‘The deceit, the crime, the destroyed lives’: How Australia lost its gamble on casinos

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It was getting late on Tuesday night when one of the most senior figures in the NSW government rose to his feet and expressed what many in the state, and nation, were surely thinking.

“Are the illusory and ephemeral benefits of Sydney’s casinos worth the proven harm – the deceit, the crime, the destroyed lives?” Rob Stokes, the NSW minister for cities and infrastructure, asked.

The Star is following Crown’s path into public disgrace. Credit:Flavio Brancaleone

Australia’s largest casino group, James Packer’s Crown Resorts, had been exposed as a “veritable cesspit of dishonesty, tax evasion, junkets, money laundering and extensive infiltration by organised crime,” he said.

Meanwhile, evidence was emerging that its rival, The Star Entertainment Group, could be just as bad, “or worse, if that were possible”.

This raised “an existential question about the future of casinos in NSW,” Stokes told parliament. “Perhaps it is time for our community to rise up against them.”

For the past three decades, there has been near-unwavering bipartisan support for The Star and Crown’s casinos in Australia’s two largest states. The fact their existence is being openly challenged by a senior Liberal party minister shows just how far their once-glittering names have fallen.

Over the past three years, the dirty secrets behind the massive financial success of the casino giants – they shared profits of $600 million in 2019 while paying millions in tax revenue and supporting thousands of jobs – have been laid bare.

NSW minister Rob Stokes has asked if the supposed benefits of casinos are worth “the deceit, the crime, the destroyed lives”. Credit:Michele Mossop

Crown has been ruled unfit to hold a casino licence by royal commissions in Victoria and Western Australia and by a commission of inquiry NSW, each revealing how it was infiltrated by powerful Asian criminal gangs who turned it into a money-laundering factory, while it inflicted massive harm on vulnerable gamblers and cheated Victoria out of $61 million in tax.

A single card is yet to be dealt in the higher-roller casino at Crown’s new $2.2 billion Barangaroo resort which now towers over Sydney, with the NSW gambling watchdog still not convinced to reinstate its licence almost a year and a half after it was due to open.

The Star is now three weeks into a public inquiry into its Pyrmont casino – triggered, like those into Crown, by the Sydney Morning Herald, The Age and 60 Minutes’s investigative reporting – and appears to be following the same path.

Crown is yet to open the casino at its new Barangaroo tower – Sydney’s tallest building – after it was ruled unfit to hold the licence in early 2021. Credit:Renee Nowtarger

Already evidence has emerged of it encouraging patrons to make $900 million in fraudulent transactions on Chinese bank cards, ignoring warnings about its failing anti-money laundering controls, and working with high-roller “junket” groups despite their known criminal links. Queensland, where The Star has casinos in Brisbane and the Gold Coast, is watching closely.

The risk of criminal infiltration was why Victoria and NSW were the last two states to legalise casinos in the 1990s, two decades after Australia’s first, Hobart’s Wrest Point, opened its doors.

Xavier Connor, QC, wrote two prescient reports for the Victorian government. The first, in 1983, on whether the state should allow casinos (he said it shouldn’t) and another in 1991 on how to regulate one when John Cain’s Labor government, facing an economic meltdown, decided to open one anyway.

“Crime is constantly knocking on the door and the most stringent and sustained measures are required to keep it out,” the former Federal Court judge warned.

James Packer (pictured in 2015) led Crown’s aggressive push into the Chinese market. Credit:Bloomberg

Bob Carr was NSW opposition leader when the Greiner government legalised casinos in 1992, and premier when The Star opened in September 1995. He says there was a consensus across politics, business and the media that permitting casinos was “the lesser of two evils”.

He points to three factors to support this view: eliminating illegal backroom gaming that could draw police into corruption, the opportunity to create a drawcard for international tourists, and the opening of Crown in Melbourne a year earlier.

“A gargantuan casino was sucking life from every corner of its city, but clearly adding to tourist appeal and underpinning jobs,” he explains. “The business sector in Sydney was asking: surely we can compete?”

Carr says the casino legislation appeared up to the task, noting some potential bidders even “backed off” when they saw how rigorous it was. Both states wrote their casino laws based on Connor’s second report, which urged “strict, even draconian” government control to ensure the casinos were run properly.

CCTV footage shows Suncity staff dealing with large amounts of cash in the junket’s private gaming salon at The Star Sydney, which one casino executive has said was probably money laundering.

