially].
2012—took the deduction, went into the reports.
Late 2017—[Andrew] wilkie announcements. Post that reported [to] the board, [Barry] Felstead asked what is there. Someone said bonus jackpots—a little unsure—what’s this about? Then asked for [MinterEllison’s] advice. Glen ward said should have got it approved—but overriding question is whether winings [sic] anyway.
And no clear definition on that.
But he said think you’re on unstable ground since didn’t get it approved.
…
[XW:] The issue that made it difficult—needed approval and didn’t seek it. Approved by system change but questionable. And technical requirements doc—it allows for what we’re doing now, that wa samnedd [sic] and approved by the [VCGLR] in 2020, and covers what we are doing now. We advised them in 2018. But as to 2012—crown’s gone out of its way to cheat tax—what do you think? Awkward conversation.
…
XW: $40 mil issue. Around $4 mil per year. Gives the impression didn’t raise as we didn’t want a response. In email and slide deck.
…
XW: an email—talks about increase in gaming machine tax says proposed change not noticed by [VCGLR]. Then preso in business plan says something similar. Legal advice says doesn’t alert anyone’s interest, hence risk is low.
…
XW: started with the team at crown—around local and domestic customers, started in earnest last year, why didn’t you do it 5 years ago.
Environment was, unless really aware something wrong, thinking was play on.131
- It is important to mention what Mr Maher was not told, as it helps to explain what subsequently transpired. He was not told:
- that Crown Melbourne had received advice suggesting there was a serious risk that the deductions were not allowable132
- that some deductions had been made in respect of benefits to which members were entitled because of their membership status (a matter that appears to have been known to at least Mr Herring, who was at the meeting)133
- that the potential liability for unpaid casino tax was far in excess of $40 million, which is the case however the evidence is viewed.
- Crown submits Mr Walsh was only ever concerned about the category 8 deductions.134 Even if that is correct, the amount of $40 million was a material understatement, because it excluded super tax and penalty interest.135
- By contrast, Mr Mackay said the spreadsheet he prepared for Mr Walsh separated category 8, category 1 and the other categories based on legal risks.136 This suggests that, internally, Crown Melbourne may have viewed the risk associated with the deductibility of the categories differently. This conclusion is supported by the fact that Mr Mackay included those categories in the spreadsheet he provided to, and discussed with, Mr Walsh. In the circumstances, the $40 million Mr Walsh spoke of was a patently inadequate estimate. It must, however, be acknowledged that according to the evidence, Crown Melbourne’s primary concern was the category 8 deductions.
- One possible explanation is that Mr Walsh was only concerned about the category 8 deductions and was not alert to any other issue. Whether this is a satisfactory explanation is not clear. From the spreadsheet Mr Mackay gave him, Mr Walsh must have appreciated there were potentially other casino tax problems. Perhaps he did not appreciate the extent of those problems.
- In any event, Mr Maher gave evidence that, had he been told Crown Melbourne had advice that ‘there was a possibility’ the category 8 deductions were not allowable, he would have advised Crown Melbourne to make disclosure to the Commission.137
- The details of the discussion suggest that the Crown Melbourne representatives downplayed the significance of the underpayment of casino tax. If they had taken it as seriously as the circumstances required, they would have provided more information to Mr Maher and the other solicitors.
- That said, towards the conclusion of the meeting Mr Maher asked to be given the relevant documents so he could consider whether the matter need be disclosed.138 The documents were provided the following day. They included a draft of Mr Ward’s 2018 advice and Mr Ward’s advice of 18 November 2019, and some relevant presentations.139 Had those documents been reviewed, Allens Linklaters would have advised Crown to disclose the matter to the Commission. According to Allens Linklaters and Crown, however, ‘Allens inadvertently overlooked the need to review the documents in [the] folder closely’.140
- This is in part explicable on the basis that Mr Maher did not appreciate the importance of the issue. That Mr Maher did not appreciate the importance of the issue is confirmed by subsequent events.
- To comply with the Commission’s request for details of actual or potential breaches of relevant legislation and agreements, Allens Linklaters prepared a number of schedules containing the requested information. Schedules were provided to the Commission on 24 March 2021,141 and a further schedule was provided on 21 April 2021.142 In none of these schedules was the Bonus Jackpot issue mentioned.143
- The issue was not mentioned even though the schedules expressly referred to other casino tax transgressions. For example, the 24 March 2021 breach schedule contained the following entry:
On 20 November 2015, the VCGLR issued Crown with a letter requesting the payment of penalty interest in accordance with s 116(1) of the Casino Control Act.
Crown’s August 2015 Gross Gaming Revenue (GGR) Report had incorrectly overstated jackpot winnings, resulting in $41,842.79 underpayment of gaming tax for the period. The $41,842.79 was added to the following month’s GGR calculation (September 2015).
The penalty interest calculated for the period the tax was unpaid (one month) was $326.72. Crown chose not to dispute the letter and submitted a cheque to the VCGLR for the amount of $326.72.144
- This entry did not prompt Allens Linklaters or Crown Melbourne staff (who examined the schedule carefully) to disclose the Bonus Jackpot issue.145
- The issue only came to light when Mr Mackay’s spreadsheet setting out the quantum of unpaid casino tax was noticed by one of counsel assisting this Commission. The spreadsheet had been produced to the Commission along with tens of thousands of other documents and was not produced in response to any notices to produce that related to requests for information on breaches or potential breaches.
- Crown Melbourne’s failure to flag the Bonus Jackpot issue before it was raised at Commission hearings was closely investigated.
- The Commission accepts that the failure to inform it of the Bonus Jackpot issue was inadvertent. It was overlooked by Allens Linklaters when the schedules were being prepared. It was overlooked by Crown Melbourne staff when they reviewed the schedules before they were produced to the Commission.
- Whether or not Mr Walsh downplayed the matter, he did raise it with Allens Linklaters. He provided Allens Linklaters with the relevant documents. He followed up the matter internally to ensure that disclosure was made.146
The cat is out of the bag
- Mr Mackay was called to give evidence on 7 June 2021. He had previously caused the spreadsheet to be prepared and, as well, had made some changes to it.147 Mr Mackay had been asked to prepare a statement on a number of issues unconnected with unpaid casino tax. However, it was during his oral evidence that the unpaid casino tax issue became public.
- On the same day, there was a meeting of the directors of Crown Resorts. During the meeting, or shortly thereafter, a media article about the unpaid casino tax was drawn to the directors’ attention.148
- The directors were asked to explain what happened when they heard the news. Ms Halton said that she was shocked by what was reported in the article.149 Ms Korsanos and Mr Morrison said much the same thing.150 Mr Morrison said that everyone at the meeting was shocked by the magnitude of the potential underpayment.151
- On the evidence, it could be suggested that Ms Coonan’s position was somewhat troubling. She had been told of the potential underpayment by Mr Walsh on 23 February 2021. Yet she made no mention of this at the meeting.152 On the contrary, according to Mr Morrison, Ms Coonan seemed as shocked about the news as were the others.153
- However, the other directors were in the same position. Each had been told about the ‘legacy issue’, although Mr Morrison may have been given fewer details than the others. None thought the matter of sufficient significance that action had to be taken.
- Once again, the explanation may be that the manner in which Mr Walsh disclosed the ‘legacy issue’ did not cause any alarm. That is, for whatever reason, the issue was downplayed.
- There was another meeting on 7 June 2021 that raises a most troubling matter. The meeting was between Mr Meade, Ms Williamson and Mr Reilly. They discussed the disclosure that had occurred that day during the Commission hearings.
- According to Ms Williamson, who gave evidence before the Commission, Mr Reilly recounted a meeting he had with Mr Felstead and Mr Preston. During that meeting, Mr Felstead referred to the failure to disclose to the VCGLR the Bonus Jackpot issue. According to Mr Reilly, Mr Felstead suggested that given the lapse of seven years, the documents relating to the issue should be destroyed. Mr Preston said that this should not occur.154
- Mr Meade made a file note of the meeting with Mr Reilly and Ms Williamson. The relevant portion of his file note reads:
Chris called to discuss the matters covered in hearings today.
Recounted a meeting w/ Barry Felstead & Josh Preston in 2018.
Josh had identified that there was a presentation which raised concerns about disclosure of the tax matter to VCGLR, from 7 years prior.
Barry had suggested that, @ 7 years, the docs be destroyed.
Josh refused.
Chris advised, if asked, pay the tax.
Jan advised we had the presentation. Chris grateful for confirmation[.]155
- The possibility that documents might be destroyed to cover up an underpayment of tax is most disturbing. That said, it is not possible to determine whether Mr Felstead did suggest that incriminating documents be destroyed. First, Mr Felstead has filed a statement in which he denies the allegation.156 Second, Mr Reilly was not called to give evidence. So, the truth may never be known.
The quantum of the underpayment
- Once the underpayment of casino tax became public, Crown Resorts and the Crown Resorts’ directors sought independent tax advice from senior counsel in Sydney and senior and junior counsel in Melbourne.
- Having received that advice, Crown now accepts that it has underpaid casino taxes.157
Categories 5 and 8
- Crown Melbourne acknowledged that the category 8 Bonus Jackpot deductions, and some of the category 5 deductions, should not have been made.158 It agreed that Crown Melbourne’s casino tax obligations for the years 2013 to 2021 had to be reassessed, with an adjustment to be made for GST, and the proper amount paid. In due course, an amount in excess of $60 million (inclusive of interest) was paid.159
- Crown Melbourne has ceased treating the costs of the category 8 promotion as deductions and has determined that it will no longer run aspects of the category 5 promotion.160
Category 6
- Regarding category 6, the Consolation category, no issue is raised. The prize to which the category refers is a sum paid out as winnings. But because Crown Melbourne treated category 6 amounts as sums received (which they may not have been) and as sums paid out as winnings (which they appear to be), Crown Melbourne may have overpaid tax in relation to this category (although the amount would be less than $1.14 million,161 and any refund may be subject to limitations issues).
Category 3
- The Commission is of the opinion that there has been a significant underpayment of casino tax in relation to category 3 (Matchplay). There are two lines of reasoning that support this view.
- The first line is based on the proposition that the pokie points should be treated as a ‘sum received’ for the purposes of GGR. To understand the reasoning, it is helpful first to consider the decision in London Clubs Management Ltd v Revenue and Customs Commissioners (a decision of the United Kingdom Supreme Court, the final court of appeal).162
- The case concerned the proper calculation of gaming duty. Under the relevant legislation, gaming duty was payable as a percentage of the ‘gross gaming yield’ of a casino. The ‘gross gaming yield’ was the aggregate of ‘gaming receipts’ and ‘banker’s profits’ (the casino being the banker). ‘Banker’s profits’ from gaming were the difference between ‘the value, in money or moneys worth, of the stakes staked with the banker’ and ‘the value of prizes provided by the banker’.163
- The casino provided non-negotiable chips to selected gamblers as a promotional tool. The chips were provided free of charge. They could not be used to buy goods or services. They could not be exchanged for cash. They could only be used to place bets. The casino also provided free bet vouchers to selected gamblers as a promotional tool. They could be used in the same way as non-negotiable chips.164
- The question the Supreme Court had to resolve was whether, in calculating ‘banker’s profits’, the non-negotiable chips and free bet vouchers were to be brought to account. The Supreme Court said ‘No’ to this question.165
- The reason was that a non-negotiable chip or free bet voucher does not represent money to which the gambler is entitled. This is because, unlike cash chips, a non-negotiable chip or free bet voucher cannot be cashed in or exchanged for goods or services. The Supreme Court explained that a non-negotiable chip or free bet voucher has no real-world value to the casino.166
- The non-negotiable chips and free bet vouchers considered in London Clubs are different to the Matchplay benefits. Matchplay benefits have real value—the Crown Rewards points can be exchanged for goods or services.167 In addition, the benefits (points), once earned, are a liability of Crown Melbourne.168 Properly characterised, they are a contingent liability. As with any liability, a contingent liability can be valued. In the case of Matchplay, the value will be either (a) the face value of the pokie credits; or (b) a discount from the face value based on the likelihood of the contingency occurring.
- If a member applies the points to acquire goods or services, the contingency is satisfied. Then Crown Melbourne will incur a cost, namely the amount that must be paid to the supplier of the goods or services. Conversely, if the member elects to exchange the points for pokie credits, the contingent liability is immediately discharged. In that event, Crown Melbourne receives an immediate benefit. The value of the benefit is equal to the face value of the pokie credits or their discounted value.
