Katsibuba was not alone in her misfortune. “At times I felt undermined and excluded,” Ivanoff told the inquiry into the ways in which Cook and the company’s then chief of staff Peter Jenkins handled legal matters.
In fact, the story with Ivanov was even stranger. She claims she resigned on Sept. 6, something Cook doesn’t even remember months later. “In addition to our conversations … including your views on your colleagues, the team’s ability, and the working relationship with me,” Cook eventually wrote to her before Ivanoff left the company.
Four years ago, Star Entertainment was on top of the world. Or at least Sydney. Its biggest rival, Crown, has been dragged through investigations that probed everything from massive money laundering to its ties to Hong Kong businessman Lawrence Ho, who himself had long ties to organized crime syndicates.
And he wanted to build. Although the area has a height limit of 28 metres, the Star harnesses the full force of Sydney’s tabloid media – from Daily Telegraph of 2GB’s Alan Jones – to demand that the NSW Government allow him to build a luxury resort and casino complex of up to 237 metres.
Rebuffed by planning officials, the Star’s then chief executive, Matt Bequier, even went so far as to describe it as a “uniquely Sydney problem”. What officials actually decided was that the Star had simply made up the concept of the “Sydney global waterfront” which, they said, was “not part of an existing or emerging government planning direction”.
It was the perfect illustration of the hubris that consumed Starr.
The first investigation into Bell ultimately found that the company had engaged in many of the same illegal activities as the Crown. His final report would make difficult reading for Star’s managers and shareholders.
There was a “deeply troubling culture permeating senior management” and the decisions “reflected a culture where business objectives were given undue priority over regulatory and money laundering and terrorist financing risks”. And there were “a number of extremely serious failures in governance, risk management and culture”.
So Bequiere was out and Cook was in. The clean-up began – and it came at the same time that Star was facing severe strain on its finances as high-profile players stood aside, regulatory costs rose and debt problems emerged.
As business ethics specialist Attracta Lagan told the survey, even the first six months of last year were “very positive”. Lagan, the Managing Values director, was brought in to help oversee the culture change. “[Robbie] saved the business, I’m sure, with those capital increases, but it came at the cost of the cultural reform agenda,” she told the inquiry. “We lost six months.”
Attracta Lagan at Bell’s inquiry on Thursday.
Lagan said cultural change is never stuck.
“A new internal story emerged which was ‘the regulator doesn’t like us, they don’t like gambling, the special manager is too demanding’. It was us and them. I started to understand it around July,” she claims.
These are the issues Adam Bell is addressing now.
So far, he has heard that Star failed to detect a faulty payout machine that handed out $3.2 million to players even if they had already withdrawn their winnings – over seven weeks – demonstrating a “deep cultural problem” at the casino. Star also “mass approved” clients when it had to carry out detailed checks to determine the source of their wealth.
Here’s another example, as Weeks explained to Bell this week. Star wanted to reintroduce free drinks for patrons. This means that gamblers are more likely to come to Star, and when they are there, they stay longer and spend more.
According to Weeks, Star decided they wanted to reintroduce free drinks in the private gaming rooms – where the big players are – in June. The company asked its in-house legal team to consider the proposal, but in August those lawyers decided the plan was not legal.
“What the company did next was hire outside counsel to review the matter … and that counsel formed an opinion based on the proposition that it was legal,” Weeks said. Free drinks were reintroduced.
The problem for Cook – and for his successor – has always been balancing the regulator’s views with business needs. Not only the visitors like the free drinks, but also the shareholders.
As brokers Macquarie told clients in August, the free drinks would deliver “increased gaming revenue”. Before they were discontinued in 2022, Star told investors it expected a $60 million revenue impact from their shutdown. Between September and June this year, Macquarie expects a $20 million increase in beverage revenue.
Even before the new Bell investigation, Star’s business was under considerable pressure. Profits are falling as high-profile players pull out and the company’s Queensland operations – it operates in Brisbane and the Gold Coast – are mired in their own difficulties, with Star and Multiplex at odds over the long-awaited Queen’s Wharf project due to open this year .
The company has lost more than two-thirds of its value in the past 12 months, with shares falling 85¢ to 42¢, giving it a market capitalization of $1.2 billion.
Simon Thackray, an analyst at Jefferies, told clients earlier this week that he had become “more concerned about the changing regulatory and governance regime” and expected a “stronger penalty” which could include losing Star’s license for Sydney.
“The future terms of employment of the Sydney casino could even be stricter than the current special manager and could include some corporate administration,” he said. “The case for valuing casino assets becomes more difficult under a new regulatory regime and concerns about governance and regulatory changes will weigh on the share price.”
Lagan, the consultant, should have emphasized this. As she told the inquiry, “Crown – especially after the Blackstone takeover – had a lot of money.” She added: “I understand Star didn’t have the same resources.”
This is something that is on the minds of advisers working for both Star and Blackstone. There are a number of directors at the Star who are convinced the government – and the regulator – are hoping the only outcome of the Bell investigation will be the consolidation of the two casino licenses in one city.
Blackstone, according to sources, arranged meetings with Starr earlier this year. Perhaps because of the rival’s deteriorating relationship with regulators or the sudden departure of the entire executive, but the meeting did not take place.
More recently, former PwC chief executive Luke Sayers, who is known to be close to Crown chief executive Ciarán Carruthers, has privately floated the idea of what a deal between Star and Blackstone would look like. Mr Sayers has been approached for comment.
Then there’s billionaire publican Bruce Matheson and his son, Bruce Matheson Jr., who have moved up the shareholder register and now control nearly 10 percent of the company. The Mathiesons are ideally positioned to play kingmaker should any offer arise.
Crown, under Blackstone, had its difficulties. A lucrative high-roller trade reliant on wealthy gamblers from China has ended, laying off hundreds of staff and closing one of Sydney’s two gambling halls. But a decision on whether Crown’s Sydney casino – which does not include the huge number of poker machines at Star’s operations – should be granted an unconditional license to operate is expected next week (Victoria’s regulator has already decided it can keep its casino license in Melbourne).
This seems like a dream come true for Star. Cook and Foster will soon have their turn to refute some of the damaging claims made by Weeks, Katsibuba, Ivanoff and others who have spent time at Star.
But it’s likely to get uglier, not better.
How far will the regulator push the company? How much damage did squabbling executives who didn’t watch the ball do? No doubt, neither are shareholders at the top of their minds.
