Star plotted to oust regulator, failed to check high-risk clients
Star Entertainment’s chairman and former chief executive privately schemed to wage war on the casino regulator and considered engaging shareholders in a class action against a NSW government-appointed manager.
Nick Weeks, special manager of Star Sydney, alleged to an inquiry called by the Independent Casino Commission in NSW that the ASX-listed gaming group was also “bulk approving” high-risk customers when it was meant to check the source of their wealth, and even falsifying documentation about welfare checks.
Star Sydney’s special manager, Nick Weeks, at the regulator’s inquiry in Sydney on Monday.
Emails and text messages tendered to the inquiry between Robbie Cooke, who quit as chief executive last month, and David Foster, the group’s chairman, show that Star executives knew about Mr Weeks’ schedule and investigated who he was meeting.
The inquiry is being led by Adam Bell, SC, and was called by the state’s casino regulator in February. It is concerned Star has not done enough to overhaul the company’s culture.
In one exchange in January, Mr Foster suggested the company try to remove Mr Weeks from his position. “If done right, it could be a catalyst to get rid of Weeks,” Mr Foster wrote in a message read by counsel assisting the inquiry, Caspar Conde.
Mr Foster also proposed a different option to Mr Cooke: “Another angle is establishing grounds if possible for a class action from shareholders against [Weeks] and/or NICC.”
Mr Weeks, who controls Star Sydney’s licence, was installed at the casino in October 2022 after the first inquiry. On Monday, he said he was surprised by the emails and messages sent by Mr Cooke and Mr Foster because he believed he had a “strong working relationship” with the board and executive.
He also alleged the company must have accessed his diary and had pre-warning of meetings between him and the regulator, based on the timing of certain exchanges.
New failings
“We are meeting Monday to get ready for war though,” Mr Foster allegedly wrote to Mr Cooke, referring to a separate, private meeting that Mr Weeks was scheduled to attend but had yet to. Mr Weeks was using a Star email address, but had been assured that the company’s executives would not access his communications.
“It’s difficult to reconcile everything that the company has told me and everything it tells the market and the regulator in relation to its motivations to reform,” Mr Weeks told the inquiry. “I find it extraordinary that the chairman of a listed company and a CEO exchanging messages contemplating a class action from shareholders against me personally ... where their public position … is that they’re working co-operatively.”
Star is one of two major casino operators in the country, alongside Crown Resorts, which was sold by billionaire businessman James Packer to Blackstone after similarly damning findings against the company in 2021. Star is backed by a number of wealthy investors, including publican Bruce Mathieson, who has taken a big position this year.
Mr Bell’s first report in 2022 found Star was unsuitable to hold its licence, describing its operations as “a case study of unethical conduct and cultural failure” that may have evaded taxes and facilitated $900 million of banned gambling transactions.
Over four months, his inquiry revealed Star hid criminal gang-linked junket operator Suncity’s illegal cash cage and allowed it to operate a secret gambling room.
The hearing on Monday began to shed light on newer failings at the Sydney operation, including what was described by Mr Weeks as a “deliberate falsification of records”.
Mr Weeks was referring to an ongoing investigation that has found Star staff members are not interacting with patrons who gambled on a slot machine for at least three hours, despite records claiming they had done so.
“It became evident pretty quickly that falsification of documents … was endemic in that team,” Mr Weeks said. “It appeared to be occurring very often and a large proportion of that team were involved in that conduct. The investigation into that is ongoing.
“It’s concerning to me that, at least based on the evidence to date, this was a very widespread practice and nobody raised it in the casino.”
One of the other major concerns outlined by Mr Weeks was over a form of due diligence for high-risk customers documented in anti-money laundering laws.
Star was required to conduct so-called enhanced customer due diligence checks on existing high-risk customers to comply with new international control measures. These checks typically include ascertaining a person’s identity and source of funds.
‘Bulk processing’
The inquiry revealed Star had a backlog of more than 32,000 customers who needed to be put through the enhanced customer due diligence program. Mr Weeks alleged this process was fast-tracked and excluded a critical component – source of wealth checks.
“Based on the information provided to me, I formed the view that those source of wealth checks had not been undertaken with almost all of the ECDD that were performed as part of this cohort,” he said.
“They had undertaken what they described as ‘bulk processing’ ... they had aggregated customers within that cohort with similar characteristics and processed them in bulk.”
Mr Bell questioned how a casino could “bulk approve” customers if it was required to check their sources of wealth individually.
