The Federal Court is scheduled to hand down its decision this week on how big a penalty Star Entertainment should pay for repeated breaches of anti-money laundering laws that led to the suspension of its casino licences in NSW and Queensland.
Star has acknowledged in its most recent annual report the existential threat the fine may pose for its business.
“AUSTRAC submitted that a penalty of $400 million would be appropriate while The Star submitted that a penalty of greater than $100 million, payable in the 12 months following the hearing, would be challenging based on available liquidity options, including accessing equity markets. The Star is awaiting the court’s judgment,” it told investors in August.
Justice Cameron Moore is due to hand down his judgment on Wednesday morning, a day after shareholders gather for the casino operator’s annual meeting in Sydney.
It will be shareholders’ first, and possibly last, chance to meet new chairman Soo Kim, and chief executive Bruce Mathieson Jnr, who led the $300 million rescue package that saved Star from financial collapse last year. If the fine is too hefty, the company could end up in administration.
The rescue handed control of the casino business to Kim’s US casino operator Bally’s and the Mathieson family pub empire also emerged with a significant stake after contributing $100 million to the deal.
Star’s troubles started in 2021, when an investigation by The Age, The Sydney Morning Herald and 60 Minutes alleged Star had enabled suspected money laundering, organised crime, large-scale fraud and foreign interference in its Australian casinos for years, even though its board had been warned its anti-money-laundering controls were failing.
Further inquiries led to the loss of its casino licences, a legal battle with the corporate regulator, as well as legal action by financial crime regulator AUSTRAC over the money-laundering breaches.
Gambling revenue has fallen, and the casino group’s regulatory costs have mounted following the run of scandals.
Star got into more hot water this year following an investigation by this publication and the Australian Financial Review that raised questions about Star’s commitment to reforms to help it regain its casino licence, as its top executives try to make the casino operator financially viable under new regulatory restraints in NSW and Queensland.
A leaked recording of Star Entertainment Group’s most senior executives has captured its Sydney casino boss and Mathieson Jnr complaining of the risk and compliance measures forced on to the group.
“We get these fines, which I think are just disproportionate to what is happening, and … all we’re doing is existing to pay a fine,” Mathieson Jnr said.
“We keep on restricting ourselves tighter and tighter. We’re coming to a pretty critical time with obviously licences and all that sort of stuff, but it should be quite obvious to everyone that unless we can breathe … every time we get up to breathe, we cop another hit.”
Mathieson Jnr was conciliatory to the regulators in his letter to fellow shareholders via the annual report in August.
“I would like to acknowledge and thank our regulators and other key stakeholders for their ongoing engagement, guidance and collaboration throughout this period of significant transformation. Their commitment and constructive involvement have been important in supporting our ongoing remediation and progress towards returning The Star to suitability.”
He later told staff the new management team is “working to change” the problems inherited from previous management.
Last month NSW Independent Casino Commission chief Philip Crawford extended the suspension of Star’s licence, saying questions remained over the casino’s progress in improving its governance, leadership and culture.
“There is no doubt that The Star has come a long way in addressing the matters which led to the suspension of its casino licence in 2022,” Crawford said.
“However, recent allegations regarding governance, leadership and culture at the casino are serious and are being treated as such by both the manager and the NICC. It is disappointing that despite the progress made by the Sydney casino, the Group company continues to experience problems that affect each of its properties.”
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