A key director involved with negotiating the sale of a major stake of Crown Resorts to Lawrence Ho’s Macau-based casino group has admitted he gave little thought to whether the transaction potentially breached a special “Stanley Ho clause” designed to protect the Sydney casino from ties to organised crime.
A NSW inquiry into whether Crown remains suitable to hold a casino licence heard on Monday that Crown’s largest shareholder, James Packer, insisted on a $1.7bn deal with Lawrence Ho’s Melco Resorts to buy 19.9%, even though executive Michael Johnston had flown to Los Angeles to discuss other options with the billionaire in May 2019.
Packer told Johnston via text message: “Mike, it’s my life and I’m going to overrule you.”
Lawrence Ho is the son of billionaire Stanley Ho, who has been suspected of having links to organised crime in Macau by other casino authorities. There is no suggestion Lawrence Ho has any such links.
At the time, Packer was living in the US and had pulled back from business, citing his mental health.
Johnston, who was both a director of Packer’s private company, Consolidated Press Holdings (CPH), and a director of Crown, has faced questions about whether he considered the sale could put the Sydney licence at risk.
When the NSW government issued the licence to Crown in 2013, it was concerned to keep Stanley Ho and a raft of companies he was involved with out.
Although Melco is run by Lawrence Ho, a company linked to Stanley Ho, Great Respect, maintains a substantial stake. Great Respect is on NSW’s banned list.
CPH did not tell Crown about the deal with Melco until it was inked.
Johnston told the inquiry he phoned Crown’s then-executive chairman, John Alexander, late on the night of 30 May to inform him of the Melco deal.
He said Alexander “didn’t sound happy with the news”.
Johnston faced a grilling over what he knew about Melco’s true ownership and why, as a director of Crown, he did not review Melco’s ownership structure more carefully.
He said he was “not sure” he knew that Stanley Ho had an interest in Melco, despite having been involved in past dealings between Packer and Melco.
But Johnston agreed he was aware that the NSW government was determined to prevent Stanley Ho from getting a foothold in the Sydney licence.
The inquiry, headed by former supreme court judge Patricia Bergin, is inquiring into whether Crown’s failure to tell the regulator about the deal potentially breached the licence condition.
It is also investigating allegations made by Nine media that Crown turned a blind eye to money laundering at its Melbourne and Perth casinos and that it had business relationships with Chinese-based junkets with links to organised crime.
Johnston, who was a member of Crown’s risk committee and involved in overseeing its international VIP strategy, was also quizzed about Crown’s knowledge of the risk of having staff in mainland China.
Recruiting patrons for gambling is illegal in China. In October 2016, Crown’s China-based staff were arrested and later jailed for gambling crimes.
He said he “did not accept” that he had failed to engage with the company’s risk-management strategies.
The inquiry is continuing. Packer is due to give evidence by video link later this week.