Mr Weeks said the casino should have told the regulator about the backlog and discussed ways to process customers carefully. “That didn’t happen,” he added.
The second Bell inquiry hearings into Star Sydney are expected to run for about three weeks. Mr Cooke and other former senior executives are scheduled to appear.
Mr Cooke blamed the breakdown in his relationship with NSW chief casino commissioner Philip Crawford as the reason for his resignation late last month. He said, at the time of his exit from the company, that he did not believe Star would ever retain its licence if he stayed at the helm, a view that Mr Weeks agreed with.
The inquiry heard that Mr Crawford said at a meeting in December that he had no confidence in Mr Cooke’s ability to transform the business. Mr Weeks said Mr Cooke had worked hard but struggled to run the business while keeping up with the demands of remediation.
If Star is found unsuitable at the end of the second inquiry, its licence could be permanently revoked and the casino could be shut down, affecting thousands of jobs.
Star, which sought refinancing twice last year, is still facing a multimillion-dollar penalty over claims brought against it by AUSTRAC that it allowed 117 high-risk VIP patrons to churn billions of dollars of dirty cash through its casinos for years.
Shares closed at a record low of 48¢ on Monday.
Zoe Samios covers wagering and the business of sport from the AFR's Sydney newsroom. She was previously the media and telecommunications reporter for The Sydney Morning Herald and The Age, and covered media at The Australian. Connect with Zoe on Twitter. Email Zoe at zoe.samios@afr.com
The Star accused of falsifying welfare checks as gamblers took $3.2 million from company
The Star Entertainment Group’s special manager has alleged the company falsified required welfare checks on pokies players and accidentally allowed customers to take $3.2 million they had not won from its machines.
In opening evidence at the NSW inquiry into The Star’s culture, Nicholas Weeks also accused executives of plotting to sue him.
Weeks was appointed to The Star by the NSW Independent Casino Commission on the day it was stripped of its casino licence in October 2022 for what was supposed to be a three-month period. His term has since been extended three times on the request of the regulator, which remains unconvinced the company has committed to cultural renewal.
Adam Bell, SC, has been engaged by the regulator to assess how the company has progressed in the two years since his first inquiry.
The Pyrmont business could be shut down if it does not regain its licence, which would end the employment of 3000 people and cut billions of dollars in tax contributions from the state government’s bottom line.
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Weeks – who has held the company’s casino licence since it was disgraced in 2022 – said he believed the business’s recently departed boss, Robbie Cooke, had worked hard but ultimately failed to juggle the requirements of keeping the business afloat with the demands of remediation.
He said he was surprised by text message exchanges between the company’s executive chair, David Foster, and Cooke, which referred to plans to oust him from the company, including a proposal to concoct a shareholder-led class action against him and the regulator. Weeks said the exchanges exemplified his view the company was focused on the wrong things.
“I find it extraordinary that the chairman of a listed company and its chief executive would exchange messages contemplating a class action against me personally and the regulator in circumstances where their public position with me is that they’re working co-operatively to address deficiencies that they need to address,” Weeks said.
Weeks revealed Star Sydney had failed to fix a broken “ticket in, cash out” machine that allowed customers to take $3.2 million in cash they had not earned from the casino over a six-week period in June last year.
He said this event was of particular concern given it was not addressed by the company until July 24, and he had expected that an ASX-listed casino business would have strict oversight of its financial position at all times. Instead, it failed to fix the machine for almost two months, which meant customers were able to keep reusing their tickets in exchange for more money.
“This incident identified deep cultural problems in relation to the level of rigour through which controls are followed and the level of care in which work is conducted... I was also concerned about the control environment because I anticipated that balancing the books and counting money was something I anticipated the casino would be very good at,” Weeks said.
Weeks also told the Bell inquiry that officers from Liquor and Gaming NSW revealed Star Sydney had observed Star Sydney’s failure to comply with its requirement to complete welfare checks on customers who had continually played on its poker machines for longer than three hours.
When Weeks conferred with the company’s compliance log, it became apparent that the relevant Star Sydney customer support officers had falsified the document to indicate the check had been completed.
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Weeks said it quickly became apparent that this event was not a one-off but widespread across the Sydney premises and had since prompted an investigation into its Queensland precincts in Brisbane and the Gold Coast dubbed Operation Falskur (icelandic for “false”).
Weeks said he was most concerned that the breaches were raised only by Liquor and Gaming inspectors and not any staff within the company itself, despite the scale of the breaches.