- Two questions then arise. First, can the discharge of a contingent liability be a ‘sum received’? Assuming the answer to this question is ‘Yes’, the second question is whether the ‘sum received’ is received ‘from the conduct or playing of games’.
- On the first question, the reference to a sum received in the definition of GGR includes the receipt of money or moneys worth.169 There are many instances where a reference to a ‘sum’ of money is taken to include money or moneys worth. It would be an odd result if the same approach is not adopted for the purposes of GGR. Take the following example. Assume a patron acquires $1,000 worth of chips in exchange for a $1,000 watch. Is the acceptance of the watch a ‘sum received’ in exchange for the chips? Obviously, the answer is ‘Yes’. Otherwise, the operation of the definition of GGR could easily be frustrated.
- The same position holds if the member elects to convert Crown Rewards points to pokie credits. Crown Melbourne receives value, the discharge of its contingent liability (equivalent to the watch). In exchange, the member receives pokie credits (equivalent to the chips).
- Crown Melbourne raises three issues to avoid this result.170
- First, it says that a ‘sum received’ must be a sum of money. It is enough to say that this is a contention unlikely to be upheld.
- Second, it says that Crown Melbourne did not receive any ‘real sum’ from the exchange.171 The argument seems to be that the exchange of points for pokie credits involves the satisfaction of contractual obligations, but not the receipt of anything of value.172 This contention ignores the value to Crown Melbourne of being discharged from its contingent liability. In the real world, the release of an extant liability has real value. For the Melbourne Casino, the release has an easily ascertained value.
- Third, Crown Melbourne contends that if the exchange did produce a ‘sum received’, that sum was not received from the conduct of playing of games.173 It is difficult to understand this submission. The only way pokie credits can be used is for play on an EGM. Acquiring pokie credits is the same as acquiring chips with which to gamble. The money received by Crown Melbourne for the chips is ‘from the conduct … of games’. The same must be true of the value of the release received by Crown Melbourne for the pokie credits.
- Last, there is a faint suggestion that there may be double counting because the GGR definition refers to money received from the ‘conduct or playing’ of games.174 There is nothing in the point. A sum may be received from the conduct or, alternatively, the playing of games, but not both.
- On this analysis, Crown Melbourne is liable to pay tax on all sums received from Matchplay.
- The second line of reasoning differs from the first. It is premised on the correctness of Crown Melbourne’s contention that there is no ‘sum received’ from Matchplay. In that event, winnings paid out from bets where no sum is received cannot be deducted from GGR.
- To understand why this is so, it is helpful to begin with an issue that arose in 2017.
- Crown Melbourne conducted poker tournaments at the Melbourne Casino. It charged entry fees to players to participate in the tournaments. The State was of the view that the entry fees were a ‘sum received’ within the definition of GGR. Crown Melbourne disagreed.175
- In support of its contention, Crown Melbourne relied upon a submission by MinterEllison. In that submission, MinterEllison referred to what it described as ‘[t]he proper construction of “Gross Gaming Revenue”’.176
- According to that construction, MinterEllison said:
- It is evident that the definition of ‘Gross Gaming Revenue’ sets up a relationship of interdependency between (a) ‘sums … received … from the conduct of playing games’; and (b) ‘sums paid out as winnings … in respect of such conduct or playing of games’.
- The function of the word ‘such’, in the expression ‘sums paid out [as winnings] in respect of such conduct or playing of games’, is to direct attention back to the conduct or playing of games from which the sums are received.
- The relationship is between ‘sums … received’ and ‘sums paid out’.
- Thus, ‘sums received’ from the playing of games must refer to the sums that enter the pools of funds from which winnings are paid out.177
- On this construction, in respect of sums paid out from ‘free’ Matchplay bets, there is an obvious lack of interdependency because (a) there is no sum received; yet there are (b) sums paid out.
- Applying the MinterEllison analysis (which may be correct), winnings from a bet where there is no sum received are not deductable from the GGR calculation. The result is that winnings paid out from ‘free’ Matchplay bets are not deductable. The consequence is that Crown has underpaid casino tax, but in a different amount than if the first line of reasoning is applied.178
Categories 1, 2, 4 and 7
- The benefits in categories 1, 2, 4 and 7 are provided in the form of pokie credits, with each credit having a specific value when used in an EGM. Apart from their use to play a game in an EGM, the credits have no value to the member.
- The VCGLR has obtained an opinion from Melbourne senior counsel on a similar issue. Counsel said that ‘free play vouchers are issued by Crown to recipients at no cost to the recipients; the face value of the voucher, however, plainly represents an expense to Crown’. According to senior counsel, the vouchers, ‘when converted into a chip and thereafter gambled at the casino plainly represent a “sum received by the casino”. For this purpose it does not matter that the chip was sourced from a [voucher], that is an irrelevant fact’.179 There may be significance in the fact that the opinion refers to a situation where a free play voucher may be ‘exchanged by the patrons for chips for playing at a gaming table … or may be exchanged for cash’ (as opposed to a pokie credit, which is not cashable and non-transferrable).180
- It is not proposed to address the correctness of this view. It is sufficient to say that, if there is no sum received, the second line of reasoning (developed by Crown Melbourne’s lawyers) would mean that Crown Melbourne has underpaid its casino tax by a considerable amount.
The consequences of non-payment
- Although some of the underpaid casino tax has been paid, there is a significant question as to whether more tax is due.
- That dispute can be resolved in one of two ways. First, the failure to pay casino tax following the service of a notice demanding payment will constitute a breach of a condition of Crown Melbourne’s casino licence.181 In that event, the regulator can serve a notice under section 20(2) of the Casino Control Act affording Crown Melbourne the opportunity to show cause why disciplinary action (the cancellation, suspension or variation of the casino licence, the imposition of a fine or a letter of censure) should not be taken.
- Second, the State could also sue for any unpaid casino tax together with penalty interest. There is no other financial consequence if casino tax is not paid, even if it is intentionally not paid.
- This is an unusual situation. Most taxing statutes impose penalties for the non-payment of tax, in addition to charging interest on any amount not paid.
- The Casino Control Act, for example, imposes penalties for the wilful evasion of the payment of any tax or levy payable under the Act.182 It is an offence to furnish a false or misleading return or report to the regulator in respect of any tax or levy payable under the Act.183 In each case, the penalty is 100 penalty units.
- The penalty provisions do not apply to the evasion of tax, furnishing a false return or making a false or misleading statement to the regulator in respect of casino tax payable under the Management Agreement. This is because casino tax payable under the Management Agreement cannot be described ‘as a tax payable under the [Casino Control] Act’, which it must be for the offence and penalty provisions to apply.
- This is a significant omission and one that may not have been intended. The omission can be rectified.
- The Taxation Administration Act 1997 (Vic) was enacted to make general provision for the administration and enforcement of taxation laws in Victoria.184
- The Taxation Administration Act has extensive provisions dealing with the collection of tax, and provisions for record keeping to enable a person’s tax liability to be properly assessed.185 The Taxation Administration Act also creates a number of offences, including for giving false or misleading information to tax officers, deliberately omitting information to a tax officer and tax evasion. The penalties are significant.186
- An important feature of the Taxation Administration Act is that it imposes penalty tax in the event of a tax default.187 The failure to pay tax in whole or in part is a tax default.188 Penalty tax is payable in addition to interest and any unpaid tax. The amount of penalty tax may be up to 75 per cent of the amount of tax unpaid.189
- If a taxpayer takes steps to prevent or hinder the Commissioner of State Revenue becoming aware of the nature and extent of the taxpayer’s default, penalty tax can be increased by a further 20 per cent.190
- The Taxation Administration Act does not apply to casino tax. It does, however, apply to gaming tax payable under part 6A of chapter 4 of the Gambling Regulation Act.
Recommendation 16: Unpaid casino tax
It is recommended that the Taxation Administration Act be amended to cover casino tax payable under the Management Agreement as well as any other taxes payable under the Casino Control Act.
Endnotes
1 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 2 (definition of ‘Gross Gaming Revenue’).
2 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 2 (definition of ‘Commission Based Players Gaming Revenue’).
3 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, Annexure h; Exhibit RC1250 Crown Rewards Rules, 1 August 2019, rule 6.1.
4 Exhibit RC0542 Letter from Mark Mackay to Solicitors Assisting, 25 June 2021; Exhibit RC0543 Crown Rewards Participating Outlets Melbourne, n.d.
5 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure f; Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure g; Exhibit RC0542 Letter from Mark Mackay to Solicitors Assisting, 25 June 2021; Exhibit RC0543 Crown Rewards Participating Outlets Melbourne, n.d.
6 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure f; Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure g; Transcript of Alan McGregor, 6 July 2021, 3520; Transcript of Xavier Walsh, 5 July 2021, 3363.
7 Exhibit RC1250 Crown Rewards Rules, 1 August 2019; Exhibit RC0542 Letter from Mark Mackay to Solicitors Assisting, 25 June 2021; Exhibit RC0543 Crown Rewards Participating Outlets Melbourne, n.d.
8 Exhibit RC0133 Statement of Nicolas Emery, 5 May 2021, Annexure h.
9 Transcript of Ahmed Hasna, 3 May 2021, 7–8.
10 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure c.
11 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure c.
12 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure c.
13 Exhibit RC0542 Letter from Mark Mackay to Solicitors Assisting, 25 June 2021; Exhibit RC0543 Crown Rewards Participating Outlets Melbourne, n.d.
14 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure c.
15 Casino Control Act 1991 (Vic) s 3(1).
16 Exhibit RC0919 Supplementary Opinion regarding the Crown Melbourne Victorian state gaming tax issue, 4 July 2021, 2; Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure c.
17 Exhibit RC0425 Statement of Peter Herring, 30 June 2021, Annexure c.
18 Exhibit RC0158 Email chain between Glen Ward and Joshua Preston, 14 November 2018, Annexure a, 2 [13]–[17].
19 Exhibit RC0156 Email from Glen Ward to Joshua Preston 25 October 2018, Annexure a, 2 [18]; Exhibit RC0267 File Note regarding ‘winnings’, October 2011, 23.
20 Exhibit RC0267 File Note regarding ‘winnings’, 24 October 2011, 24.
21 Exhibit RC0267 File Note regarding ‘winnings’, 24 October 2011, 18−29.
22 Casino Control Act 1991 (Vic) s 3(1) (definition of ‘jackpot’). Under the applicable standard operating procedure, the calculation of GGR included the deduction of ‘Bonus Jackpots’ awarded via the DACOM system: see Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 228 [G.8]–[G.9]; Exhibit RC1500 Crown Melbourne Standard Operating Procedures—Revenue Audit and Reporting, 6 July 2012, 2.
23 Exhibit RC0800 Email chain between Peter Herring, Debra Tegoni and Greg Hawkins, 6 March 2012, 1.
24 Exhibit RC0773 Memorandum regarding Proposal Classifying Gaming Machines F&B Promotional Program to be part of Bonus Jackpot, 22 March 2012.
25 Exhibit RC0775 Memorandum regarding Proposal Classifying Gaming Machines F&B Promotional Program to be part of Bonus Jackpot, 28 March 2012.
26 Exhibit RC0775 Memorandum regarding Proposal Classifying Gaming Machines F&B Promotional Program to be part of Bonus Jackpot, 28 March 2012, 3.
27 Exhibit RC0775 Memorandum regarding Proposal Classifying Gaming Machines F&B Promotional Program to be part of Bonus Jackpot, 28 March 2012, 3.
28 Exhibit RC0775 Memorandum regarding Proposal Classifying Gaming Machines F&B Promotional Program to be part of Bonus Jackpot, 28 March 2012, 4.
29 Exhibit RC0224 Crown Melbourne, Gaming Machines Food Program Initiative Presentation, March 2012; Exhibit RC1231 Second Statement of Peter Herring, 14 July 2021, 2–3. Cf Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 231 [G.20].
30 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 231 [G.20].
31 Exhibit RC1231 Second Statement of Peter Herring, 14 July 2021, 2–3.
32 Exhibit RC0224 Crown Melbourne, Gaming Machines Food Program Initiative Presentation, March 2012, 10; Exhibit RC0823 Email from Greg Hawkins to Peter Herring et al, 4 April 2012.
