tag:theconversation.com,2011:/us/topics/james-packer-2228/articlesJames Packer – The Conversation2022-02-16T04:50:19Ztag:theconversation.com,2011:article/1771492022-02-16T04:50:19Z2022-02-16T04:50:19ZCrown Resorts has sunk so low that private equity is the best option<figure><img src="https://images.theconversation.com/files/446691/original/file-20220216-26-16cb0ax.jpg?ixlib=rb-1.1.0&rect=0%2C298%2C1920%2C974&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Michał Parzuchowski/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Private equity companies generally have a reputation for buying “distressed assets” at bargain prices, squeezing as much cash out of them while making them look as profitable as possible, then selling out for a huge profit.</p>
<p>But the takeover of Australia’s disgraced casino operator Crown Resorts by US private equity behemoth the Blackstone Group may be the best option available to Crown’s shareholders, the governments that benefit from gambling revenue, and the community that suffers the consequences of problem gambling.</p>
<p>The board of Crown Resorts has recommended Blackstone’s A$9 billion offer for total ownership, subject to approval from the federal Foreign Investment Review Board and state gaming regulators in New South Wales, Victoria and Western Australia.</p>
<p>The astonishing ethical and moral depths Crown plumbed in its pursuit of profit means that this may be one of those rare occasions where private equity’s financial and (particularly) non-financial engineering leads to a net positive outcome for the wider community. </p>
<h2>An atypical private equity deal</h2>
<p>Private equity companies raise money from private investors to buy undervalued and often distressed businesses to nurture back to commercial health before exiting at a profit.</p>
<p>Private ownership can be advantageous for a struggling company because it removes the regulatory and other distractions that come with being a listed public company. It means management can make decisions without worrying about short-term stock price fluctuations, for example. </p>
<p>Blackstone’s takeover of Crown Resorts is not a typical private equity transaction; Crown’s problems arose from moral, not financial, bankruptcy. </p>
<p>Notwithstanding the impact of the pandemic on casino profits – in particular the loss of foreign high-rollers – Crown has been consistently profitable. But its licences to continue to rake in those profits are under a cloud. </p>
<p>A NSW commission of inquiry (headed by former NSW Supreme Court judge Patricia Bergin) and a Victorian royal commission (headed by former Federal Court judge Ray Finkelstein) found Crown unfit to hold its Sydney and Melbourne casino licences. A Western Australian royal commission into the company’s fitness to hold its Perth casino licence is pending. </p>
<h2>Illegal, dishonest, unethical, exploitative</h2>
<p>The Victorian royal commission’s <a href="https://content.royalcommission.vic.gov.au/sites/default/files/2021-10/The%20Report%20-%20RCCOL%20-%2015%20October%202021.pdf">final report</a> described Crown Melbourne’s management as disgraceful and its practices as variously illegal, dishonest, unethical and exploitative. </p>
<p>It lambasted senior executives for being “indifferent to their ethical, moral and sometimes legal obligations”, and the board for failing in its prime responsibility to ensure the company “satisfied its legal and regulatory obligations”. </p>
<p>This included facilitating the laundering of millions of dollars and ignoring its problem gambling obligations. Its claim to have a “world’s best approach to problem gambling”, Finkelstein said, could not “be further from the truth”.</p>
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<a href="https://theconversation.com/responsible-gambling-a-bright-shining-lie-crown-resorts-and-others-can-no-longer-hide-behind-162089">Responsible gambling – a bright shining lie Crown Resorts and others can no longer hide behind</a>
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<p>It is hard to imagine a more damning indictment. </p>
<p>Blackstone’s priority, therefore, will be to repair Crown’s many regulatory inadequacies, and deeply tarnished reputation, away from the gaze of shareholders, the media and investment bank analysts.</p>
<h2>A rare opportunity</h2>
<p>For Blackstone, Crown Resorts is a rare opportunity. Casino cash flows are irresistible to highly leveraged private equity investors. Casino company balance sheets dominated by valuable real estate assets are also a draw-card. </p>
<p>Blackstone has extensive experience in “flipping” hotels and casinos.</p>
