Crown inquiry begins in NSW as casino group battles shareholder class action

The first of three inquiries into Crown Resorts and the conduct of its casino business kicks off on Tuesday in Sydney, when the former supreme court judge Patricia Bergin is expected to outline how she intends to tackle her task.

Witnesses are likely to be called at a later date, when the New South Wales inquiry –set up at arm’s length to the NSW Independent Liquor and Gaming Authority – begins in earnest.

Two other inquiries – by the Victorian casino authorities and the public hearings to be held by federal Australian Commission for Law Enforcement Integrity, appear to be on hold for the time being, awaiting the results of investigations.

Related: Crown Resorts annual meeting dominated by questions about wave of scandals

At the same time, Crown is fighting efforts by shareholders who are suing it in a class action to take witness statements from company employees convicted in China for illegally promoting gambling.

The NSW inquiry is expected to focus on the proposed $1.75bn sale of 20% of Crown to Lawrence Ho’s Melco Resorts, and whether this sale gives rise to any issues about probity of close associates or breaches of a specific clause in Crown’s licence for the Barangaroo casino which prevents Ho’s father, Stanley Ho, and a list of specified companies being associates of Crown.

The clause was inserted into the licence when it was granted in 2014 after an adverse finding by New Jersey authorities about Stanley Ho and possible alleged connections with triads in Macau and China.

Bergin’s inquiry will need to delve into the complex structures of Lawrence Ho’s and Stanley Ho’s casino empires in Macau and their financing to determine the answer to this question.

But revelations soon after the deal was announced that Lawrence Ho was a director of one of the banned companies, Lanceford, raised immediate questions.

As a result, Lawrence Ho, who had initially bought 10%, announced he would pause on the second 10% purchase.

But in another hurdle for Melco, another company on the banned list, Great Respect, which is closely linked to Stanley Ho, remains the owner of more than 20% of Melco.

The NSW casino legislation also includes broad requirements that close associates of a company which holds a casino licence must be of good repute and not have a business association with persons who are not of good repute. While Lawrence Ho has passed scrutiny in the past when Melco and Crown had a joint venture in Macau together, it is likely he will need to clear this hurdle again to become a significant shareholder in the Australian licence.

The NSW inquiry is also looking at a number of issues raised by 60 Minutes and Nine that allegedly go to the probity of Crown itself.

These included allegations of money laundering in Crown’s high roller rooms in its casino in Melbourne, failures to report cash transactions and dealing with junket operators with links to drug traffickers, money launderers, human traffickers and organised crime.

Bergin’s terms of reference specifically refer to the allegations as raising questions of suitability. But as they occurred in Melbourne and do not go to conduct involving the NSW licence (Barangaroo is not yet open) there may be questions about jurisdiction and whether Bergin wants to be at the forefront on these issues.

For its part, the Victorian Commission for Gambling and Liquor Regulation has put a “re-examination” of Crown’s licence on hold while it waits for the outcome of a federal investigation that has also shown little signs of progress.

“In order for the Victorian Commission for Gambling and Liquor Regulation to complete this work, it awaits the findings of other investigations being undertaken by federal agencies, as most of the matters raised in the media fall within the remit of these agencies,” its acting chief executive, Alex Fitzpatrick, told Guardian Australia.

The VCGLR had updated the responsible minister in August 2019 and continues to keep the minister briefed as required, he said.

The Australian Commission for Law Enforcement Integrity announced that it would hold public hearings to examine allegations that visa officials gave high rollers destined for Crown casino favourable visa treatment, with the former Border Force boss Roman Quaedvlieg set to be the first witness, but abruptly halted its plans just before Christmas. Other federal agencies including Austrac and the Australian Criminal Intelligence Commission are also likely to be involved in investigating money laundering allegations.

ACLEI told Guardian Australia that it was “considering a large volume of information relevant to the allegations of corruption in interactions between the Department of Home Affairs and Crown Casino”.

“ACLEI will make an announcement concerning public hearings on its website and Twitter when it is in a position to do so,” a spokesperson said.

That will almost certainly hold up the Victorian inquiry.

“If commonwealth investigations identify misconduct by Crown or its employees, the VCGLR may be able to use this information in order to consider appropriate action,” Fitzpatrick said, when explaining why Victoria was waiting.

The ACLEI has not responded to Guardian Australia’s inquiries this week.

Crown has also been dealing with the VCGLR over the regulator’s demands it beef up its anti-money laundering procedures and strengthen its protocols to exclude criminals from the Melbourne casino.

It has satisfied the regulator on the first demand by appointing the former senior NSW police officer Nick Kaldas to advise the board.

But the VCGLR rejected Crown’s first attempt at a new exclusion protocol and has demanded a second proposal, which is now being considered by the regulator.

If Lawrence Ho and Melco were found to be a business associate of his father or not of good repute, he would either have to drop his ambition to own a significant slice of Crown or he could potentially restructure Melco.

This could see all or part of James Packer’s 46% controlling stake back on the market and could provide another opportunity for other suitors such as Wynn to return to the negotiating table.

Related: Calls for Crown casino inquiry after leaked video of bricks of cash in junket room

But the broader suitability question is potentially more serious for Crown. The question is who wants to go first in investigating that question.

Meanwhile, Crown has been fighting a legal battle to stop details of convictions in China against 19 former employees spilling into public as part of a shareholder class action against the company.

Crown has appealed a federal court ruling made in May last year that voided previously secret confidentiality agreements it struck with the employees and allowed the law firm running the case, Maurice Blackburn, to obtain from them witness statements and documents relating to their court cases in China.

The Crown 19 include Jenny Jiang, who appeared in 60 Minutes and Nine Newspapers as a whistleblower.

The appeal is awaiting judgment before a trial of the class action that is set down for November.