33 Exhibit RC0830 Email chain between Richard Longhurst, Neil Spencer and Peter Herring, 30 March 2012.
34 Exhibit RC0329 File Note regarding Gaming Machines Tax Initiatives—Round 2, April 2013.
35 Exhibit RC0329 File Note regarding Gaming Machines Tax Initiatives—Round 2, April 2013, 9; Exhibit RC0424 Supplementary Statement of Alan McGregor, 1 July 2021, Annexure a.
36 Exhibit RC1231 Second Statement of Peter Herring, 14 July 2021, 2 [9].
37 Exhibit RC0329 File Note regarding Gaming Machines Tax Initiatives—Round 2, April 2013.
38 Exhibit RC0424 Supplementary Statement of Alan McGregor, 1 July 2021, Annexure a.
39 Transcript of Michelle Fielding, 28 June 2021, 2636.
40 Transcript of Mark Mackay, 7 June 2021, 1650–1; Transcript of Michelle Fielding, 28 June 2021, 2716–17.
41 Exhibit RC0206 Memorandum regarding Casino Tax, 19 December 2014.
42 Exhibit RC0206 Memorandum regarding Casino Tax, 19 December 2014, [11].
43 Exhibit RC0206 Memorandum regarding Casino Tax, 19 December 2014, [24].
44 Exhibit RC0760 Minutes of VCGLR Crown Business as Usual Operational meeting, 29 June 2017.
45 Exhibit RC0375 Email chain between Michelle Fielding and Matt Asher et al, 2 June 2018.
46 Exhibit RC0816 Email chain between Michelle Fielding and Peter Herring et al, 31 May 2018.
47 Exhibit RC0816 Email chain between Michelle Fielding and Peter Herring et al, 31 May 2018; Exhibit RC0331 Email chain between Michelle Fielding and Peter Herring, 2 June 2018; Exhibit RC0332 Email chain between Michelle Fielding and Nicole Wendt et al, 4 June 2018; Exhibit RC0824 Email chain between Peter Herring and Michelle Fielding et al, 5 June 2018; Exhibit RC0817 Email chain between Alan McGregor and Peter Herring et al, 5 June 2018.
48 Exhibit RC0817 Email chain between Alan McGregor and Peter Herring et al, 5 June 2018.
49 Exhibit RC0780 Email chain between Michelle Fielding and Barry Felstead et al, 5 June 2018.
50 Exhibit RC0780 Email chain between Michelle Fielding and Barry Felstead et al, 5 June 2018.
51 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 231–2 [G.21].
52 Exhibit RC1231 Second Statement of Peter Herring, 14 July 2021, 2; see also Exhibit RC0329 File Note regarding Gaming Machines Tax Initiatives—Round 2, April 2013.
53 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 251 [G.105].
54 Transcript of Mark Mackay, 7 June 2021, 1655. Cf Transcript of Michelle Fielding, 28 June 2021, 2729.
55 Transcript of Xavier Walsh, 5 July 2021, 3250, 3262.
56 Exhibit RC0150 Email from Joshua Preston to Glen Ward, 17 October 2018.
57 Exhibit RC0150 Email from Joshua Preston to Glen Ward, 17 October 2018.
58 Exhibit RC0856 File Note regarding Crown General ‘Winnings’, 19 October 2018.
59 Exhibit RC0156 Email from Glen Ward to Joshua Preston, 25 October 2018; Exhibit RC0156 Email from Glen Ward to Joshua Preston, 25 October 2018, Annexure a.
60 Exhibit RC0156 Email from Glen Ward to Joshua Preston, 25 October 2018, Annexure a.
61 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 234 [G.32].
62 Transcript of Michelle Fielding, 28 June 2021, 2711−12; Exhibit RC0157 Email from Joshua Preston to Glen Ward, 2 November 2018; Exhibit RC0157 Email from Joshua Preston to Glen Ward, 2 November 2018, Annexure a.
63 Exhibit RC0158 Email chain between Glen Ward and Joshua Preston, 14 November 2018; Exhibit RC0158 Email chain between Glen Ward and Joshua Preston, 14 November 2018, Annexure a; Exhibit RC0158 Email chain between Glen Ward and Joshua Preston, 14 November 2018, Annexure b; Transcript of Michelle Fielding, 28 June 2021, 2712−13.
64 Exhibit RC0840 Email from Joshua Preston to Xavier Walsh, 13 December 2018; Exhibit RC0840 Email from Joshua Preston to Xavier Walsh, 13 December 2018, Annexure a.
65 Transcript of Mark Mackay, 7 June 2021, 1665.
66 Transcript of Mark Mackay, 7 June 2021, 1664.
67 Exhibit RC0159 Letter from Michelle Fielding to Glen Ward, 9 July 2019.
68 Exhibit RC0160 Memorandum regarding Gaming Machines Bonus Jackpot Program Initiative—GGR treatment, 18 November 2019, 2.
69 Exhibit RC0796 Email chain between Mark Tafft and Angelina Bowden-Jones, 12 June 2021, Annexure dd.
70 Exhibit RC0160 Memorandum regarding Gaming Machines Bonus Jackpot Program Initiative—GGR treatment, 18 November 2019, 3.
71 Exhibit RC0204 Email chain between Peter Herring and Mark Mackay et al, 24 February 2021, Annexure b.
72 Exhibit RC0204 Email chain between Peter Herring and Mark Mackay et al, 24 February 2021, Annexure b.
73 Transcript of Mark Mackay, 7 June 2021, 1672.
74 Crown Melbourne Ltd v Federal Commission of Taxation (2020) 20 ATR 117.
75 Crown Melbourne Ltd v Federal Commission of Taxation (2020) 20 ATR 117. The Commissioner of Taxation successfully appealed the judgment: see Commissioner of Taxation v Burswood Nominees Limited as trustee for the Burswood Property Trust [2021] FCAFC 151.
76 Exhibit RC0333 Email from Chris Reilly to Xavier Walsh et al, 17 September 2020.
77 Exhibit RC0335 Email chain between Peter Herring and Michelle Fielding et al, 21 September 2020.
78 Exhibit RC0337 Meeting invitation from Xavier Walsh to Chris Reilly et al, 22 September 2020.
79 Exhibit RC0802 File Note regarding GST—Case, 22 September 2020.
80 Transcript of Xavier Walsh, 5 July 2021, 3255.
81 Transcript of Xavier Walsh, 5 July 2021, 3255.
82 Transcript of Xavier Walsh, 5 July 2021, 3256−7.
83 Transcript of Michelle Fielding, 28 June 2021, 2733–4.
84 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 236–7 [G.37]–[G.41], 251–2 [G.107]–[G.108].
85 Responsive submission Xavier Walsh, 2 August 2021, 11 [42].
86 Exhibit RC0358 Memorandum regarding Crown Melbourne Weekly Catch Up Agenda, 23 February 2021, 2.
87 Transcript of Xavier Walsh, 5 July 2021, 3220.
88 Transcript of Xavier Walsh, 5 July 2021, 3221.
89 Transcript of Xavier Walsh, 5 July 2021, 3221–2.
90 Transcript of Xavier Walsh, 5 July 2021, 3221.
91 Exhibit RC0358 Memorandum regarding Crown Melbourne Weekly Catch Up Agenda, 23 February 2021, 2.
92 Transcript of Xavier Walsh, 5 July 2021, 3222.
93 Transcript of Helen Coonan, 8 July 2021, 3802–3.
94 Transcript of Helen Coonan, 8 July 2021, 3805.
95 Transcript of Helen Coonan, 8 July 2021, 3809.
96 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 253 [G.114].
97 Transcript of Mark Mackay, 7 June 2021, 1610.
98 Exhibit RC0202 File Note regarding tax deductible expenses, 24 February 2021.
99 Transcript of Mark Mackay, 21 June 2021, 2135.
100 Exhibit RC0792 Email from Jose Machado to Mark Mackay, 24 February 2021; Exhibit RC0790 Email chain between Jose Machado and Mark Mackay, 24 February 2021; Exhibit RC0794 Email chain between Jose Machado and Mark Mackay, 24 February 2021; Exhibit RC0793 Email chain between Jose Machado and Mark Mackay, 25 February 2021.
101 Transcript of Mark Mackay, 7 June 2021, 1609.
102 Exhibit RC0147 Crown Melbourne Bonus Points and Bonus Jackpots Earnings Report, 26 February 2021; Transcript of Mark Mackay, 7 June 2021, 1610.
103 Transcript of Mark Mackay, 21 June 2021, 2137.
104 Exhibit RC0203 Mark Mackay calendar, 24–26 February 2021.
105 Transcript of Mark Mackay, 21 June 2021, 2141.
106 Transcript of Mark Mackay, 21 June 2021, 2141.
107 Transcript of Mark Mackay, 7 June 2021, 1610–12, 1615.
108 Transcript of Xavier Walsh, 5 July 2021, 3353; Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 237 [G.44].
109 Exhibit RC0205 Email chain between Michelle Fielding and Jan Williamson et al, 14 June 2021; Exhibit RC0338 File Note regarding Tax Bonus Jackpot, 1 March 2021; Transcript of Xavier Walsh, 5 July 2021, 3230.
110 Transcript of Xavier Walsh, 5 July 2021, 3234.
111 Transcript of Xavier Walsh, 5 July 2021, 3234–5; Exhibit RC0338 File Note regarding Tax Bonus Jackpot, 1 March 2021.
112 Transcript of Xavier Walsh, 5 July 2021, 3237–8.
113 Transcript of Xavier Walsh, 5 July 2021, 3238.
114 Transcript of Xavier Walsh, 5 July 2021, 3238–9.
115 Transcript of Jane Halton, 7 July 2021, 3608–9.
116 Transcript of Jane Halton, 7 July 2021, 3610–11.
117 Transcript of Xavier Walsh, 5 July 2021, 3239.
118 Transcript of Antonia Korsanos, 7 July 2021, 3695–6.
119 Transcript of Antonia Korsanos, 7 July 2021, 3697.
120 Transcript of Nigel Morrison, 22 June 2021, 2244, 2249.
121 Transcript of Nigel Morrison, 22 June 2021, 2248–9.
122 Transcript of Nigel Morrison, 22 June 2021, 2249–50.
123 Transcript of Nigel Morrison, 22 June 2021, 2245.
124 Transcript of Nigel Morrison, 22 June 2021, 2247.
125 Transcript of Nigel Morrison, 22 June 2021, 2250.
126 Exhibit RC0148 Letter from Solicitors Assisting to Crown Melbourne Directors, 10 March 2021.
127 Transcript of Andrew Maher, 22 June 2021, 2296.
128 Exhibit RC0230 File Note regarding meeting between representatives of Crown and Allens Linklaters, 19 March 2021.
129 Transcript of Andrew Maher, 22 June 2021, 2325.
130 Transcript of Andrew Maher, 22 June 2021, 2305.
131 Exhibit RC0230 File Note regarding meeting between representatives of Crown and Allens Linklaters, 19 March 2021, 3–4.
132 Transcript of Andrew Maher, 22 June 2021, 2311–12; Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 251 [G.106].
133 Exhibit RC1231 Second Statement of Peter Herring, 14 July 2021, 2. See also Exhibit RC0329 File Note regarding Gaming Machines Tax Initiatives—Round 2, April 2013.
134 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 256–7 [G3.3.3].
135 Transcript of Andrew Maher, 22 June 2021, 2327.
136 Transcript of Mark Mackay, 21 June 2021, 2137.
137 Transcript of Andrew Maher, 22 June 2021, 2312.
138 Transcript of Andrew Maher, 22 June 2021, 2297.
139 Transcript of Andrew Maher, 22 June 2021, 2336–7. The documents provided to Allens Linklaters were: Exhibit RC0225 Timeline Review Briefing Note, n.d.; Exhibit RC0232 Summary of Gross Gaming Revenue, 28 February 2018; Exhibit RC0233 VCGA Technical Requirements for Gaming Machines, 10 July 1996; Exhibit RC0234 Letter from the VCGR to Lonnie Bossi, 6 November 2006; Exhibit RC0328 Memorandum regarding Proposal Classifying Gaming Machines F&B Promotional Program to be part of Bonus Jackpot, 28 March 2012; Exhibit RC0763 Memorandum regarding Gaming Machines Food Program Initiative—GGR Treatment, 25 October 2018; Exhibit RC0235 Email from Edwin Aquino to Peter Herring, 30 March 2012; Exhibit RC0236 Meeting invitation regarding Gaming Machines Tax Initiative, 12 October 2011; Exhibit RC0224 Crown Melbourne Gaming Machines Food Program Initiative Presentation, March 2012; Exhibit RC0238 Crown Melbourne Gaming Machines Business Plan, 2013; Exhibit RC0239 Crown Melbourne Gaming Machines Business Plan, 2014; Exhibit RC0240 Approval Requirement for new Bonus Jackpots, n.d.; Exhibit RC0240 Approval Requirement for new Bonus Jackpots, n.d.; Exhibit RC0242 VCGLR Technical Requirements Document for Melbourne Casino, n.d.