<p>For example, it acquired the <a href="https://www.afr.com/property/blackstone-exits-hilton-earning-18-billion-after-11-years-20180521-h10bb3">Hilton hotels empire</a> in 2007 and exited 11 years later, making a $US14 billion profit. Last year it sold The Cosmopolitan of Las Vegas <a href="https://www.wsj.com/articles/blackstone-selling-vegas-casino-firms-most-profitable-property-deal-11632744001">for US$5.65 billion</a>, seven years after buying it for US$1.8 billion. It is in the process of exiting its investment in Spanish <a href="https://www.reuters.com/markets/funds/blackstone-plans-34-bln-ipo-bookmaker-cirsa-spanish-paper-says-2021-12-09/">gambling company CIRSA</a>, which runs casinos and betting shops across Spain and Latin America.</p>
<p>Crown Resorts’ shareholders, meanwhile, are over a regulatory barrel. </p>
<p>The company’s licence to operate its brand-new Barangaroo casino is suspended. Its Victorian licence <a href="https://theconversation.com/illegal-dishonest-unethical-and-exploitative-but-crown-resorts-keeps-its-melbourne-casino-licence-170625">is on probation</a>, with a requirement that Packer reduce his 37% stake (through his company Consolidated Press Holdings) to 5%.</p>
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<a href="https://theconversation.com/how-sydneys-barangaroo-tower-paved-the-way-for-closed-door-deals-161816">How Sydney's Barangaroo tower paved the way for closed-door deals</a>
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<p>Existing casino operators would have been averse to tarnishing their reputations by buying into Crown, given its outstanding regulatory problems. Correcting its myriad problems can be expected to raise Crown’s costs (especially compliance costs) and cut its revenue (fewer high-roller junkets) – reducing its profitability and, hence, investor appeal. </p>
<p>If Blackstone can oversee Crown’s rehabilitation from regulatory pariah, it has the opportunity to profit from the ultimate corporate redemption story.</p>
<h2>What happens next</h2>
<p>Private equity outfits assist distressed companies by injecting the money required to turn things around and providing management expertise. </p>
<p>Crown doesn’t need money, so Blackstone’s main role will be rehabilitating its brand and corporate credentials with regulators and, hence, the investment community. </p>
<p>It can then be expected, after a polite interval, to sell Crown either to a global casino operator via a trade sale, or to public investors via a refloat on the Australian Stock Exchange. </p>
<p>One of the criticisms often made of private equity firms like Blackstone is that they aggressively (but legally) minimise their tax obligations. In the case of a casino, tax obligations should be harder to avoid since they are calculated on the basis of revenue received rather than reported profit. (That said, the Victorian Royal Commission did find Crown Resorts had avoided $200 million in tax, of which the company has since repaid $61.5 million). </p>
<p>But so long as Blackstone follows the rules, particularly those to do with policing problem gambling, there’s a chance it could serve shareholder interests while minimising the social harm casinos tend to visit on the communities in which they operate.</p><img src="https://counter.theconversation.com/content/177149/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Melatos is a member of the Reserve Bank of Australia's Educators Advisory Panel and a member of the NSW Education Standards Authority's HSC Standards Committee. He is also a volunteer for the Australian Conservation Foundation.</span></em></p>Crown Resorts has plumbed astonishing ethical and moral depths in pursuit of profits. Private equity giant Blackstone is also chasing a profit – from redeeming Crown’s reputation.Mark Melatos, Associate Professor of Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1618162021-06-02T05:52:41Z2021-06-02T05:52:41ZHow Sydney’s Barangaroo tower paved the way for closed-door deals<p>Crown Towers Sydney, at 75 storeys, is now the city’s tallest building. It should not exist, and certainly not where it is – in prime location on Sydney’s famous harbour. </p>
<p>The redevelopment of the 22-hectare Barangaroo precinct was supposed to transform the former docklands into a world-class example of architectural and public domain design. </p>
<p>But giving Crown Resorts the go-ahead to build its skyscraper – containing a casino, hotel and luxury apartments – diminished the space set aside for parkland in the original <a href="https://www.hillthalis.com.au/projects/barangaroo-formerly-east-darling-harbour">concept plan</a> and broke height limits.</p>
<p>This week the ABC’s <a href="https://www.abc.net.au/4corners/packer%E2%80%99s-crown-casino-gamble/13366976">Four Corners</a> program shed light on how the tower got approved, beginning with a 2012 lunch facilitated by radio celebrity Alan Jones between Crown Resorts’ majority shareholder James Packer and then NSW premier Barry O'Farrell.</p>
