Crown Resorts: Packer's casino group foots bill as 'special relationship' in spotlight

Ben Butler
Photograph: Philippe Lopez/AFP/Getty Images

On Sydney’s harbour, down by the southern end of the city’s famous bridge, James Packer’s dream is thrusting itself into the sky.

The tower at Barangaroo that is to house Sydney’s second casino is now 49 levels or 195m tall, skyscraper watchers say – much more than half way towards its eventual height of about 270m.

But even as construction continues, the gambling empire Packer built, Crown Resorts, is under unprecedented scrutiny.

After a fortnight in which allegation after allegation has been thrown at Crown, taking in everything from links to organised crime to accusations its high-rolling Chinese customers are given soft treatment by border officials, the NSW government on Thursday ordered a full-scale public inquiry.

Related: 'This is new territory': Australia's powerful Crown casino faces scrutiny like never before

But while the focus of the media has largely been on lurid tales involving sex, drugs and illegal wombat shooting, the inquiry will also look into Packer’s attempt to sell much of his stake in Crown to the Melco Resorts empire controlled by his friend and former business partner, Hong Kong casino billionaire Lawrence Ho, for about $1.75bn.

The inquiry’s head, former NSW supreme court judge Patricia Bergin, may find herself delving deep into the intertwined histories of the Packer and Ho dynasties.

And the consequences could be severe – if Bergin finds that Ho shouldn’t be allowed to buy the 20% of Crown he has agreed to take off Packer’s hands, the NSW Independent Liquor and Gaming Authority can take “such action as it considers appropriate”.

No allegations have been made against Ho but documents tabled in NSW parliament on Thursday have raised questions about his links with his father, Stanley, who is banned from involvement in the Barangaroo project.

Stanley Ho helped build Macau, the only part of China where casino gambling is allowed, from a sleepy former Portuguese colony into the Las Vegas of Asia.

For many years he held a monopoly over the casino industry on the island.

But Ho, who is now 97, has also been plagued by accusations of links to China’s triad organised crime gangs; in 2010 he and one of Lawrence’s sisters, Pansy Ho, were criticised by the New Jersey Division of Gaming Enforcement for allegedly allowing organised crime to thrive inside their casinos.

Ho has always denied the allegations.

To understand some of the issues Bergin is likely to explore, it is necessary to go back to 2004 when Packer’s father, Kerry, got into business with Melco and Stanley Ho to develop casinos in the Chinese territory of Macau.

Through a company in the British Virgin Islands called Great Respect, Stanley Ho convinced the Macanese government to give a joint venture between Melco and Kerry Packer’s PBL a long lease over land in the tiny territory to develop a casino.

In return, Great Respect got financial instruments that gave it the right to own a little over 10% of Melco International, which in turn is the majority owner of Melco Resorts.

Documents tabled in parliament on Thursday show that since 2014 Great Respect has been on a previously secret list of 59 companies and people the NSW Independent Liquor and Gaming Authority banned from involvement with the Barangaroo casino because they are “deemed associates of Stanley Ho”.

This may be a problem for Lawrence Ho because, following a series of corporate shuffles, Great Respect now controls a little over 20% of Melco International.

But when the deal went through in 2005, Melco International was effusive in its praise of the casino pioneer.

“Dr Ho and Great Respect have been able to employ Dr Ho’s strong and enduring links with Macau and its business community for the benefit of Melco, to secure the opportunity for the Melco group to obtain a long term lease in respect of the land, which is an opportunity which would not otherwise have been open to Melco,” it said in an announcement to the Hong Kong stock exchange.

That land eventually became the City of Dreams casino, a joint venture between Crown and Melco that opened in 2009.

Over time, the bond between James and Lawrence became tighter.

In full-page ads in News Corp newspapers, Crown has described reporting by Nine, which has led the media charge, as ‘a deceitful campaign’. Photograph: Saeed Khan/AFP/Getty Images

Their work together included the 2011 purchase by their joint venture, Melco Crown Entertainment, of the rights to the much-delayed Macau Studio City casino project, and building a second City of Dreams in the Philippines.

Ho also featured heavily in a soft interview Packer did with the Seven network, broadcast in February 2013 as he was promoting his Barangaroo dream.

It was “a special friendship and a special relationship”, Packer said.

“We both have legendary fathers and it’s great fun to have started out on this dream together.”

The tacky, hideously expensive party Melco Crown threw to celebrate Studio City’s opening in October 2015 marked the high point of Packer’s love affair with Asia, and his peak as a public figure.

His then-girlfriend, the pop singer Mariah Carey, warbled on stage; Leonardo DiCaprio, Robert De Niro and Martin Scorsese were there, chatting to the press about a bizarre 15-minute film – “the coolest 15 minutes ever made”, Packer said – they had put together to plug the casino.

But Packer was soon to cool on Macau.

Just across the border from the enclave, Chinese authorities were becoming increasingly concerned about the amount of money leaving their tightly controlled country across the green felt of gaming tables.

In 2016, Packer quit the joint venture with Lawrence Ho by selling Crown’s shares in it.

It was the beginning of a turbulent period for Packer during which he broke up with Carey (apparently she kept the engagement ring) and got dragged into a corruption investigation into Israeli prime minister Benjamin Netanyahu.

And the following year mainland China turned toxic for Crown when authorities there arrested – and later convicted – 19 staff for illegal gambling promotion. Packer wasn’t on the board of Crown at the time and there is no suggestion he had any involvement in the episode.

Related: Greens condemn Chinese high-rollers being offered wombat hunts

On 30 May this year, Packer struck his deal with Ho. It should have lightened Packer’s load and given Melco a valuable foothold in the Australian market.

But the presence of Great Respect in Melco’s corporate structure may lead Bergin to question whether the company is suitable to be involved in running the Barangaroo casino.

Bergin may also want to find out if Stanley Ho is still behind Great Respect.

Back in 2005, Melco International said Great Respect was “a company controlled by a discretionary family trust of Dr. Stanley Ho”; but in more recent filings Melco Resorts says it is “a company controlled by a discretionary family trust, the beneficiaries of which include Mr. [Lawrence] Ho and his immediate family members”. Which ones, it does not say.

Bergin may also want to look into why Ho took delivery of 10% of Crown on 6 June at the same time as he was a director of another family company banned from Barangaroo by the ILGA.

A Melco spokeswoman said the company would cooperate with the inquiry.

“Dr Stanley Ho does not hold any board seat in Melco International Development Limited, Melco Resorts & Entertainment Limited or any other group companies, has no involvement in their business operations and does not exercise any influence on any financial and operating policies or other matters of these companies,” she said.

In full-page ads in News Corp newspapers, Crown has described reporting by Nine, which has led the media charge, as “a deceitful campaign”.

It has had a lot less to say about the inquiry, issuing a short note to the stock exchange on Thursday evening pledging its cooperation.

Meanwhile, Bergin is wasting no time. She has already used her powers, which are similar to those of a royal commissioner, to send notices to Crown and others (she would not say who) demanding information.

This is in contrast to the Victorian regulator responsible for Crown’s flagship Melbourne casino, which on Friday admitted it was yet to begin a probity approval process announced more than two months ago.

Whatever the outcome of Bergin’s investigation, Crown will pay – literally.

Under the NSW Casino Control Act, it is a condition of its licence that it bear the cost of the inquiry.