140 Exhibit RC0228 Letter from Allens Linklaters to Solicitors Assisting, 7 June 2021.
141 Exhibit RC0149 Letter from Allens Linklaters to Solicitors Assisting, 24 March 2021; Exhibit RC0149 Letter from Allens Linklaters to Solicitors Assisting, 24 March 2021, Annexure a; Exhibit RC0149 Letter from Allens Linklaters to Solicitors Assisting, 24 March 2021, Annexure b.
142 Exhibit RC0244 Letter from Allens Linklaters to Solicitors Assisting, 21 April 2021; Exhibit RC0244 Letter from Allens Linklaters to Solicitors Assisting, 21 April 2021, Annexure a; Exhibit RC0244 Letter from Allens Linklaters to Solicitors Assisting, 21 April 2021, Annexure b; Exhibit RC0244 Letter from Allens Linklaters to Solicitors Assisting, 21 April 2021, Annexure c.
143 See Appendix G.
144 Exhibit RC0149 Letter from Allens Linklaters to Solicitors Assisting, 24 March 2021, Annexure a, 6−7.
145 Transcript of Andrew Maher, 22 June 2021, 2345–9.
146 Transcript of Xavier Walsh, 5 July 2021, 3269.
147 Transcript of Mark Mackay, 7 June 2021, 1610, 1673; Transcript of Mark Mackay, 21 June 2021, 2136.
148 Transcript of Nigel Morrison, 22 June 2021, 2258.
149 Transcript of Jane Halton, 7 July 2021, 3606.
150 Transcript of Antonia Korsanos, 7 July 2021, 3693–4; Transcript of Nigel Morrison, 22 June 2021, 2258–60.
151 Transcript of Nigel Morrison, 22 June 2021, 2259–60.
152 Transcript of Nigel Morrison, 22 June 2021, 2260.
153 Transcript of Nigel Morrison, 22 June 2021, 2259–60.
154 Transcript of Jan Williamson, 2 July 2021, 3128–9.
155 Exhibit RC0339 File Note regarding call with Jan Williamson and Chris Reilly, 7 June 2021.
156 Exhibit RC1259 Statement of Barry Felstead, 15 July 2021, 2 [4]−[7].
157 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 244 [G.71].
158 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 244 [G.71].
159 Exhibit RC1461 Letter from Helen Coonan to Catherine Myers, 27 July 2021; Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 246 [G.78].
160 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 229 [G.11].
161 Exhibit RC0424 Supplementary Statement of Alan McGregor, 1 July 2021, Annexure a.
162 London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333.
163 London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333, 336 [3], [5] (Lord Kitchin, Lady Black and Lord Carnwath agreeing at 336).
164 London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333, 337–8 [9]–[11] (Lord Kitchin, Lady Black and Lord Carnwath agreeing at 336).
165 London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333, 340 [23], 346 [48], 347 [54] (Lord Kitchin, Lady Black and Lord Carnwath agreeing at 336).
166 London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333, 345 [43]–[44] (Lord Kitchin, Lady Black and Lord Carnwath agreeing at 336, Lord Sales agreeing at 354 [88]).
167 See Adrian Finanzio, Penny Neskovcin, Meg O’Sullivan and Geoffrey Kozminsky, Closing submissions of Counsel Assisting the Commission, Royal Commission into the Casino Operator and Licence (14 July 2021) 107 [1.167].
168 See Adrian Finanzio, Penny Neskovcin, Meg O’Sullivan and Geoffrey Kozminsky, Closing submissions of Counsel Assisting the Commission, Royal Commission into the Casino Operator and Licence (14 July 2021) 107 [1.166].
169 Cf Exhibit RC1437 Memorandum of Advice from Christopher Archibald and Anna Dixon to ABL, 30 July 2021. In reaching that conclusion, the Commission means no disrespect to the opinion of Melbourne Counsel whose advices on the topic were of great assistance.
170 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 247 [G.85]–[G.86]; Exhibit RC1436 Memorandum of advice from Mark Robertson, 28 July 2021; Exhibit RC1437 Memorandum of advice from Christopher Archibald and Anna Dixon to ABL, 30 July 2021.
171 Exhibit RC1436 Memorandum of Advice from Mark Robertson, 28 July 2021, 13–15.
172 Exhibit RC1436 Memorandum of Advice from Mark Robertson, 28 July 2021, 17–18.
173 Exhibit RC1437 Memorandum of Advice from Christopher Archibald and Anna Dixon to ABL, 30 July 2021, 10 [37].
174 Exhibit RC1436 Memorandum of Advice from Mark Robertson, 28 July 2021, 13.
175 Exhibit RC0885 Letter from Barry Felstead to Cate Carr, 1 December 2017.
176 Exhibit RC0885 Letter from Barry Felstead to Cate Carr, 1 December 2017.
177 Exhibit RC0885 Letter from Barry Felstead to Cate Carr, 1 December 2017.
178 This reasoning is consistent with the approach in London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333, 347–8 [56] (Lord Kitchin, Lady Black and Lord Carnwath agreeing at 336). See also London Clubs Management Ltd v Revenue and Customs Commissioners [2021] 2 All ER 333, 353–4 [80] (Lady Arden).
179 Exhibit RC0799 Email chain between Shaun Cartoon and Christopher Archibald et al, 19 June 2021, Annexure tt, [13].
180 See views expressed on this point in: Exhibit RC1436 Memorandum of advice from Mark Robertson, 28 July 2021; Exhibit RC1437 Memorandum of advice from Christopher Archibald and Anna Dixon to ABL, 30 July 2021.
181 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 25.2(a); Casino Licence granted to Crown Melbourne (then Crown Casino Ltd) under Part 2 of the Casino Control Act 1991 (Vic) dated 19 November 1993, cl 11.
182 Casino Control Act 1991 (Vic) s 120(a).
183 Casino Control Act 1991 (Vic) s 120(b).
184 Taxation Administration Act 1997 (Vic) s 1.
185 Taxation Administration Act 1997 (Vic) pts 7−8.
186 Taxation Administration Act 1997 (Vic) pts 5, 8.
187 Taxation Administration Act 1997 (Vic) pt 5 div 2.
188 Taxation Administration Act 1997 (Vic) s 3(1) (definition of ‘tax default’).
189 Taxation Administration Act 1997 (Vic) s 30.
190 Taxation Administration Act 1997 (Vic) s 32.
Chapter 13
The China Union Pay issue
The China Union Pay issue
Introduction
- In 1983, Mr Connor, QC warned of the dangers of casinos providing credit to patrons:
Credit has almost routinely been the principal source of trouble with casinos. Casino management is generally anxious to be in a position to extend credit at its discretion to favoured gamblers. It increases casino turnover as well as encouraging gamblers to gamble beyond their means. The granting of credit leads to all kinds of problems particularly relating to skimming and collecting the unpaid debts of gamblers who live out of State. The way to eliminate problems relating to credit is simply to prohibit it.1
- Mr Connor, QC also said that it was in the public interest that persons coming to and going from casinos should not carry large amounts of cash. He said: ‘[a] properly controlled cheque cashing facility would go a fair distance toward [encouraging gamblers not to carry cash]’.2
- The Casino Control Act adopted these suggestions.
- Relevantly, subject to certain exceptions, by section 68(2) a casino operator is prohibited from providing money or chips as part of a transaction involving a credit card or debit card.
- One exception is section 68(8), which provides that a casino operator may provide credit to a non-Australian resident participating in a premium player arrangement or a junket.
- This chapter will outline how Crown Melbourne contravened section 68 by implementing what has become known as the ‘CUP process’; the ‘CUP process’ being the use of the Chinese-based bank card, China Union Pay, to allow international patrons to access funds in order to gamble at Crown Melbourne.
The process
- On 10 March 2021, Solicitors Assisting the Commission wrote to Crown Resorts and Crown Melbourne requesting them to disclose, relevantly, conduct that would or might breach any provision of the Casino Control Act.3
- On 16 March 2021, a leadership training workshop was attended by a number of Crown Melbourne employees. There, one of the employees said he was aware that money laundering was taking place at the Melbourne Casino.
- A surveillance log entry report summarised what the employee had said:
[The form of money laundering] involved having a high action international patron staying at a hotel (ie. Crown Towers). They (the hosting or hotel staff) would charge an ‘incidental charge’ ([the employee] failed to specify an amount) to the hotel invoice of the patron. The patron would then settle their hotel bill, including the incidental charge, using ‘tap and go’. This would transfer money from an international account to Crown to settle the amount on the hotel room. The money for the incidental charge would then be made available to the patron, potentially at the cage, for the purposes of gaming.4
- On 25 March 2021, the employee was interviewed by three Crown Melbourne officers, including Mr Robert Meade (Crown Melbourne’s in-house counsel), Ms Jan Williamson (another in-house lawyer) and Ms Miriam Burado (the manager of the employee’s direct manager).5
- On 21 April 2021, in response to the disclosure request, the Commission was informed that Crown Melbourne may have breached the AML/CTF Act. The Commission was provided with a copy of the surveillance log entry report recording what the employee said at the leadership training workshop. It was advised that Crown Resorts had begun an investigation into the matter.6
- In due course, the Commission was provided with a Memorandum of Advice, dated 1 June 2021, by senior and junior counsel who had been retained by the directors of Crown Resorts to investigate the matters raised by the employee. That advice sets out a detailed history of the practice.7 It will be necessary to return to aspects of that advice.
- It is important to understand the reason for the CUP process. China had imposed restrictions on Chinese nationals transferring money out of the country. Between the years 2012 and 2016, a Chinese national could not transfer more than USD50,000 per year to another jurisdiction. The Chinese currency restrictions were well known to Crown Melbourne executives.8 The CUP process was devised to enable the illegal transfer of funds from China.
- In brief outline, the CUP process involved the following steps. International VIP patrons, mostly from China, were permitted to transfer funds to the Crown Towers Hotel through their CUP credit card or debit card. NAB was the merchant facility provider whose terminal facility was used. The hotel issued a room charge bill to the patron, falsely asserting that the hotel had provided services to the person. The patron would pay the bill and be given a voucher acknowledging the receipt of funds. Then the patron, accompanied by a Crown VIP host, took the voucher to the Cage and exchanged it for cash or chips.9
- Crown Melbourne adopted the CUP process in the following circumstances. In August 2012, Crown Melbourne’s Vice President South China contacted Mr William Mackay, the Executive Vice President of VIP Operations. He enquired whether two Chinese VIP patrons who were planning to visit Crown Melbourne could transfer to the casino $200,000 via a credit card so that they could purchase chips to gamble.10
- Crown Melbourne’s Vice President South China discussed the matter with several Crown executives, including Mr Matt Sanders, a strategy manager at Crown Melbourne. Mr Sanders came up with the idea that the patrons could pretend to acquire services from the Crown Towers Hotel and use money transferred from their credit card account to pay for those services. Mr Sanders sought advice from Ms Debra Tegoni and Ms Michelle Fielding, Crown Melbourne’s legal and compliance officers, on whether it could be done.11
Internal advice on the process
- On 9 August 2012, Ms Fielding sent an email to Mr Sanders and Ms Tegoni containing her advice. The advice noted that:
- the Casino Control Act prevented a cash advance from a credit card on the gaming floor and within 50m of any casino entrance
- the Casino Control Act also forbade the provision of cash or chips as part of a transaction involving a credit card or debit card
- there was an exception where the chips were provided on credit to a person not ordinarily resident in Australia and the person was participating in a junket or a premium player arrangement.12
- Ms Fielding’s advice did not deal with the lawfulness of the proposed arrangement. She merely paraphrased the applicable provisions in the Casino Control Act.