<p>It is a familiar story of a culture of wealthy mates and backroom deals. It is also a story about the novel use of an obscure infrastructure approvals mechanism called “unsolicited proposals” – or USPs for short – that circumvented established processes intended to protect the public interest. </p>
<p>The Barangaroo tower has not just changed Sydney’s skyline. It has changed the whole planning system.</p>
<h2>An unsolicited proposal</h2>
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<a href="https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="James Packer with an artist's impression of his Crown Casino Barangaroo development proposal at a business function at the Sydney Opera House, May 16 2013." src="https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=901&fit=crop&dpr=1 600w, https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=901&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=901&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1133&fit=crop&dpr=1 754w, https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1133&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/403697/original/file-20210601-22-130ozah.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1133&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">James Packer with an artist’s impression of his Crown Casino Barangaroo development proposal at a business function at the Sydney Opera House, May 16 2013.</span>
<span class="attribution"><span class="source">Dean Lewins/AAP</span></span>
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<p>As the Four Corners program related, in February 2012 Packer (one of Australia’s ten wealthiest individuals) asked his friend Jones to organise a meeting with O’Farrell. </p>
<p>In Jones’ penthouse suite overlooking Sydney’s Circular Quay, they <a href="https://www.abc.net.au/news/2021-05-31/crown-sydney-alan-jones-james-packer-barry-ofarrell/100164178">ate pies and mash</a> while Packer outlined his vision for a A$1 billion-plus hotel, casino and entertainment complex.</p>
<p>How did Packer’s plan fit into the concept that won <a href="https://www.hillthalis.com.au/projects/barangaroo-formerly-east-darling-harbour">Hill Thalis Architecture</a> the international design competition for Barangaroo? It didn’t. </p>
<p>O'Farrell, <a href="https://www.abc.net.au/4corners/packer%E2%80%99s-crown-casino-gamble/13366976">Jones said</a>, pointed to the rigours of NSW’s urban planning process as a barrier to Packer’s idea. The premier “made the point that it wouldn’t be all that easy, but he embraced the vision”. </p>
<p>Packer went public with his vision shortly after. Many objected. Then:</p>
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<p>With Packer’s project still facing significant opposition, Premier Barry O’Farrell came up with a novel solution which he proposed at another private meeting in his office. The solution was to use an obscure government policy called the “unsolicited proposals” process. </p>
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<h2>How unsolicited proposals work</h2>
<p>The Productivity Commission <a href="https://www.pc.gov.au/inquiries/completed/infrastructure/report/infrastructure-volume2.pdf">has defined</a> an unsolicited proposal as a public-private infrastructure project initiated by a private party, not in response to a request from government.</p>
<p>Common to all guidelines for considering such a proposal is “a requirement for uniqueness or innovation” – with uniqueness implying no other party
could reasonably deliver the project for the same value for money in the same time.</p>
<p>But <a href="https://www.abc.net.au/4corners/packer%E2%80%99s-crown-casino-gamble/13366976">as Serena Lillywhite</a> of Transparency International Australia told Four Corners: “If it’s a project that is considered to be unique and on such a large scale, then it should be going to an open tender process.”</p>
<h2>Part of the urban planning landscape</h2>
<p>We’ve studied unsolicited proposals as part of <a href="https://doi.org/10.1177/0308518X20952421">our research</a> into how planning systems have changed since the 1990s and the implications for public participation and social justice. We’ve been involved in several studies in Sydney’s <a href="https://doi.org/10.1016/j.cities.2015.09.008">Millers Point</a> and <a href="https://doi.org/10.1177/0308518X20952421">Barangaroo</a> since 2014. </p>
<p>This research has included interviewing key actors in local and state government, urban planning and heritage professionals, public housing residents facing eviction, journalists, documentary makers and Indigenous knowledge holders.</p>
