James Packer’s testimony at the Crown inquiry
The billionaire gambling tycoon James Packer once said he measured his success in “toys”. The person who accumulates the most toys in life, he claimed, was the winner.
And on that score, he was a winner before he uttered a single word this week to a public inquiry by the New South Wales Independent Liquor and Gaming Authority (ILGA) into the operations and governance of Crown Resorts casinos.
Packer gave his evidence from aboard his big new toy, a sleek 108-metre Benetti gigayacht, acquired last year for more than $200 million. Reportedly, he was safely socially distanced, moored near Tahiti.
If boat size were the measure of success, then the son has clearly surpassed the father, for his boat is a whole lot bigger and more elegant than Kerry Packer’s converted icebreaker, Arctic P.
Yet the younger Packer did not look or sound much like a winner as he was politely and forensically grilled about the operations of Crown and other companies with which he was associated, and about his personal behaviour and ethics.
Packer appeared slightly glazed when proceedings began on Tuesday. His answers tended to the monosyllabic. He frequently asked for questions to be repeated and had to be prompted to recall events. There were long pauses between questions and answers, although it’s impossible to know if that was due to communication lags.
At the outset, when Adam Bell, SC, asked why he left Crown in 2015 – Packer stepped down from the chairmanship in August and resigned as director in December, then returned as a director in August 2017, then resigned again in March 2018 – the scion replied, softly: “I wasn’t well.”
Packer has bipolar disorder, for which he now is medicated. But the medication, the inquiry was told, has impeded his recall of events.
And though Packer’s responses grew a little more expansive as proceedings went on, there was no hint of the combativeness we’ve come to associate with previous generations of Packers – grandfather Sir Frank, who built the family media empire, and father Kerry, who enlarged it. It was, throughout, a strangely flat performance, given the gravity of the issues being investigated.
For this is no proforma inquiry. It was set up following a series of damning reports last June from The Age, The Sydney Morning Herald and 60 Minutes, which alleged Crown was involved with organised crime gangs in Asia and the laundering of drug money, and had made efforts to lure Chinese high rollers to its casinos in breach of Chinese law, which resulted in the arrest and jailing of Crown staff in that country in October 2016.
The inquiry is also investigating an agreement struck by Packer last year to sell 19.9 per cent of Crown’s shares – about half his stake in the company – to another casino operator, Melco Resorts. Melco is run by Lawrence Ho, a close associate and friend of Packer, and its largest shareholder is a Ho family trust. Until his death a little more than four months ago, Stanley Ho, Lawrence’s father and a man with links to organised crime, was a beneficiary of this trust. Crown’s licence to operate its new Sydney casino forbade any connection with the elder Ho.
Crown’s $2.2 billion hotel, apartment and casino at Barangaroo, in what is Sydney’s tallest building, is due to open in December. The question now is whether the inquiry will complete its investigations and report before the planned opening.
The worst outcome for Crown would be losing its casino licence. That seems unlikely. Instead, it’s Packer personally who seems at greatest risk. He could be forced to sell down or divest his 36 per cent holding in Crown.
There are issues about what Packer should have known while he was a director – but apparently didn’t – and what he did know after he resigned his directorship. There are also questions about his generally erratic behaviour.
On Tuesday, he was questioned about unspecified threats he made against a businessman, identified only as “Mr X”, from a private equity firm identified as “Z Co”.
In 2015, Packer was contemplating a plan to privatise Crown. To this end, he sought $1.5 billion from Z Co, but the company offered only $400 million.
In response, Packer sent a string of emails, containing a threat that, as Bell described it, put Mr X “in fear”. According to a subsequent story in the Nine newspapers, the man was sufficiently scared as to seek legal advice and engage personal security.
Packer’s counsel, Noel Hutley, SC, intervened to prevent further public questioning.
“These communications took place at a state of deep personal crisis of my client. The matters, if you look at them, are matters which … are likely to be reflective of that and, in our respectful submission, there is no public interest in disclosing them,” he said. The inquiry went into a private session, and so it was left tantalisingly unclear what relationship, if any, these threats had to previous questions about Packer’s behaviour in 2015.
Those questions related to his relationship with Arnon Milchan, an Israeli billionaire and Hollywood film producer who also worked as a liaison to Israel’s Bureau of Scientific Relations and was close to Prime Minister Benjamin Netanyahu. In 2015, Packer and Milchan had plans to set up a cybersecurity business, also involving a person connected to the Israeli security service, Mossad.
Counsel assisting referred Packer to a quote attributed to him in a biography by journalist Damon Kitney. Bell asked: “You’re quoted as saying that Mr Milchan ‘may be the most charming and deadly person I’ve ever met’. What did you mean by that?”