- However, Ms Fielding was alive to the risk such transactions represented, for she stated:
There is therefore a risk that the Regulator may take the view that to take advantage of exemption it must be the casino operator providing the credit and not the bank. We would argue in reply (if the matter arises), that the chips are being sold on credit as facilitated by and for the benefit of the casino operator and accordingly, in our view, the exemption should apply.13
- Nonetheless, Ms Fielding advised that Crown Melbourne could sell and provide chips from a credit card to international patrons, provided those patrons were participating in a junket or a premium player arrangement.
- Unfortunately, Ms Fielding did not consider whether, by acting in accordance with her advice, Crown Melbourne would be providing credit to the VIP patrons—for it is only in that circumstance that the exemption in section 68(8) would apply.
Adoption of the process and further reviews
- Also on 9 August 2012, Mr Jason O’Connor (Group Executive General Manager, VIP International) approved the process and limited the transfer of funds to $200,000.14
- The process was then partially formalised. Mr Sanders emailed the duty managers at the hotel and the manager of the Cage on 6 September 2012 and explained the procedure to be followed. The instructions were quite detailed.15
- By mid-2013, 14 patrons had used the CUP process. The amounts transferred ranged from $5,000 to $450,000.16
- An internal review of the process was then undertaken. The report of the review, dated 6 June 2013, identified potential money laundering as a problem. The report noted that the staff at the Cage were responsible for compliance with the AML requirements.17
- There was no evidence before the Commission that, at any time during which the CUP process was in operation, the Cage staff considered that it might be necessary to make reports to AUSTRAC regarding the funds transferred from China. To the contrary, the evidence suggests they did nothing.
- In mid-2013, an issue arose that should have alerted Ms Tegoni to the unlawfulness of the CUP process. In July 2013, Crown Melbourne reviewed whether its banking arrangements with NAB permitted the CUP process. It also considered whether it might engage CBA to be its merchant facility provider instead of NAB. Ms Tegoni was one of the review team.
- During the review, correspondence passed between Ms Tegoni and an officer at CBA. In particular, on 26 July 2013, the CBA officer emailed an executive at Crown Melbourne, who forwarded the email to Ms Tegoni, noting there were a number of constraints on using the CUP process. Of the problems identified, three should be noted. According to the CBA officer, CUP cards:
- cannot be used to process cash out
- cannot be used to place bets or purchase gaming chips
- cannot be used to purchase foreign currency.18
- On 16 September 2013, Ms Tegoni reviewed an article from China Briefing News. The article discussed the problems faced by Chinese nationals seeking to transfer funds from China.19
- In the unlikely event that Ms Tegoni had not been aware that the CUP process enabled Crown Melbourne’s Chinese VIP patrons to illegally transfer funds from China, she now knew it. Upon reading the article, Ms Tegoni made a file note: ‘[t]ransaction NOT valid if it’s illegal. Where?? Discretion if breaches laws or sanctions of another country.’20
- Ms Tegoni was also concerned about Crown Melbourne’s AML obligations. She sent an email to Mr Roland Theiler, Senior Vice President of International Business at Crown Melbourne, asking: ‘Do you know if the Cage report on any pre-approval or intention to visit and use CUP here from an AML perspective—i.e. an IFTI on the instruction?’21
- On 17 September 2013, Ms Tegoni prepared a ‘note to file’. In summary, she recorded:
- CBA emailed to say CUP cannot be used to purchase chips.
- The NAB offer allows a CUP card to process a ‘quasi-cash transaction’ (something, such as chips, that may be readily converted to cash) as a ‘purchase’ rather than a ‘cash out’. This suggests CUP can process such a transaction.
- There would be proceeds of crime issues if such transactions were not legal.
- NAB’s terms and conditions suggest that such transactions are not valid if they are illegal.
- Such transactions cannot be processed to provide players with cash.
- If it is illegal for Chinese residents to gamble overseas (and she did not think it was), then that would be a matter for the individual patron, subject to proceeds of crime issues and NAB terms and conditions.
- There is a technical risk that such transactions are only completed on the gaming floor, but ‘we have been doing this for a long time and this has been acceptable’.
- It is hard to see how the transactions could be illegal unless NAB has changed its terms and conditions or specified that using a CUP card for a quasi-cash transaction such as this is now illegal and invalid. This should be clarified and a new letter of offer obtained.22
- Once again, Ms Tegoni was on notice that the CUP process was potentially unlawful.
- In the same month, Ms Tegoni was asked to consider whether the CUP process required the patron to be a guest of the Crown Towers Hotel. In her advice, provided on 30 September 2013, Ms Tegoni stated:
- … S68 (2) of the Act prohibits Crown from providing money or chips as part of transaction involving a credit or a debit card unless exempted under S68(8) when the chips are provided on credit (there is no mention of debit card in this section) is provided to an International resident when participating in a Premium program agreement or a junket at the casino.
- Accordingly, this is a further reason why we may have required them to be hotel guests. Either way it is preferable that we check that they are International residents and on such a program before we allow them to transact in this manner—I understand that this is the case.
- It may well be argued that S68(2) does not apply for funds accessed at the hotel at all, as the section only deals with a transaction ‘in connection with gaming or betting in the casino’ and providing access to funds at the hotel is not this type of transaction. Irrespective, we have taken the view that, it is preferable to ensure the customer is international and playing on a program just in case.23
- In October 2013, the CUP process was formalised in the VIP International ‘Credit and Debit Card cash out policy’.24
- In December 2013, the previous transfer limit of $200,000 per transaction was increased to $500,000 per transaction and patrons were informed of the increase.25
- In fact, on several occasions, the $500,000 limit was exceeded.26
- In February 2014, Mr O’Connor met with representatives of Regal Crown (a Hong Kong-based remittance payment company) in Hong Kong to discuss whether it would become a merchant acquirer for CUP. At the time of the meeting, Mr O’Connor had been informed of concerns held by Ms Tegoni. Those concerns were:
...
- Do CUP know that the transactions are gaming related?
- Can we review the agreement between RC [Regal Crown] and CUP? ...
- How can we be assured that RC have a proper AML reporting process in place?27
- Around the same time, there were internal discussions about whether the CUP process should be adopted by Crown Perth. Mr O’Connor was concerned about this. In an email to Ms Tegoni, he wrote, ‘[o]ne issue is what the VCGLR might do if contacted by the Perth regulator, which Josh [Preston] feels is likely to happen’.28
- Whatever may have been the position in 2012 and 2013, by early 2014, Mr O’Connor, Mr Preston (then Chief Legal Officer, Australian Resorts) and Ms Tegoni were obviously worried about the lawfulness of the CUP process.
- Indeed, in March 2014, Mr O’Connor read a Reuters article that referred to the CUP process; specifically, it noted that the process violated China’s AML regulations and restrictions on currency exports. It also noted that the Chinese authorities feared the CUP process was being used by ‘corrupt officials and business people to send money out of the country’.29
- On 17 October 2014, Ms Tegoni sent the following email to Mr O’Connor:
Further to our conversation today, I thought that I should point out and clarify the relevant provisions of the Casino Control Act (Vic) 1991 that we have previously discussed in the context of this issue.
See attached section 68(2)(c). This provision states that, other than is provided/permitted under the remaining parts of section 68, Crown is not permitted ‘in connection with any gaming or betting in the casino … to provide money or chips as part of a transaction involving a debit or credit card’.
This was the provision I was talking about that we would have to defend in circumstances where the transactions were questioned.
We would argue that subsection 68(8) allows us to provide credit to a person who is not ordinarily resident in Australia on a premium player arrangement or as a Junket and so is effectively an exception to the above prohibition. Technically, however and as discussed, a credit card transaction is where credit is provided by the bank.
If we are providing chips as part of a credit or debit card transaction for those that are not international customers there may be additional risks involved.
In either situation (international or local customers), we would need to rely on the fact that the transaction is not ‘in connection with gaming or betting in the casino’ given that such transactions occur at the hotel (albeit may be argued to be completed at the Cage).
Obviously we may fail in any defence in this manner but the way in which we agreed to undertake these transactions are designed to mitigate the risks. This is predominantly why we agreed to limit CUP card transactions to international patrons staying at the hotel etc.
To the extent that we are accepting cards for other patrons—debit and credit—we need to be aware of the restriction of section 68(2)(c).30
- Throughout 2015 and into 2016, further events occurred that threw more doubt on the lawfulness of the CUP process. Star Casino, which operated a casino in New South Wales, was also using the CUP process with NAB as its merchant service provider. NAB had begun querying their arrangement.31
- On learning this, Ms Tegoni wrote another file note, which included the statement: ‘[m]y suggestion close down before if going to happen anyway’.32
- In late 2015, Ms Tegoni spoke with Mr Alex Carmichael, the Managing Director of Promontory Group Australasia. Ms Tegoni’s notes of the conversation included:
CUP Chinese Govt—crusade against corruption effectively shut down a lot of junkets operating out of Macau. Ceased.
CUP goes through at lower levels and prob exceed levels with multiple cards being used—within per day limit.
Large amounts over $50k—single card.
Processed up $200k.
Single card would be flagged—Chinese Govt—tracking $50k and above.
Could be spread amongst multiple cards.33
- Ms Tegoni’s concern about compliance with the AML rules remained. She discussed the issue with senior officers during February 2016, but no action was taken to overcome any failings.34
- If Ms Tegoni was still in any doubt about the propriety of the currency controls, that doubt was removed by a research note prepared by her legal assistant in February 2016. The research note stated that Chinese banks do not allow customers to send more than USD50,000 out of China each year.35
- Notwithstanding the concerns about the CUP process, in March 2016 there were detailed discussions about extending the CUP process to Crown Perth even though the VCGLR might learn about the process.36
- The CUP process came to an end in October 2016 following the arrests of Crown staff in China.37
- However, between 2018 and 2019, the VIP business sought to reintroduce the practice. This was resisted by Mr Preston.38
- It should be noted that the process of using credit cards or debit cards at Crown Towers in return for cash continues. Invoices from Crown Towers from 2017 to 2021 show that customers used the card facilities to access cash of up to $5,000. The invoices also include false room numbers for those not staying at Crown Towers Hotel.39
- Mr Meade has succinctly summed up the purpose and consequences of the CUP process. In a file note prepared following his review of the CUP material, Mr Meade wrote that the CUP process:
- was clearly designed to circumvent Chinese capital control laws
- may have been contrary to Crown Melbourne’s AML obligations
- compromised Crown Melbourne’s financial books and records.40
- There was no need for Mr Meade to add that the CUP process contravened section 68 of the Casino Control Act as it plainly did—a point Crown Melbourne concedes.41 First, section 68(2)(c) prohibited the provision of money or chips as part of a transaction involving a credit card or debit card. The CUP process fell within the prohibition. Second, the exception in section 68(8) only applied if the casino operator provided credit to a person. The CUP process did not involve Crown Melbourne providing credit.
Repercussions of the CUP process
- Counsel retained by the directors of Crown Resorts considered whether officers of Crown Resorts or Crown Melbourne had contravened the AML obligations under the AML/CTF Act, certain sections of the Crimes Act 1958 (Vic) and certain parts of the Criminal Code 1995 (Cth).42
- It is not appropriate to discuss those aspects of their advice. For one thing, the CUP process has been referred to AUSTRAC and it will no doubt undertake its own inquiries to decide whether the AML/CTF Act has been contravened.
- Second, the ability of counsel to advise adequately on the criminality of the conduct was hampered by the fact that they could not speak with all important participants and may not have had all relevant documents. As counsel themselves explain, this only allowed them to express tentative opinions on the illegality of the conduct.43
- That said, and putting aside any potential criminal offences, there is a strong case to be made that parties involved in the CUP process have contravened section 184 of the Corporations Act. That section relevantly provides that an officer of a corporation commits an offence if they are reckless or dishonest and fail to exercise their powers in good faith and in the best interests of the corporation.
- The decision to authorise and oversee the CUP process was clearly not in the best interests of Crown Melbourne. On the contrary, it was plainly against its interests for, having breached section 68, Crown Melbourne was at risk of being caught and subjected to disciplinary action of some kind.44 Indeed, it is still possible that action will be taken as regulatory investigations are currently underway.