<p>Since the process was adopted to greenlight Packer’s plan for Barangaroo, unsolicited proposals have become a well-used tool to circumvent the standard approval processes for urban planning in Australia. </p>
<p>The concept has spread to Victoria and Western Australia, where they are called “<a href="https://www.dtf.vic.gov.au/infrastructure-investment/market-led-proposals">market-led proposals</a>”, and <a href="https://www.parliament.nsw.gov.au/researchpapers/Documents/Unsolicited%20proposals.pdf">Queensland</a>, where they are also known as “exclusive mandates”.</p>
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<a href="https://theconversation.com/market-led-infrastructure-may-sound-good-but-not-if-it-short-changes-the-public-127603">Market-led infrastructure may sound good but not if it short-changes the public</a>
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<p>Examples include Macquarie Group’s <a href="https://www.nsw.gov.au/sites/default/files/2020-05/Unsolicited_proposals_Macquarie_Group_Limited_Martin_Place_Metro_Station_Assessment_Outcome.pdf">Metro station and towers on Sydney’s Martin Place</a>, the <a href="https://www.theurbandeveloper.com/articles/dexus-frasers-central-place-sydney-development">redevelopment</a> of Henry Deane Plaza (near Sydney’s central station) by property manager Dexus and Frasers Property Australia, and Transurban’s <a href="https://www.nsw.gov.au/sites/default/files/2020-05/Unsolicited_proposals_NorthConnex_Contracts_summary.pdf">Northconnex</a> tollway in Sydney, <a href="https://www.transurban.com/news/logan-enhancement-project-complete">Logan Enhancement Project</a> in Queensland and <a href="https://www.transurban.com/roads-and-projects/melbourne">West Gate Tunnel</a> in Melbourne. </p>
<p>The concept <a href="https://doi.org/10.1177/0308518X211007867">is also spreading internationally</a> as a means to connect global money to local infrastructure projects. </p>
<h2>Creating a black box</h2>
<p>One bureaucrat who has worked on unsolicited proposals described the process to us. After the initial proposal is made, discussions go on behind closed doors and “some sort of contribution is cooked up”. </p>
<p>Contributions could include a commitment to provide infrastructure or a fee to government by the proponent.</p>
<p>For example, Macquarie Group will “deliver the new metro station, retail space, and pedestrian connections” <a href="https://www.nsw.gov.au/sites/default/files/2020-05/Unsolicited_proposals_Macquarie_Group_Limited_Martin_Place_Metro_Station_Assessment_Outcome.pdf">at Martin Place</a> in exchange for approval to build its towers.</p>
<p>In the case of Crown Resorts’ Barangaroo deal, the promised contributions included guaranteed future taxation revenue and “an upfront <a href="https://web.archive.org/web/20180424152558/http://www.premier.nsw.gov.au/sites/default/files/CROWN%20PROPOSAL%20MOVES%20TO%20STAGE%203%20.pdf">licence fee of $100 million</a>” for the state government. </p>
<p>We are not suggesting these negotiations and contributions are corrupt. From a transparency perspective, however, they are concerning. The public does not know the exact nature of the relationships involved, nor the financial details of what (in the words of our bureaucrat) is being “cooked up” and whether they are value for money.</p>
<p>These negotiations happen, as another insider put it, “in a very black box […] no one knows what happens there”.</p>
<h2>Baked into the system</h2>
<p><a href="https://theconversation.com/market-led-infrastructure-may-sound-good-but-not-if-it-short-changes-the-public-127603">Urban planning academics</a> and multiple agencies with oversight on public finances and integrity have flagged this as problematic. </p>
<p>In 2016 the Audit Office of NSW <a href="https://www.audit.nsw.gov.au/our-work/reports/managing-unsolicited-proposals-in-new-south-wales">urged greater transparency and public reporting</a> of unsolicited proposals, warning they “pose a greater risk to value for money than procurements done through open, competitive and transparent processes”. </p>
<p>In 2018, the Australian Competition and Consumer Commission <a href="https://www.accc.gov.au/system/files/public-registers/documents/MER18%2B4542.pdf">criticised state governments</a> for accepting unsolicited proposals for tollways, warning the lack of competitive tender processes would inflate costs for taxpayers.</p>
<p>The Victorian Auditor-General made similar warnings <a href="https://www.audit.vic.gov.au/report/market-led-proposals?section=33405--3-west-gate-tunnel-project-value-for-money#33404--2-west-gate-tunnel-project-uniqueness-options-and-benefits">in 2019</a>. </p>
