Two former executives of The Star Entertainment Group (ASX: SGR) have been penalised a combined $240,000 for breaching their duties in the latest fallout from the Bell inquiry into the casino group’s operations three years ago.
The Star’s former chief casino officer and former boss of The Star Sydney, Gregory Hawkins, has been ordered to pay $180,000 and has been disqualified from managing corporations for 18 months.
Former group chief financial officer Harry Theodore has been hit with a $60,000 penalty and has been disqualified from managing corporations for nine months.
The penalties follow a Federal Court hearing today after civil proceedings were brought by the Australian Securities and Investments Commission (ASIC) against 11 current and former directors and officers of The Star in what has been described as a landmark case for Australian corporate governance.
ASIC says that based on facts agreed between the parties, Hawkins was found by the court to have breached his duties between 2018 and 2019 by approving an agreement between The Star and Macau-based gambling junket operator Suncity Group.
The 2018 agreement allowed Suncity exclusive access to a private gaming room known as Salon 95 in The Star Sydney casino which was the subject of intense questioning during the first Bell inquiry into the group’s casino operations involving Asian high rollers.
ASIC says Hawkins signed the agreement despite knowing that the conduct of Suncity’s representatives exposed The Star to the risk that it would breach the law or become unsuitable to hold a casino license, and for failing to report the information he knew about Suncity to the board.
The court also found that Hawkins failed to inform The Star’s board in 2019 of further information he knew, including of the conduct of players in Salon 95 and the information about Suncity and its associates published in the media, and the risks The Star was exposed to arising from its business relationship with Suncity.
The penalty also relates to Hawkins failing to recommend to the board that The Star either review or terminate its relationship with Suncity and its associates.
Salon 95 was established exclusively for Suncity that the Bell inquiry found had posed serious risk of money laundering activity at The Star. Evidence presented to the inquiry revealed that Suncity was operating its own casino within a casino at The Star Sydney, where gamblers bypassed the casino’s main cage to buy and cash in gambling chips.
Theodore, along with Hawkins and The Star’s former chief legal and risk officer Paula Martin, resigned from their positions in May 2022 after giving evidence at the Bell inquiry.
ASIC says the Federal Court found Theodore breached his duties by failing to prevent The Star from sending correspondence to National Australia Bank on 7 November 2019 which contained "inaccurate, incomplete and misleading" representations about the use of China Union Pay (CUP) cards for gambling purposes at NAB terminals located within Star’s Sydney casino.
During the Bell inquiry, Theodore was alleged to have knowledge of The Star’s misleading representations to NAB that CUP credit card payments made by high rollers at the casino were not being used for gambling.
Under an agreement with Chinese authorities, NAB had sought clarification from The Star on whether any of the payments made on CUP cards were used for gambling which was prohibited by the Chinese government at the time.
Theodore told the review that despite the representations made to NAB, he understood there was a "tacit acceptance" that the CUP cards were used to fund gambling and that it was a "prevalent practice" in the industry.
The penalties issued against Hawkins and Theodore are the first secured by ASIC in the corporate regulator’s legal action against The Star’s former directors and officers. Breaches of directors’ duties under section 180 of the Corporations Act attract a maximum penalty of $1.05 million for each breach.
ASIC says its proceedings against the other nine former Star directors and officers continues.
The defendants include former chairman John O Neill and former CEO Matt Bekier, as well as Richard Sheppard, Gerard Bradley, Sally Pitkin and Benjamin Heap.
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