Endnotes
1 Xavier Connor, Report of Board of Inquiry into Casinos in the State of Victoria (Report, 1983) [16.43].
2 Xavier Connor, Report of Board of Inquiry into Casinos in the State of Victoria (Report, 1983) [16.44].
3 Exhibit RC0148 Letter from Solicitors Assisting to Crown Melbourne Directors, 10 March 2021.
4 Exhibit RC0376 Surveillance Log Entry Report, 19 March 2021.
5 Exhibit RC0936 File Note regarding meeting with whistleblower, 25 March 2021; see also Transcript of Employee 15, 23 June 2021, 2472–3.
6 Exhibit RC0244 Letter from Allens Linklaters to Solicitors Assisting, 21 April 2021, Annexure b, 14–15. See also Exhibit RC1452 Minutes of Crown Resorts board meeting, 9 April 2021.
7 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021.
8 See Exhibit RC0952 File Note regarding China Union Pay meeting with Roland Theiler, 22 April 2021; Exhibit RC0959 File Note regarding China Union Pay meeting with Jacinta Maguire, 18 May 2021; Exhibit RC0955 File Note regarding China Union Pay meeting with Barry Felstead, 28 April 2021.
9 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, 50 [200].
10 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure xx, 6.
11 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure xx, 5.
12 Exhibit RC0263 Email chain between Matt Sanders and Jason O’Connor et al, 9 August 2012.
13 Exhibit RC0263 Email chain between Matt Sanders and Jason O’Connor et al, 9 August 2012.
14 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure eee.
15 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure yy, 2–3.
16 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure uu, 1.
17 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure uu, 3.
18 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure r, 2.
19 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure v.
20 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure w, 4.
21 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure t.
22 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure q.
23 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure n, 1.
24 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure j.
25 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure k.
26 Exhibit RC0313 Main Cage Purchase transaction spreadsheet, 23 October 2016.
27 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure m, 2.
28 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure m, 1.
29 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure ggg; Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure ll.
30 Exhibit RC0265 Email chain between Debra Tegoni and Jason O’Connor et al, 11 September 2015.
31 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure hh.
32 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure hh.
33 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure c.
34 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure z.
35 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure cc.
36 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure gg; Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure jjj.
37 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, Annexure d.
38 Transcript of Jan Williamson, 2 July 2021, 3179–82.
39 Exhibit RC0964 Crown Resorts Invoice, 26 February 2017; Exhibit RC0965 Crown Resorts Invoice, 13 August 2020; Exhibit RC0963 Crown Resorts Invoice, 6 August 2019; Exhibit RC0962 Crown Resorts Invoice, 31 May 2019; Transcript of Employee 10, 23 June 2021, 2437–8.
40 Exhibit RC0315 File Note regarding China Union Pay potential AML breach, 22 March 2021, 1.
41 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 269–70 [H.28].
42 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021.
43 Exhibit RC0268 Final Memorandum of Advice—Crown Resorts, CUP process and transfers by associates of customers, 1 June 2021, 4 [8].
44 See Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373, 399–402 [104]–[110]; see also Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52, [460].
Chapter 14
Overseas operations
Overseas operations
Introduction
- A significant number of patrons who gamble at the Melbourne Casino are citizens of countries in Asia. Their custom makes a large contribution to Crown Melbourne’s profits. In the period 2015 to 2020, Crown Melbourne’s reported turnover from VIP program play was $220.8 billion.1 A substantial proportion of that amount comprised turnover from Asian patrons.2
- To attract custom from Asia, Crown Melbourne established a VIP International business unit. The function of this unit was to market Crown’s casinos to overseas gamblers.
- VIP International had offices in mainland China, Macau, Malaysia, Singapore, Indonesia, Thailand, Vietnam, Taiwan and New Zealand.3 Its marketing activities were conducted from these offices. The staff were local residents.
- There was, however, a serious problem with these activities. Since the 1990s, Crown Melbourne knew that gambling or the promotion of gambling was illegal in China, Indonesia, Malaysia, Taiwan and Singapore. It had received advice to that effect from several law firms, including Baker & McKenzie and Jones Day, as well as from lawyers who practised in the various countries.4
Legal advice
- Ms Jan Williamson is an in-house lawyer at Crown Melbourne. One of her areas of responsibility was VIP International.5 Ms Williamson said that she was only concerned with the ‘HR side’ of VIP International.6 In fact, her role involved much more than that. On several occasions since 2002, Ms Williamson obtained advice from overseas law firms regarding the lawfulness of gambling in the Asian countries from which Crown Melbourne drew its custom.7
- Crown Melbourne also knew that, in at least some of those jurisdictions, it was illegal to promote gambling in overseas casinos. Once again, it was Ms Williamson who had obtained advice to that effect.8
- The fact that gambling and its promotion were unlawful in a number of Asian countries did not deter VIP International from luring Asian gamblers to the Melbourne Casino.
- That practice was interrupted in October 2016 with the arrest of the 19 China-based Crown employees, who were charged under Article 303 of the Criminal Law of the People’s Republic of China (Criminal Law) with procuring of Chinese citizens to gamble at Crown’s casinos in Australia.9
- Crown Resorts, following the arrests, requested its Melbourne solicitors, MinterEllison (Mr Richard Murphy), to provide advice regarding the lawfulness of its overseas operations.10 For the purposes of that advice, Crown Melbourne provided MinterEllison with a summary of the advice it had previously received about gambling laws in Asian countries, as at February 2017. Ms Williamson prepared the summary.11
- The Hong Kong summary is a useful example of the previous advice. It summarised advice from MinterEllison’s Hong Kong office, noting that while there was no specific legal restriction explicitly prohibiting the marketing or promotion of overseas casinos, casinos were illegal in Hong Kong and by implication the promotion of foreign casinos may be illegal.12
- The advice distinguished between different types of promotion. There was ‘above the line’ advertising, being advertising that goes to the general population, and ‘below the line’ advertising, which involves marketing towards a smaller specific group. In relation to ‘above the line’ advertising, the advice noted that there was no prohibition on the marketing or promotion of overseas casinos, but advised against high-profile campaigns.13
- As to ‘below the line’ advertising, the advice was more circumspect:
There is no specific legal restriction which explicitly provides that the promotion of overseas casinos in Hong Kong is illegal but by implication it is argued that such promotion is illegal.
Further, in light of the geo-political factors caution is to be exercised when promoting Crown Resorts and the main focus should be on non-gaming elements.14
- Mr Murphy informed Crown Melbourne that MinterEllison had reviewed ‘the legal opinions obtained by Crown [Melbourne] as to what is permissible under local law in Macau, Hong Kong, Taiwan, Thailand, Indonesia, Singapore, Malaysia and Vietnam (and for completeness the UK and New Zealand)’. Mr Murphy added that this advice would be the foundation for determining what future activities, if any, Crown staff may engage in in those jurisdictions.15
- Mr Murphy recorded his understanding that Crown staff were not engaged ‘for the time being’ in any marketing activities outside Australia. No doubt the marketing activities had stopped because of the China arrests.16
Proposed operating model
- On 3 March 2017, MinterEllison provided to Crown Resorts a ‘Draft—proposed operating model for VIP business’.17 The draft proposal described the legal position in the Asian countries where Crown conducted its marketing. It included the ‘do’s’ and ‘don’ts’ for staff visiting Asian countries and the ‘“do’s” and “don’ts” for “road shows”, functions, events and the like in Asian countries’.18
- The draft proposal advised that Crown should establish a regional hub in Hong Kong ‘because the legal environment is relatively amenable’.19 The proposal recommended, on the basis of the risks in other countries, that the Crown offices in each of those countries should be closed and the staff relocated to Hong Kong. The staff could then travel from Hong Kong to the various Asian countries where Crown previously had offices, to continue their work.
- The draft proposal described the law relating to gambling in each country.20 It is helpful to set that out here, as it will make plain precisely what Crown Melbourne understood the position to be.
- Regarding Macau, the legal position was that ‘the promotion and operation of local casinos by licensed operators is permitted. All other gaming activities and promotion are implicitly prohibited’.21
- For Singapore, the position was that ‘[o]rganising, promoting or advertising … of gaming in foreign casinos is likely to constitute a criminal offence’.22
- For the remaining countries, Thailand, Malaysia, Indonesia, Vietnam and Taiwan, the advice was that ‘[o]rganising, promoting or advertising in [that country] of gaming in foreign casinos is an offence’.23
- The draft proposal then described the ‘“do’s” and “don’ts” for “low key” visits by staff to Asian countries’. The ‘do’s’ included:
- keep meetings as small and low-key as is practicable, with no more than five invitees per meeting
- discuss Crown’s non-gaming facilities and non-gaming events
- if a customer wants to discuss any aspect of gaming, inform the customer that is not the purpose of the visit and say ‘someone will follow up by telephone (calling from Australia or HK)’
- take only a ‘sanitised’ mobile device
- take only approved collateral that ‘promotes Crown���s resorts, non-gaming facilities and non-gaming events, but does not mention … gambling activities’.24
- The ‘don’ts’ included:
- meet with more than five customers at a time without prior approval of Crown’s compliance officer
- discuss any aspect of gaming (terms, credit, debt collection, and so on)
- take any electronic device other than a Crown-approved ‘sanitised’ mobile device
- use public wi-fi for email or other electronic communications
- dock any external storage device to the Crown mobile device.25
- Mr Murphy provided advice along these lines to the Crown Resorts board on 27 April 2017.26
- As a result, the Crown Resorts board decided to restructure its VIP operating model. It closed its offices throughout Asia and established a regional hub in Hong Kong. Crown staff then travelled from Hong Kong to the Asian countries, where offices had previously existed, to carry out their work.27
- There is also advice provided by MinterEllison to Crown, which is contained in a document entitled ‘DRAFT—Proposed operating model’.28 This is a most troubling document. It provides advice about the activities that Crown staff based in Australia or London might undertake and comments on the appropriateness of those activities. It provides similar advice to that given to staff based in Hong Kong who were to carry out their work in the Asian countries.
- The troubling aspect of this draft proposed operating model is that it is not confined to advising on the lawfulness of particular activities. It also describes the ‘[r]isk mitigation’ for each activity and rates the risk out of 10.29
- To appreciate the true nature of this advice, two examples concerning Hong Kong-based staff activity in Macau are reproduced here:
Activity
Risk mitigation
Risk (/10)
Comments
Promotion of resorts and events (not gaming) eg circulation of gaming-free version of Crystal magazine and advertising golf tournaments at Capital
Govt. / regulator relations strategy
2
Residual risk is that such promotion comes to be regarded as, in truth, promotion of gaming. Risk seems relatively low because foreign casinos have been doing it for a long time with no issues, and Crown staff in Macau were not targeted when mainland PRC [China] staff were detained.
Gaming related activities including promotion, negotiating terms of play (including front money or credit terms) and collecting debts
Without any …
8
Whilst promotion of gaming in foreign casinos is not expressly prohibited—local legal advice is that it is implicitly prohibited. Moreover there are instances of persons (generally mainland PRC [Chinese] nationals) disappearing from Macau and turning up in detention in mainland PRC [China].
Source: Exhibit RC0295 Draft—Proposed operating model, n.d., 4.
- Precisely the same information is provided for the other Asian countries. The only difference is in the risk rating. For example, the risk rating for the ‘[p]romotion of resorts and events (not-gaming)’ in Hong Kong is 1/10, for Singapore it is 3–4/10, for Thailand it is 3–4/10 and for Malaysia it is 3–4/10.30
- This is a very useful guide if Crown was interested in having its staff engage in illegal conduct in those countries. It enabled Crown to assess the chance of its staff being charged with a serious offence. It could then decide whether it was prepared to run the risk of its staff being caught.
- The guide might also be construed as an encouragement to carry out prohibited conduct—that is, it may go beyond the lawyer’s role of giving advice. On the other hand, some might (likely incorrectly) take the view that, because the role of a lawyer is not restricted to giving advice, risk rating is not out of order.31
Further advice
- On 6 July 2018, Mr Murphy emailed Mr Joshua Preston (then Chief Legal Officer of Crown) to pass on additional information he had received from Hakluyt, an international strategic advisory firm.32 The Hakluyt information also dealt with how Crown’s marketing activities might safely be conducted in Asian countries, despite the promotion of gambling being unlawful.
