If there’s one rule in PR in Australia that institutions and individuals should take note of, it’s this: don’t take on Nick McKenzie.
Time and again Australia’s outstanding investigative reporter of his generation (who briefly volunteer-edited the Crikey letters section in 2000-01 when studying journalism at RMIT) pulls together remarkable exclusives which rarely, if ever, prove to be off the money or poorly researched.
After almost 20 years of hits for The Age, The Sydney Morning Herald, the ABC and more recently 60 Minutes, it is becoming increasingly predictable that the targets which deny everything will eventually come a cropper. Will they never learn?
Victoria Cross winner Ben Roberts-Smith must surely by now regret taking up the offer by billionaire media oligarch Kerry Stokes to bankroll his Federal Court litigation against McKenzie and Nine newspapers, although we’re yet to see the outcome of Australia’s most expensive defamation battle.
Casino giant Crown Resorts is certainly chastened after initially taking out full-page ads in Australia’s newspapers debunking McKenzie’s original reporting about its various nefarious activities in July 2019.
No Crown directors or executives who signed off on that blanket denial are still with the company, and now it is the turn of cross-town rival Star Entertainment, which got skewered yesterday at the opening day of public hearings into its Sydney casino licence.
McKenzie was justifiably crowing in today’s Nine papers after Star was revealed to have dressed up $900 million of Chinese high-roller gambling via debit card provider China Union Pay as “hotel and entertainment” expenditure, spread across 156 transactions averaging $5.7 million each.
Crown only did this to the tune of $160 million at its Melbourne casino.
Exaggerating or telling porkies can have serious consequences, particularly when a bank is involved. When NAB challenged Star over the $900 million in 156 transfers, it blatantly lied, saying all was above board. The transaction also breached China Union Pay’s agreement with Star as it forbids transfers to gambling entities.
Star Entertainment is a major Australian company which capitalised at $3.15 billion (before today’s 4% slide in the share price), although it was worth more than $4 billion before McKenzie first rolled out his hits in October last year.
NAB will presumably no longer be keen to do business with Star. It was part of a syndicate which lent Star more than $1.6 billion two years ago, meaning it will be due for repayment next year.
After yesterday’s spectacular start to the NSW Independent Liquor and Gaming Authority’s (ILGA) inquiry, this livestream will prove particularly popular, especially when veteran Star CEO Matt Bekier and long-serving chairman John O’Neill give evidence. Bekier and O’Neill have run Star as a double act for almost a decade.
The next most interesting witness will be Harry Theodore, who joined the business as head of strategy in 2011 after the Tabcorp demerger and just before the tactical move to compete with Crown in the high- roller market. He has been chief financial officer for the past three years and was named yesterday by witness Paulinka Dudek as one of the senior executives who authorised the $900 million scheme.
A decisive board of independent non-executive directors would perhaps move against Bekier and O’Neill immediately by at least standing them down. Instead Star Entertainment has been Crown-esque in its response. There’s been no ASX announcement for a month and shares are trading 4% lower this morning without any form of update for the 75,000 increasingly worried shareholders.
When McKenzie first hit Star up last October the company told the ASX much of the reporting was “misleading”, but then hid behind confidentiality when it came to discussing individual high rollers. A day later it told the ASX it was wrong to suggest a 2018 KPMG report into its money laundering non-compliance was kept secret and not acted upon.
McKenzie was leaked a copy of the damning KPMG report, which was not provided to ILGA at the time.
KPMG is on the list of witnesses for next week at the four-week inquiry and an NAB executive will give evidence today, along with a former Star compliance officer. The tag-team counsel assisting of Adam Bell SC and Naomi Sharp SC, who proved so effective against Crown, is going to have lots of fun over the coming month.
Given yesterday’s evidence, it’s no wonder the financial intelligence regulator, AUSTRAC, revealed in January that it was widening its inquiry into Star from its Sydney casino to other entities in the group. And don’t be surprised if the class actions start to fly just like at Crown, which settled one brought by Maurice Blackburn for $130 million last year.
In 2020, Star Entertainment Group completed a 4.5-year, $1.59 billion, three-tranche syndicated loan, sourced from ANZ, NAB and Westpac and a number of foreign banks.
Because Star’s three casinos have been involved in successive lockdowns, its revenue, profits and cash flows have not been enough to satisfy the banking covenants, so the syndicate granted waivers to Star in 2020, June 2021 and December 2021. And then it received $156 million in JobKeeper payments, making it a top 20 recipient of the widely rorted $90 billion scheme.
The Star in Sydney peaked at $571 million of high-roller revenue in 2017-18, a figure we are unlikely to see again as regulators crack down on money laundering and so-called junket operators.
As for this board, the only director who is safe is Michael Issenberg, who joined the board only last month.
In terms of who goes first, look at the risk and audit committee members and overall length of service, but expect to see a majority of new directors in place by the time of the October AGM.
Bell is due to deliver his report to ILGA by June 30.