“I meant that I would hate to cross him, and he was extraordinarily charming,” Packer replied.
As to the threats against Mr X, Packer said it came as a surprise that the recipient would have been in fear. He nonetheless conceded his behaviour was “shameful” and “disgraceful”, even if it happened at a time when he was unwell.
Commissioner Patricia Bergin seemed unimpressed. “The communications that are in the confidential exhibit were totally unsuitable for a director of a public company as a close associate of a licensee of a casino,” she observed.
When Packer was a director of Crown, he appeared not to know important details of what was going on in the company, most notably in relation to the events leading up to the arrest of the Crown employees in China.
He claimed ignorance of their legal status as they touted for gamblers to populate his casinos. He said he accepted the word of senior management that the operation was legal, never reading any legal advice on the matter.
He couldn’t recall media reports in early 2015 about the Chinese government announcing a crackdown on foreign casinos luring Chinese citizens to gamble at their establishments. Asked if he was aware, while he was a Crown director, that staff were saying they feared for their safety, Packer replied, “No, I wasn’t.”
There was some awareness within Crown that its Chinese staff could be in trouble, and the possibility that staff who had only Chinese passports could be provided work visas for Singapore or Hong Kong was explored, which would allow them to maintain the fiction they were travelling on business. External legal advice was sought on whether Crown should pull executives out of China, as some competitors had done. But the board was not made aware.
Packer conceded a failure of corporate ethics and of risk management processes. He laid most of the blame on people other than himself: on the man who replaced him as Crown’s chairman, Robert Rankin, and particularly on chief executive Rowen Craigie.
“I believe Mr Rankin and Mr Craigie let the side down,’’ Packer said. “… I don’t know how he [Craigie] could not have been aware of this, if he was doing his job.”
Had he known the risk, Packer said, he would have acted to ensure the safety of Crown staff.
There was much, it seemed, he was unaware of in his time as a director.
“A lot of the things that I’ve seen or heard in this inquiry have been a total shock to me,” Packer said.
After he resigned his directorship, though, he may have been too engaged.
Under a “controlling shareholder protocol”, Packer was entitled to receive confidential information about the operations of the company, but not to direct operations. Yet the inquiry has heard evidence indicating he did just that.
He was taken through various examples of communications between himself and executives in which, Bell suggested, Packer was “providing instructions … about matters that you wanted them to attend to”.
In one instance, an email exchange in November 2018, he appeared to chide Crown’s then executive chairman, John Alexander, for embarking on “a world trip looking at restaurants”.
“This seems excessive to me,” Packer wrote in the email. “… Do we need an overall cost-cutting plan to immediately implement, including travel bans for our executives?”
He encouraged Alexander to make other cuts at Crown, ending the email by writing: “I’m over being Captain Good Guy to everyone. Go hard my friend. You have my blessing.”
In another example cited by counsel assisting, Packer said he expected financial targets for 2020 to be met “or there would be consequences”.
When Bell accused Packer of threatening Crown’s senior executives, he countered: “I might have just been being dramatic.”
The casino mogul’s counsel drew a distinction between instructions and requests, but Bell pushed the point: “You were acting as though you were still a director of Crown Resorts, weren’t you?”
It was more a statement than a question.
Finally, there is the matter of the sale agreement last year, which saw Melco acquire 10 per cent of Crown last May – subsequently onsold to Blackstone private equity.
Yes, said Packer, he had been aware of Stanley Ho’s interest in Melco, and of the conditions imposed by the ILGA prohibiting Ho from having any involvement in Crown, before he did the deal. He offered multiple excuses for his actions: he thought of Melco as Lawrence Ho’s company, not Ho snr’s; he left the details up to the lawyers. And finally: “I had forgotten, Mr Bell.”
We will have to wait and see what Commissioner Bergin makes of it all.
But Packer seemed, by the end, to have come to the realisation that his days of dominating Crown – whether from inside or out – would soon be over.
On Thursday, he acknowledged Bergin’s suggestion that his “powerful personality” was likely to have been a factor in Crown’s poor corporate culture, discouraging his executives from sharing bad news, lest they displease him.
“I had never thought about it … before two days ago. Perhaps you are right,’’ he told her.
He also said he would never go back on the Crown board. He said he believed there “certainly shouldn’t be major shareholder provisions going forward” and thought caps on the size of individual shareholdings might be in order.
He sounded like someone who’d finally accepted he couldn’t come out of this a winner.
And he looked glum and disappointed, which is odd for a man floating on a $200 million boat off Tahiti. Perhaps he was wrong after all, and success is not just measured in toys.
This article was first published in the print edition of The Saturday Paper on Oct 10, 2020 as "Crown of thorns".
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