- With regard to Macau, Hakluyt said ‘careful marketing is possible’. In his email, Mr Murphy said that ‘by careful marketing’ Hakluyt means ‘marketing of Integrated Resorts and visitor services, not mentioning gambling’.33 The text of what Hakluyt actually reported was a little different. This is what Hakluyt wrote:
Private VIP marketing restricted to Macau remains relatively low risk … In Macau, provided it is done judiciously, VIP marketing can be relatively low risk ... and a marketing office would not invite undue attention … Any public marketing in Macau should avoid mentioning casinos or gaming and focus instead on IR [integrated resorts] and visitor services.34
- In relation to Singapore, Mr Murphy wrote that ‘Hakluyt considers the operational risks in Singapore to be generally lower than Macau’. The text from Hakluyt read:
Open marketing of casino operations is strictly forbidden and, in the words of a former Resorts World Sentosa executive, ‘just isn’t worth it’ … However, it is clear that overseas operators are able to market their services without undue attention from the authorities provided a number of conditions are met. In particular, as with other jurisdictions, it is important to be seen to promote IRs [integrated resorts] in any public marketing with no mention of gambling.35
- In relation to Malaysia, Mr Murphy summarised Hakluyt’s assessment as ‘relatively low risk for low key marketing’. Hakluyt’s Report read:
Integrated Resorts a well-established back door for casino marketing
There are ways around this though. According to a former executive at Genting: ‘Marketing in Malaysia can be done—but it must be done discreetly, due to the sensitivities of its primarily Muslim population. Conservative politicians must never be in a position to complain of obvious promotions from foreign casinos’.36
Action taken by Crown
- It is important to mention two steps that were taken by Crown in relation to its South-East Asian operations. The first step was its treatment of commissions or bonuses. Until late 2017, the marketing staff received a bonus or commission. The bonus was calculated by reference to the turnover at Australian casinos by patrons who staff procured to attend.37 The payment of commission was subsequently discontinued.38
- The second step was to prepare written VIP Operating Procedures to regulate the conduct of the marketing staff. The procedures contained ‘main points to remember’. The ‘main points’ included that staff members should ‘only discuss Crown’s resorts and facilities (non-Gaming) whilst travelling’.39
- The VIP Operating Procedures also set out in broad terms what was permissible in Asia. Staff were told they could meet patrons for coffee, lunch or dinner (with the proviso that meetings be kept small and low-key) and discuss Crown’s non-gaming facilities and patrons’ travel preferences.40
- The VIP Operating Procedures stated that discussions about any aspect of gaming (including terms, credit and debt collection), or making travel, visa or accommodation arrangements for a customer, were prohibited.41
- While the VIP Operating Procedures did not deal with New Zealand, Ms Williamson said there were similar procedures in place in that country as it also prohibited the promotion of foreign casinos.42
Reopening of Malaysian and Singaporean offices
- The Malaysian and Singaporean markets were lucrative. Crown thought it likely that if offices in those jurisdictions could be reopened, substantial additional revenue would accrue.
- Accordingly, in October 2018, the Crown Resorts board met to consider whether to re-engage local staff in Malaysia and Singapore ‘to hold’ non-gaming-related meetings with local customers.43
- Mr Murphy attended the meeting. He relayed advice received from Hakluyt that local staff operating in Malaysia and Singapore would be at ‘low risk’ of enforcement action, provided they were careful not to approach customers who had a faith-based objection to gaming.44
- In February 2019, Mr Barry Felstead (then CEO of Crown Resorts) made a presentation to the Crown Resorts RMC about reopening offices in Singapore and Malaysia. The minutes of the meeting record that Mr Felstead advised the Committee that, based on legal advice, returning to operate in Singapore and Malaysia was ‘low risk’ and that Crown would be at a ‘competitive disadvantage’ if it did not establish a physical presence in those countries.45
- Mr Felstead, with the assistance of Mr Murphy, prepared a memorandum for the RMC concerning the reopening of the Malaysian office. The memorandum recorded:
The current control framework in place has been effective since the change in the VIP Operational Model and is focused on ensuring compliance and minimising the risk of Crown’s processes being viewed by local law enforcement or even the general public as inadequate, and risking the safety and freedom of staff, as well as Crown’s reputation.46
- The memorandum also referred to the financial contribution of the Malaysian market to Crown Resorts, being $5.4 billion in the 2018 financial year. It included the number of gaming programs Malaysian nationals had been involved in over the previous 18 months.47
- The memorandum concluded:
Management advises that the Malaysia Proposal contains a range of existing and enhanced protocols designed to address and reasonably mitigate the risks, with the residual risk rating being LOW, as support[ed] by MinterEllison, Hakluyt and local Malaysian lawyers.48
- A letter of advice from Mr Murphy was also provided to the RMC. The letter summarised the updated legal advice received from Shearn Delamore, a local Malaysian law firm, and strategic advice from Hakluyt.
- The summary of the legal advice was:
…
- the law [in Malaysia] is focused on domestic gaming, not foreign casinos;
- nevertheless, it is broadly drafted, such that a court could interpret it to apply to offers of hospitality and marketing of integrated resorts where, in reality, the focus is on attracting patrons to gamble;
- offering hospitality, entertainment and the like to existing customers is low risk;
- approaching prospective customers (unless those prospective customers are known to be significant customers of other foreign casinos) is higher risk;
- providing that marketing activities by foreign casinos remain low key and not directed generally at the Muslim community, they are unlikely to be an enforcement priority for local authorities; and
- the authorities have ‘bigger fish to fry’ for enforcement resources, including local and online gaming activities.49
- Beneath the heading ‘Risk/reward balance’, Mr Murphy wrote:
The risk of enforcement of the law (through detention of local staff or prosecution of Crown or its directors) appears low, if:
- activities in Malaysia are generally ‘low key’ and do not involve media advertising of Crown;
- interactions ‘on the ground’ in Malaysia are non-gaming related and are limited to persons who are existing gaming customers of Crown or who are reliably known to be significant customers of other foreign casinos; and
- regular up-dates are sought from local lawyers and Hakluyt (or another suitable government risk advisor) to pick up and evaluate any early warning signs of any change in enforcement policy or any ‘crackdown’ on foreign casinos.50
- Having considered the matter, on 8 May 2019 the Crown Resorts RMC recommended to the board that it reopen its Malaysian office.51 It had made a similar recommendation regarding the Singapore office in February 2019.52 It also resolved that FTI Consulting be retained to provide regular updates about the political and regulatory environment in Malaysia.53
- Crown staff continued to operate in these Asian countries until all VIP International operations came to an end in early 2021.54
- There is no evidence that describes precisely the activities engaged in by the overseas staff to obtain business for Crown. It is, of course, possible that the staff did observe the ‘do’s’ and ‘don’ts’ that were repeated in substance in the VIP Operating Procedures.
- There is, however, an air of unreality about the maintenance of a relatively significant workforce (there were approximately 11 staff in Hong Kong and three in New Zealand) simply to wine and dine clients.55 It is much more likely, indeed probable, that the staff carried on in the way they had in the past, namely, to entice patrons to gamble at Crown’s Australian casinos.
- Plainly, Crown was aware of the risk that this might happen. It is precisely the risk that was described in MinterEllison’s ‘DRAFT—Proposed operating model’. No doubt because the risk rating (between 1/10 and 3–4/10, depending on the country) was relatively low, Crown thought it was considered a risk worth taking. In any event, the people facing the real risk were the overseas staff.
- Discontinuing bonuses and giving written directions to Crown staff regarding what was and was not permitted conduct did not eliminate the risk. The only safe thing to do (that is, safe for the staff) would be to discontinue overseas marketing altogether.
- In the end, this is what occurred.
- In December 2020, China’s National People’s Congress Standing Committee passed an amendment to the Criminal Law to make clear that it was illegal for any Chinese citizen to participate in gambling outside China.56 The change to the Criminal Law also made clear that anyone who organised a Chinese citizen to gamble outside China committed an offence. That is, as Crown observed in January 2021, the overseas staff were now at greater risk than before if they solicited Chinese citizens to gamble outside China.57
- Not surprisingly, the Crown Resorts board resolved to close the office in Hong Kong. The board also decided to close the Auckland office.58
Conclusion
- The following points emerge from the nature of Crown’s marketing activities in Asia and New Zealand:
- Crown knew that promoting its casinos was illegal or was likely to be illegal.
- Crown knew that its staff were only permitted to market its resorts with no mention that a casino was part of the resort.
- Crown knew there was a risk (albeit a low-rated risk) that the activities of its overseas staff would be regarded, in truth, as the promotion of gaming.
- Despite knowing of all these things, Crown was prepared to run the risk (more accurately, Crown was prepared to allow its overseas staff to run the risk) of prosecution.
- It is difficult to imagine more reprehensible conduct on the part of an employer in this day and age.
- This behaviour also demonstrates that Crown learnt little from the incarceration of its China-based staff in 2016 and 2017. It continued to exhibit disregard for the safety of its employees.
Endnotes
1 Crown Resorts, Annual Report 2015 (Report, 2015) 51; Crown Resorts, Annual Report 2016 (Report, 2016) 13; Crown Resorts, Annual Report 2017 (Report, 2017) 13; Crown Resorts, Annual Report 2018 (Report, 2018) 14; Crown Resorts, Annual Report 2019 (Report, 2019) 17; Crown Resorts, Annual Report 2020 (Report, 2020) 16.
2 The centrality of patrons from Asia to Crown’s VIP International business model was discussed further in the Bergin Report: see Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 14 [9], 19 [20], 21 [54], 24 [65]–[66], 93 [10], 148 [24], 149 [25].
3 Transcript of Richard Murphy, 29 June 2021, 2838.
4 Exhibit RC1567 File Note regarding legal advices obtained by Crown Melbourne regarding overseas gambling and promotion, n.d.
5 Transcript of Jan Williamson, 2 July 2021, 3088.
6 Transcript of Jan Williamson, 2 July 2021, 3133.
7 Exhibit RC1567 File Note regarding legal advices obtained by Crown Melbourne regarding overseas gambling and promotion, n.d.; Transcript of Jan Williamson, 2 July 2021, 3149–50.
8 Transcript of Jan Williamson, 2 July 2021, 3149–50.
9 See Chapter 10.
10 Transcript of Richard Murphy, 29 June 2021, 2835; Exhibit RC0269 File Note regarding presentation by Richard Murphy to Crown board meeting, 20 February 2017.
11 Exhibit RC0300 Email chain between Jan Williamson and Kyle Wombolt et al, 27 January 2021; Transcript of Jan Williamson, 2 July 2021, 3148–9.
12 Exhibit RC0345 Advice on marketing and rendition risks—Hong Kong as at February 2017, 4–5.
13 Exhibit RC0345 Advice on marketing and rendition risks—Hong Kong as at February 2017, 4–5.
14 Exhibit RC0345 Advice on marketing and rendition risks—Hong Kong as at February 2017, 5.
15 Exhibit RC1575 Email from Richard Murphy to Michael Neilson, 18 January 2017, [5].
16 Exhibit RC1575 Email from Richard Murphy to Michael Neilson, 18 January 2017, [5].
17 Exhibit RC0346 Email chain between Richard Murphy, Barry Felstead and Geoff Dixon, 3 March 2017.
18 Exhibit RC0296 Draft—proposed operating model for VIP business, n.d., 8–9.
19 Exhibit RC0296 Draft—proposed operating model for VIP business, n.d., 1.
20 Exhibit RC0296 Draft—Proposed operating model for VIP business, n.d., 6–7.
21 Exhibit RC0296 Draft—Proposed operating model for VIP business, n.d., 6.
22 Exhibit RC0296 Draft—Proposed operating model for VIP business, n.d., 6.
23 Exhibit RC0296 Draft—Proposed operating model for VIP business, n.d., 6–7.
24 Exhibit RC0296 Draft—Proposed operating model for VIP business, n.d., 8.
25 Exhibit RC0296 Draft—Proposed operating model for VIP business, n.d., 8.
26 Exhibit RC1262 File Note regarding presentation to Crown Resorts board meeting, 27 April 2017; Transcript of Richard Murphy, 29 June 2021, 2851–2.
