How Packer and Crown are gaming politics
In this story
“It’s not so much a grubby deal,” says independent anti-gambling senator Nick Xenophon. “It’s closer to the ultimate piece of sucking up. If this legislation gets through, no longer can Denis Napthine be accused of being a ‘do-nothing premier’. He’s actually done quite a lot for James Packer.”
On August 22, 2014, the Victorian Coalition government announced that it had reached an agreement with Melbourne’s Crown Casino. The bill, which was tabled in parliament late last week, will extend Crown’s existing gaming licence to 2050, and provide licences for an additional 40 gaming tables, 50 fully automated table game terminals and 128 poker machines. It will also remove the existing “super-tax” on international and interstate VIP players.
The deal is “shameless”, according to Australian Churches Gambling Taskforce chairman Reverend Tim Costello: “The whole thing smells.” Xenophon deems it “the ultimate in corporate hypocrisy”. The Victorian Greens have called for a parliamentary inquiry. In a statement to the press, Packer could barely disguise his glee: “Now, with the support of the Victorian government, we will have a licence that enables us to compete on a level playing field, to help drive tourism, jobs and economic benefit for the state.”
The Saturday Paper’s inquiries with the state treasurer’s office were deflected with a copy of the interview Treasurer Michael O’Brien gave ABC 774’s Jon Faine earlier this week. The interview begins with O’Brien parroting Packer’s sentiments: Crown is Melbourne’s biggest single-site employer; Crown supports jobs; Crown isn’t just a casino, it’s got restaurants and shops, too. Above all, it’s important that Victoria remains competitive. “We need to maintain some level of competitiveness,” O’Brien explained patiently. “New South Wales has got a new VIP casino at Barangaroo opening in 2019…”
Faine cannot wait to interrupt. “So, we’re changing the rules in Victoria, so we can compete better with a casino in Sydney run by the same company?”
Backed into a corner, O’Brien recites the price tag of the deal, again and again. “We are securing payments up to $910 million, for what is a 17-year extension… $910 million… New South Wales extended a 99-year lease for $100 million. We’re getting $910 million. It is a very good deal for Victoria.”
It is a very good deal for the Victorian government. If the legislation passes before the November 29 state election, Napthine’s budget will receive a huge windfall, courtesy of the $250 million upfront payment Crown will be required to make this year as a provision of the agreement. It is, however, a much, much better deal for Crown.
Almost one-quarter of Crown’s remaining payment – $200 million due in 2022 – is contingent on Crown Casino’s gaming revenue increasing. The licences for 128 additional poker machines, which will be purchased from pubs and clubs and therefore maintain the statewide cap of 300,000 machines, will turn a higher profit at Crown than they ever would in a suburban RSL. “Each poker machine at Crown probably makes in the region of $300,000 each year, and that’s a conservative estimate,” says Dr Charles Livingstone, a senior lecturer at Monash University’s School of Public Health and Preventive Medicine, and an expert in gambling regulations and the public health impacts of poker machines. “Suburban machines make an average of $100,000 a year. Yes, Crown are going to contribute some more tax to the government, but giving them more machines will mean that they’re actually increasing the ‘productivity’ of those machines by a factor of three or more. What that means is, Crown has got this deal for nothing.”
As well as a questionable price tag, the deal also has a catch. The Victorian government will have to pay $200 million to Crown if any changes are made in the next 36 years that address problem gambling: changes such as lowering betting limits, installing precommitment technology on poker machines, or restricting access to ATMs, all of which have been recommended by harm-minimisation groups. The existing exemption permitting gamblers to smoke inside VIP gambling rooms is also covered under the compensation agreement.
“Any MP that votes for this piece of legislation, from whatever side of politics, deserves to lose their seat,” says Xenophon. “What they are in effect saying is that they are willing to deprive future voters, voters who are not yet born, from having any democratic say in the conduct of Crown Casino and its role in driving problem gambling in the state.”
If the legislation passes, Xenophon says, “it becomes a constitutional issue. Any attempt to reform gambling laws in Victoria would ultimately be followed by a High Court challenge.”
The federal government might have the power to intervene. Professor Adrienne Stone, director of the Centre for Comparative Constitutional Studies at the University of Melbourne, says it could enact a licensing scheme that would likely override the state arrangement. If it did so, the federal government may not need to compensate Crown.
Stone points to the tobacco plain-packaging legislation as an example of the Commonwealth successfully avoiding a compensation requirement. “Tobacco companies sued on the basis that it amounted to an acquisition of property,” she says. “The High Court ruled that it didn’t, that it was the extinguishment of contractual rights. My suspicion would be that the Commonwealth could extinguish this licence, and it might be able to do it without paying compensation.”
The route to the High Court, however, may be a longer one than expected. In his interview with the treasurer, Faine, who has been provided with a copy of the bill, noted that: “Something like 10 pages of the annexure to the bill … are devoted to setting up the most labyrinthine alternate dispute resolution schemes you’ve ever seen, involving layer after layer of secret negotiations, dispute resolution, arbitration and referees, it seems the only purpose of which is to keep it out of the courts.”
On January 14 this year the Herald Sun reported that Crown had demanded a 99-year gaming licence from the Napthine government in “backroom negotiations”, in response to a casino levy proposed under a mid-year budget report that had left Crown “apocalyptic”. The budget update made no mention of any need to negotiate with Crown, but the government later issued a press release saying any casino levy would be “subject to the satisfactory conclusion of negotiations and mutual agreement between the Victorian government and Crown to establish an outcome that delivers real value for both parties”.
The exact value of that outcome was not mentioned for another eight months. In the meantime, Packer bypassed the usual tender and independent assessment process in NSW, and quietly secured the lucrative Barangaroo casino licence. On September 2, The Sydney Morning Herald revealed that only seven of the eight key documents relating to the operation of Packer’s Barangaroo casino have been made public by the Independent Liquor and Gaming Authority. One of the agreements behind the $100 million licence fee for the 99-year casino licence has been censored.
“I think the reality is that this is just how the Packers operate,” says Livingstone. “They get things cooked up in private, then they make an announcement with the government and say, ‘Well, this is how it’s going to be.’ Of course, by then it’s too late, and the government screams that it can’t back down on commercial deals, and that they have to be negotiated in confidence because of the sensitive nature of the business.”
When questioned about the missing Barangaroo document – the title of which, as well as the names of all involved parties, has been censored – a spokesman for the Independent Liquor and Gaming Authority said, “The information redacted in the VIP Gaming Management Agreement document would, in the view of the authority … be commercially damaging to the licensee or related entities if released.”
The Victorian government has, at least, been consistent in its secrecy. Napthine’s government has also been scrutinised for its refusal to release business plans, reports and proposals for the controversial East West Link motorway, stating that by making commercial-in-confidence information publicly available it would raise tenders. It’s a small consolation, and one that is unlikely to warm the hearts of Victorian voters should the legislation pass before the November election.
Xenophon underlines the concern neatly. “With apologies to Abraham Lincoln,” he says, “because I’m paraphrasing, this is a case of government of the people, by the people, for Jamie Packer.”
Crown declined to comment on this story, but did send The Saturday Paper an 88-page brochure outlining “Crown Melbourne’s Contribution to Victoria”. Amid the glossy pictures, and happy news of Crown being named “Casino/Integrated Resort of the Year” at the “Oscars of the gaming industry” in London, is a letter from James Packer. Among other things, he says: “I believe we are a model corporate citizen.”
It’s quite a model.
This article was first published in the print edition of The Saturday Paper on Sep 13, 2014 as "Gaming politics".
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