‘The Star’ Scandal — Who should pay the price?
By Joshua Brereton
On 31 August 2022, Adam Bell SC submitted his report into criminal activity at The Star Entertainment Group (‘The Star’) and found the company was unfit to hold a permanent casino licence in NSW. The Bell Report revealed the casino enabled money laundering, large-scale fraud, and foreign interference from November 2016 to September 2021, even as the board of directors were warned that money laundering controls were failing. The Report made no link between the unlawful activities and any additional profits or personal gain from directors or employees.
The NSW Independent Casino Commission (‘NICC’) is the casino regulator created by the Casino Control Act 1992 (NSW) and tasked with increased regulatory oversight over casino operations in NSW. Functions of NICC include granting, varying, or revoking a casino licence and taking disciplinary action. In response to the Bell Report, the NICC suspended The Star’s casino licence and fined the company $100 million.
Under amendments made to section 23 of the Casino Control Act, the $100 million fine is the maximum pecuniary penalty (raised from $1 million) as a form of disciplinary action. The appointment of an independent manager to hold the licence for at least 90 days will enable casino operations to continue in protecting the livelihoods of 8000 employees. However, NICC emphasised this does not mean it considers The Star to be a suitable licence holder.
Throughout the public inquiry, The Star’s former CEO Matt Bekier, along with several other senior executives, have resigned. To this date, no staff member, executive or board director has faced civil or criminal sanctions. The Bell Report confirmed that ‘no useful purpose would be served in assessing the suitability [to hold a casino licence] of individual directors who have resigned since the commencement of the Review.’ However, fundamentally, it is the individual directors and senior officers who act as the controlling minds of a company, rather than the corporation in and of itself. Indeed, Clause 54 of The Star’s Constitution is equivalent to the replaceable rule in section 198A of the Corporations Act 2001 (Cth) which dictates that ‘the business of a company is to be managed by or under the direction of the directors.’ It is difficult to imagine circumstances where, throughout the five-year period that criminal activity had occurred, directors of The Star did not have any actual or constructive notice of the unlawful conduct its casino was enabling.
Perhaps directors breached their statutory duties to exercise care, or act in good faith in the best interests of the company under sections 180 and 181 of the Corporations Act. As the Bell Report and NICC have referred information to the Australian Securities and Investments Commission (‘ASIC’), the chief corporate regulator, perhaps ASIC could initiate proceedings and enforce these potential breaches so that directors may be found criminally liable under section 184 of the Corporations Act. While the maximum $100 million fine and licence revocation may operate as a deterrent for current and future casino mismanagement, the financial impact is ultimately borne by the existing shareholders of The Star which are overwhelmingly institutional investors managing the savings of ordinary Australians.
Why should these shareholders be paying the price, as opposed to the culpable directors and senior employees who have simply resigned and avoided criminal prosecution?