27 Transcript of Richard Murphy, 29 June 2021, 2851–2.
28 Exhibit RC0295 Draft—Proposed operating model, n.d.
29 Exhibit RC0295 Draft—Proposed operating model, n.d., 4–8.
30 Exhibit RC0295 Draft—Proposed operating model, n.d., 5–8.
31 See the interesting debate in Exhibit RC1604 Article: Criminal Liability of Professional Advisers, 1998.
32 Exhibit RC1573 Letter from Richard Murphy to Joshua Preston, 6 July 2018.
33 Exhibit RC1573 Letter from Richard Murphy to Joshua Preston, 6 July 2018, 1.
34 Exhibit RC1573 Letter from Richard Murphy to Joshua Preston, 6 July 2018, 4–5.
35 Exhibit RC1573 Letter from Richard Murphy to Joshua Preston, 6 July 2018, 9.
36 Exhibit RC1573 Letter from Richard Murphy to Joshua Preston, 6 July 2018, 14.
37 Transcript of Jan Williamson, 2 July 2021, 3139–40.
38 Transcript of Jan Williamson, 2 July 2021, 3138.
39 Exhibit RC0299 VIP International Operation Procedures presentation, 12 April 2017, 5.
40 Exhibit RC0299 VIP International Operation Procedures presentation, 12 April 2017, 12.
41 Exhibit RC0299 VIP International Operation Procedures presentation, 12 April 2017, 13.
42 Transcript of Jan Williamson, 2 July 2021, 3152.
43 Exhibit RC0298 Crown Resorts Limited board meeting minutes, 11 December 2018, 9.
44 Exhibit RC0298 Crown Resorts Limited board meeting minutes, 11 December 2018, 10.
45 Exhibit RC0428 Minutes of Crown Resorts RMC meeting, 11 February 2019, 2.
46 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 4.
47 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 6.
48 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 6.
49 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 20.
50 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 21.
51 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 6–7; Transcript of Jane Halton, 7 July 2021, 3560.
52 Exhibit RC1263 Minutes of RMC meeting, 25 February 2019.
53 Exhibit RC0429 Crown Resorts RMC meeting diligent pack, 8 May 2019, 5.
54 Exhibit RC0437 Statement of Helen Coonan, 28 April 2021, Annexure c.
55 Exhibit RC0342 Crown Resorts RMC meeting minutes, 19 November 2020, 98–104.
56 Ben Blaschke, ‘Cross-Border Casinos, Junkets in Firing Line as China Passes Amendment to Criminal Law’, Inside Asian Gaming (online, 30 December 2020) < >.
57 Exhibit RC0343 Email chain between Kyle Wombolt and Mary Manos, 27 January 2021.
58 Exhibit RC1299 Minutes of Crown Resorts board meeting, 15 January 2021, 4.
Chapter 15
Miscellaneous breaches
Miscellaneous breaches
Introduction
- On 10 March 2021, the Commission wrote to Crown Melbourne enquiring whether it had engaged in any conduct that was, or might be, in breach of a number of statutes, including the Casino Control Act.1
- In its response, Crown Melbourne provided the Commission with details of some breaches of the Casino Control Act.2 Those details did not disclose the breaches that are the subject of this chapter.
Bank cheques
- By section 68(2) of the Casino Control Act, a casino operator is prohibited from, among other things:
- accepting a wager made otherwise than by money or chips
- lending money
- providing money or chips as part of a transaction involving a credit card or debit card
- extending any other form of credit.
- There are exceptions to the prohibition. By section 68(3) a casino operator ‘may establish for a person a deposit account into which is to be credited the amount of any deposit to the account comprising: (a) money; or (b) a cheque payable to the operator; or (c) a traveller’s cheque’.
- By section 68(4) the operator ‘may issue to the person who has established the deposit account and debit to the account chip purchase vouchers or money, not exceeding in total value the amount standing to the credit of the account’.
- Crown Melbourne has adopted the following practice in relation to bank cheques (strictly speaking, banker’s drafts); that is, cheques drawn by a bank on itself (or another bank) in favour of a payee.
- If a patron is the named payee on a bank cheque, Crown Melbourne will exchange that cheque for chips for a value equal to the face value of the bank cheque. To effect the transaction, patrons must sign the reverse side of the cheque and write their membership number. The exchange then takes place before Crown Melbourne presents the bank cheque for payment through the clearing system.
- The question that arises is whether this practice falls within sections 68(3) and (4). The answer to this question requires the resolution of two issues:
- Is a bank cheque bearing only the signature of the payee ‘a cheque payable to [Crown Melbourne]’ within the meaning of section 68(3)?
- If it is, does section 68(4) permit the account to be debited before the bank cheque is presented for payment and payment is made?
- The answer to the first issue depends on the application of rules relating to cheques. The relevant rules taken from the Cheques Act 1986 (Cth) and, where applicable, from common law principles are:
- a cheque must be payable to a specified person or to the order of a specified person
- alternatively, a cheque may be payable to the bearer
- a cheque payable to a specified person or to the order of a specified person may be negotiated by indorsement
- there are several types of indorsement: in blank, special, restrictive and conditional
- if the indorsement is in blank (that is, it is not endorsed to a specified person) the cheque is payable to the bearer
- there will be an indorsement in blank if the payee merely signs the back of the cheque without anything more.3
- To every banker the expression that a cheque that must be ‘payable to the operator’ will be regarded as a term of art that will take its meaning from the Cheques Act and so require the operator to be named or otherwise indicated with reasonable certainty on the cheque.
- The contention made by Crown Melbourne that the obligation that the cheque be ‘payable to the operator’ is satisfied if the operator (Crown Melbourne) is entitled (as the bearer) to present the cheque for payment is not correct.4 It does not apply the well-understood meaning of the expression ‘payable to [a named person]’.
- The answer to the second issue is more contentious.
- There are only two ways in which Crown Melbourne can debit a deposit account for chip purchase vouchers or money. One is for Crown Melbourne to credit the deposit account with the relevant amount of its own funds. The other is for Crown Melbourne to wait for the patron’s cheque to be cleared and the patron’s funds to be credited to the deposit account.
- The construction question is whether Crown Melbourne’s own funds or the patron’s funds can be credited to the deposit account, or whether it is only the patron’s funds that can be credited to the account.
- The answer depends upon what is contemplated by sections 68(3) and (4).
- There is no clear answer. The better view, however, is that section 68(3) assumes that the deposit that will be credited to the deposit account will come from the patron and not the casino operator.
- Whatever be the answer to the second issue, Crown Melbourne’s practice of dealing with bank cheques is in breach of section 68, at least because it is crediting to a patron’s account a bearer cheque rather than a cheque payable to Crown Melbourne.
Blank cheques
- Crown Melbourne has a practice involving blank cheques; that is, cheques that do not specify a certain sum in money that is to be paid to the payee.
- The practice is that certain patrons who have a black card can attend at the Cage, and sign a counter cheque drawn on the patron’s bank that is payable to Crown Melbourne but has no amount written in. The patron is from time to time given chips with which to gamble. At the end of a gambling session, the patron’s debts are ‘consolidated’ and the amount due to Crown Melbourne is written on the cheque.
- Unless an exception applies, this practice is in contravention of section 68(2) because it involves extending credit to the patron.
- Crown Melbourne contends that the practice is confined to patrons who are not ordinarily in Australia and are participants in a premium player arrangement or a junket.
- If this were correct, then the prohibition against giving credit imposed by section 68(2) would not apply by reason of section 68(8), which provides that a casino operator might provide chips on credit to a non-resident who is participating in a premium player arrangement or junket.
- However, Crown Melbourne’s contention seems not to be supported by the evidence. One of the hosts who was called said the practice was permitted for ‘important customers’.5 This host was a host to local patrons, not patrons from overseas.6 Another host said the practice applied to local Australian customers.7 Mr Peter Lawrence, General Manager VIP Customer Service, Mahogany Room, also gave evidence about the practice. He did not say that it only applied to foreign patrons.8
- On the evidence, it seems likely that the blank cheque practice is in breach of section 68(2).
Bank accounts
- Section 123(1) of the Casino Control Act provides that a casino operator must:
- keep and maintain separate accounts at an authorised deposit-taking institution ... for all banking transactions arising under this Act in relation to the operator; and
- … provide the Commission … with a written authority addressed to the authorised deposit-taking institution … to comply with any requirements of an inspector ...
- Between 2014 and 2019, a subsidiary of Crown Melbourne, Southbank, maintained a bank account that was used by patrons to deposit funds they needed for gambling at the Melbourne Casino. As a result, over the years, patrons deposited hundreds of millions of dollars into the Southbank account.
- The question is whether Crown Melbourne was in breach of section 123(1) by causing Southbank to establish an account into which patrons paid their funds rather than establishing an account in its own name into which patrons’ funds would be deposited.
- The short point of construction is whether the account to which section 123(1) applies must be the account of the casino operator. That depends on what is meant by the requirement that the casino operator must ‘keep and maintain’ an account.
- The relationship between a banker and its customer is one of contract. The relationship is that of debtor and creditor.
- Accordingly, the construction question comes down to this: can a casino operator be said to ‘keep and maintain’ an account with a banker if it is not a party to the contract with the banker?
- Crown Melbourne contends that it need not be the customer.9 This contention cannot be correct. Whatever be the content of the obligation to ‘keep and maintain’ an account, the account can neither be kept nor maintained by the casino operator if it is not a contracting party with the bank.
- A person cannot be said to ‘keep’ a thing that is under the control of, or is maintained by, another person.
Accounting records
- Section 124(1) of the Casino Control Act provides that a casino operator must keep such accounting records as correctly record and explain the transactions and financial position of the operations of the casino.
- Crown Melbourne accepts that the record keeping for the CUP process, which is dealt with in Chapter 13, did not properly explain the true nature of the transactions involved in that process. Accordingly, section 124(1) was breached on hundreds of occasions.
- There may well be another contravention. Crown Melbourne has an electronic customer management system that recorded details of the funds deposited into the Southbank account that were then dealt with by the Cage staff.
- When entered into the management system, deposits made by an individual patron were aggregated into one entry instead of being recorded as separate deposits. According to Ms Bergin, SC, the result was that the management system ‘did not give a complete picture of what was occurring in the underlying bank accounts. Important information which could be seen in the bank statements was lost in the process of data entry into the [management system]’.10
- It seems from the observations made by Ms Bergin, SC that, apart from the management system, Crown Melbourne maintained no accounting records of the money deposited into the Southbank account so as to be able to see the amount of any individual deposit.
- Certain of the information stored in the management system (but not all stored information) is properly characterised as an accounting record. An ‘accounting record’ is a business record that explains the transactions entered into by a person carrying on a business.11
- If the management system is the only accounting record maintained by Crown Melbourne of money deposited in the Southbank account, it is difficult to see why there were not contraventions of section 124.
Contracts
- Clause 48(1)(b) of the Casino Agreement and clause 41.41(b) of the Management Agreement provide, in substance, that Crown Melbourne must comply with all the laws applicable to the subject matters of those agreements.
- During its inquiries, the Commission has identified many contraventions by Crown Melbourne of its legal obligations. The relevant findings are scattered throughout this Report.
- Crown Melbourne acknowledges that, as a result of those contraventions, there have been breaches of the Casino Agreement and the Management Agreement.
Endnotes
1 Exhibit RC0148 Letter from Solicitors Assisting to Crown Melbourne Directors, 10 March 2021.
2 Appendix G deals with the response of Crown Melbourne.
3 Cheques Act 1986 (Cth) ss 3, 19–22, 24; MJL Rajanayagam, The Law Relating to Negotiable Instruments in Australia (Butterworths, 1980) [7.15]; Bernard Riley, Bills of Exchange in Australia (The Law Book Company, 3rd ed, 1976) 100; Peacock v Rhodes (1781) Doug 633, 636.
4 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021,
280–5 [H.68]–[H.75].
5 Transcript of Employee 6, 21 May 2021, 579–80.
6 Transcript of Employee 6, 21 May 2021, 551.
7 Transcript of BZ, 4 May 2021, 51.
8 Transcript of Peter Lawrence, 8 June 2021, 1750–4.
9 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 151 [D.219].
10 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 209 [33].
11 LexisNexis Australian Legal Dictionary (2nd ed, 2016), ‘accounting record’.
Reviewed 25 October 2021