Connor warned, though, that casinos would initially accept such conditions and then inevitably pressure governments to relax the rules, in a “constant wearing-down process, like water pressing against a dyke, ready to flood through any opening that occurs”.

And sure enough, the highly prescriptive and tight oversight of casinos in both states was watered down over the past 30 years in a shift to “self-regulation”.

Reverend Tim Costello, a long-time gambling reform campaigner, says the erosion of casino regulation is a case of “state capture”.

“That’s why it’s profoundly gone off the rails,” he says. “The regulator got captured – if they wanted to do something, they had their political masters saying, ‘well they pay a lot of revenue’, and political donations to both sides, the fundraisers for both sides.”

Crown has been ruled unfit to run its casinos in Melbourne, Sydney and Perth. Credit:Joe Armao

The casinos were handed responsibility for tasks originally conducted by the regulator. They were allowed to vet their own “junket” partners and high rollers for criminal links – something at least Crown failed at abysmally – and even write their own “responsible gaming” codes.

The specialist casino watchdogs were neutered, stripped of dedicated staff and absorbed into the generalist liquor and gaming regulators with questionable independence from state governments. (NSW and Victoria have now pledged to re-establish stand-alone casino regulators).

John Langdale, a criminologist at Macquarie University, says high-level criminal infiltration was “almost guaranteed” once casino regulation was weakened and Crown and Star started vying for the flood of cash coming out of China in the mid-2000s.

By 2006, Macau, the only part of China where gambling is legal, surpassed Las Vegas as the world’s biggest gambling hub. James Packer was one of the first foreign casino tycoons to see the potential of this market and went after it aggressively.

By 2015, Crown was making almost $955 million in revenue from international VIPs, making up almost a third of its revenue. The Star made $588 million from international high-rollers that year, a quarter of its winnings.

But with this lucrative market came new risk. China limits the movement of capital past its borders so the casinos worked with “junkets”, which would bring (sometimes illegitimately) wealthy Chinese to Australia, lend them tens of millions of dollars to gamble with and then collect the debt when they returned home.

Long a feature in Macau, the junkets Crown and Star work with were shown time and again to have clear links to organised crime, but they ignored these signs. The inquiries have examined footage of what is almost certainly money laundering taking place inside the private rooms Crown and The Star handed over to Suncity, their biggest junket partner, capturing its agents handling millions of dollars in suspect cash stored in shopping bags and backpacks.

“The push is really from each of the state governments to pay little attention to the money-laundering and capital-flight issues, and try to attract as much turnover as possible,” says Langdale, who specialises in the greater China region and has researched crime in the Asian casino industry.

“The other need is that drug traffickers need to launder their money. You’ve got a major growth in the methamphetamine markets in Australia and that money has to be recycled, back to Hong Kong or Macau, and the casinos were one of the ways of doing it. You’ve got a recipe for problems.”

Costello says Australia’s casino industry did not have to end up like this. He points to England, where casinos are small, boutique establishments and every gambler has to register their personal details so that authorities can track potential money laundering.

He also says it’s not too late to reform the sector for the better, starting with harsher penalties when casinos do the wrong thing. Crown, despite a hat trick of unsuitability findings, has not been stripped of its licences, with Victoria, Western Australia and NSW all giving it time to reform itself.

“If you have been found unfit, with the strongest adjectives condemning you, you should lose your licence,” Costello says. “No one will take it seriously until someone loses their licence.”

Carr, the former NSW premier, wouldn’t be drawn on whether allowing casinos in Australia was a mistake, or the fresh debate about whether we would be better off without The Star and Crown.

“But I rather suspect that a government that backed off banning greyhound racing will back off [from this] when business organisations point to tourist numbers, a viable Lyric Theatre, the cluster of small businesses in the casino buildings and the sum total of jobs involved,” he says.

For its part, Crown says it has substantially reformed itself, installing a new board and new management team. It’s set to have a new owner, too, with shareholders due to vote on an $8.9 billion takeover by US private equity firm Blackstone on April 29. Meanwhile, the resignation of The Star’s chief executive Matt Bekier on Monday may be the start of a similar exodus from that group.

As ugly as the story of Australian casinos turned out, nobody can claim they couldn’t have seen it coming. As Stokes put it this week: “basically, everything we were warned about turns out to be entirely true.”

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