Full video transcript [05:19 mins]

Welcome to this edition of The Board Minutes. This is the story of Star Casino, a story of international intrigue, people of not so great repute, literal bags of money and why governance and the law is so important. So ASIC has pleaded against former directors and the former management team of Star Casino.

About 400 pages worth of pleadings and defences have been filed and lodged. What we find out of the pleadings, and certainly what’s being suggested by ASIC, is that there are a number of areas in the casino’s operations where there’s been management telling board certain matters and whether management ought to have disclosed more about certain transactions and certain individuals associated with the casino.

And then the question of the board being aware of certain facts and circumstances as provided by management, and whether they ought to have expanded their enquiry and their questioning around certain other matters to ensure they were governing the organisation well.

Now again, this is all against the backdrop, remember of Crown Casino, who had been through the ringer immediately before Star Casino was in ASIC’s sights. And so, really there’s a question about, you know, whether the board ought to have been a little bit more on notice in terms of the questioning process and whether the management team ought to have been more forthcoming about some of the areas that have caused ASIC concern.

Those areas in and of themselves are really in relation to what’s known as the international rebate business of the casino. That’s really essentially international junket operators bringing in people from other countries to come and play at the casino and spend money.

At one point in time, it made up about 75% of the casino’s revenue. So it’s actually a really important part of the casino’s business. And there are international people who bring them in, the junket operators themselves. And there has been some questionable junket operators.

And when you’re talking about casinos and gambling, there are certain requirements that people be of, you know, good repute. And there were, in relation to some junket operators, some questions about the repute of those operators, particularly as it came forth in terms of publicly available probity checks in relation to those people and also a KPMG report that did a bit of an audit into those people and the way that a particular part of the casino, the Star Casino, was operating, because, not surprisingly, when you’re bringing in that kind of money there are certain arrangements that can be made to help assist those junket operators create a good experience for the gamblers.

Now, there was an agreement between Star Casino and a particular junket operator to run something called Salon 95. It was essentially a desk where people could bring money in, exchange it with chips, and then go and gamble. The real issue came when people would walk in, unknown people would walk in with literal bags of money, the staff at Salon 95 would be obfuscating certain transactions from cameras that were set up designed to monitor those transactions.

And so there was a real question about whether not just whether Salon 95 itself ought to continue because it was a casino within a casino, but whether the casino’s connection with those particular junket operators ought to have continued. And at the time when there was an opportunity for renewal, not only did the board renew that particular junket operator’s connection with the casino, but also upped the credit facilities for that particular junket operator as well.

So that’s formed part of the pleading. If you have the opportunity to have a look at the court itself when it’s going to be in action and, essentially, the trial being run and televised live, you might also hear about a particular ATM within a hotel that was attached to the casino.

 There was a question about whether that ATM was being used to essentially take money out of the ATM and out of a particular country which forbade any kind of withdrawals to move that money into gambling chips. So there was a big question about that, as well as some of the charges from the hotel on people’s bills as to whether they were genuine charges or whether they were, in fact, some kind of advance for gambling chips.

And so there’s a fair bit in this, as I said, 400 pages of pleading, so it’s going to make for some very interesting viewing and I think some really important law when it comes to not just what management ought to tell the board, because we know that there is some case law already that says management needs to tell the board all the things necessary for the board to be able to make decisions, but there’s also this question about how much should the board actually enquire, how do we stay between that line of governance and management.

And so this, I think, is going to be one of the biggest cases for those of us in the governance world, trying to figure out exactly what boards need to be asking and how deep they need to go.

So, we’ll keep you posted on the outcomes of this particular trial and look forward to seeing you in the next edition of The Board Minutes.