Weeks also said he believed the company had unduly accessed his emails and calendar without his consent based on correspondence between Foster to Cooke which referred to information that they could not otherwise have had access to.
Foster wrote to Cooke on January 31: “They are prepping for war, we better do the same”, ahead of a meeting with the regulator that Weeks said they could not have known about without accessing his diary.
Weeks said he was surprised by the tone of the exchanges, given both executives had engaged normally with him in person, and he was concerned the company had allegedly been monitoring his diary.
“To suggest they wanted to go ‘to war’ with me and the regulator in a circumstance where their licences are suspended and there’s a decision about that suspension already scheduled to occur in June… is extraordinary,” Weeks said.
Weeks’ evidence will be followed by a number of senior and former executives over the next three weeks. Bell will then be charged with determining whether the group is suitable to operate on the basis of these testimonies.
The ASX-listed businesses share price closed at an all-time low of 48¢ on Monday, indicating the market expects a gruelling month ahead for the struggling casino group.
Star wars: The dirty fight between the casino and its regulator
Management dysfunction, falsification of customer welfare checks, disclosure discrepancies, a plot for a coup, and a $3.2 million theft by patrons are just a taste of the fresh allegations made against Star Entertainment as a second public inquiry looks under the hood of the casino that is operating under an already suspended licence.
The first day’s hearing of the inquiry under Adam Bell, SC, paints a portrait of a public company at war with the regulator – the authority in whose hands sit the casino’s fate. It has the power to either reinstate the licence, have it continue with the current provisional status, or order complete disqualification.
Day one of this inquiry makes for compelling listening for all but Star Entertainment shareholders, who must appreciate the catastrophic financial risks of losing its NSW licence. It certainly won’t be lost on pubs and pokies baron Bruce Mathieson, who holds more than 8 per cent of Star.
Given the explosive revelations and allegations made during the day one of the inquiry it is very difficult to imagine how the current board of Star will be able to mend its relationship with the regulator and navigate the path to restore its licence.
It has deteriorated into a grubby battle.
On one side of the boxing ring are the recently departed chief executive Robbie Cooke and the Star board. On the other is the regulator, the NSW Independent Casino Commission (NICC), headed by Philip Crawford, alongside the manager it had installed to oversee the rehabilitation of the casinos, Nick Weeks.
The inquiry heard Cooke and the chairman, David Foster, hatched a plot to engage shareholders in a class action against Weeks and the casino commission. This speaks volumes to the toxicity of the relationship.
Bizarrely, this is the board and management team that had been installed into Star to clean the place up after a 2022 regulatory inquiry by Bell found Star was unfit to hold a licence in NSW – describing it as a “case study of unethical conduct and cultural failure”.
Over four months, Bell’s first inquiry uncovered a laundry list of misconduct, including the casino company’s links with junket operator Suncity, which had an illegal cash cage on Star’s premises.
Day one of this inquiry makes for compelling listening for all but Star Entertainment shareholders, who must appreciate the catastrophic financial risks of losing its NSW licence.
In the wake of the first Bell inquiry, the Star executed the near-wholesale cleanout of its board and management, and Cooke took over as chief executive with a remit of overhauling its operations and culture. Weeks was installed as a special manager to oversee the rehabilitation.
But in the second half of 2023, a report by Weeks questioned the speed at which the casino was progressing against its plan.
Emails and texts between Cooke and Foster that emerged during Monday’s hearing pointed to the pair spying on Weeks’ diary as part of “preparing for war” with the regulator.
Weeks said Cooke and Foster had found out about meetings with his lawyers and regulators scheduled for February by “somehow accessing my diary”.
And then there are the two versions of the recent departures of Cooke and the chief financial officer Christina Katsibouba. The announcement by the board to the Australian stock exchange gave the impression both these executives had resigned, but the company told the regulator both had been dismissed, the inquiry heard on Monday.
The announcement of Cooke’s departure contained his quote: “I have reached the conclusion that my continuation in the group CEO role is not going to be conducive to the NICC determining to find The Star capable of becoming suitable to hold a casino licence in NSW.”
Indeed, the inquiry heard that Katsibouba had been planning her departure since December, citing among other things dysfunctional management.
Cooke and Foster will get a chance to deliver their version of events when they are called to give evidence.
They will certainly be able to attest to the monumental challenges the company has faced over the past few years, dealing with a case from AUSTRAC and a number of class actions and the two equity raisings needed for Star to stay afloat financially.