<p>The Barangaroo casino has yet to open, as NSW’s Independent Liquor and Gaming Authority ponders if Crown Resorts (also being scrutinised by royal commissions in Victoria and Western Australia) is fit to hold a gaming licence.</p>
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Read more:
<a href="https://theconversation.com/its-hard-to-see-how-crown-resorts-can-be-found-fit-and-proper-to-run-sydneys-barangaroo-casino-150379">It's hard to see how Crown Resorts can be found 'fit and proper' to run Sydney's Barangaroo casino</a>
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<p><a href="https://www.abc.net.au/4corners/packer%E2%80%99s-crown-casino-gamble/13366976">As Shaun Carter</a>, former NSW president of the Australian Institute of Architects, told Four Corners: “We should look at that building and forever know that we should never let that happen again.” </p>
<p>But with unsolicited proposals being baked into the system, the likelihood is that it will happen – again and again.</p><img src="https://counter.theconversation.com/content/161816/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dallas Rogers receives funding from The Australian Housing and Urban Research Institute and the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Chris Gibson receives funding from the Australian Research Council. </span></em></p>James Packer’s Barangaroo tower has not just changed Sydney’s skyline. It has changed the whole planning system.Dallas Rogers, School of Architecture, Design and Planning, University of SydneyChris Gibson, Professor of Geography, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1503792020-11-19T03:51:38Z2020-11-19T03:51:38ZIt’s hard to see how Crown Resorts can be found ‘fit and proper’ to run Sydney’s Barangaroo casino<figure><img src="https://images.theconversation.com/files/370214/original/file-20201118-16-1h2lutz.jpg?ixlib=rb-1.1.0&rect=0%2C37%2C5000%2C3278&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s biggest gambling company, Crown Resorts, has been told by the NSW Independent Liquor and Gaming Authority <a href="https://www.abc.net.au/news/2020-11-18/crown-resorts-banned-from-opening-sydney-casino/12895344">to delay</a> its planned December 14 opening of its A$2 billion Barangaroo casino complex in Sydney. </p>
<p>The authority wants to wait for the completion of <a href="https://www.nswcasinoinquiry.com/home">the inquiry</a> into Crown Resorts’ fitness and propriety to operate the new casino, before Commissioner Patricia Bergin. Her final report is expected in February 2021.</p>
<p>This is not a surprise. The inquiry has revealed a litany of <a href="https://www.theguardian.com/commentisfree/2020/nov/11/the-crown-inquiry-shows-a-softly-softly-approach-to-gambling-regulation-doesnt-work">dodgy behaviour</a> by Crown Resorts. This includes poor governance, management failures, inconsistent and ineffective controls over money laundering, “machine tampering”, misleading public statements and inappropriate special treatment of <a href="https://theconversation.com/gaming-the-board-crown-resorts-shows-you-just-cant-bet-on-independent-directors-148522">principal shareholder James Packer</a>. </p>
<p>Emblematic of its behaviour are the newspaper advertisements it took out last year attacking whistlebower Jenny Jiang as a “gold digger”, after the former Crown employee <a href="https://www.theage.com.au/crown-unmasked">went public</a> about money laundering and other illegal activities to lure Chinese high rollers. </p>
<p>Jiang, along with 18 other Crown staff in China, was detained by Chinese authorities in 2016. She was convicted for breaching China’s tough anti-gambling laws. </p>
<p>She told her story again to the <a href="https://www.abc.net.au/news/2020-11-19/crown-whistleblower-jenny-jiang-demands-apology/12895260">ABC’s 7:30 program</a> this week. It epitomises the disarray and avoidance of responsibility that has also characterised Crown’s performance before the inquiry. </p>
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<figcaption><span class="caption">ABC TV’s ‘7.30 report’ on Crown Resorts whistleblower Jenny Jiang.</span></figcaption>
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<h2>Yet more money-laundering revelations</h2>
<p>The Independent Liquor and Gaming Authority’s decision came after yet more revelations to the inquiry on Tuesday. The company admitted it was “likely” accounts it set up for VIP players had been used for <a href="https://thenewdaily.com.au/news/national/2020/11/18/crown-resorts-money-laundering/">money laundering</a>. </p>
<p>This was done via a mechanism known as “<a href="https://www.huffingtonpost.com.au/2017/08/03/this-is-the-unusual-money-laundering-method-of-cuckoo-smurfing_a_23062608/">cuckoo smurfing</a>”, whereby money is laundered in small amounts not subject to notification (in Australia, less than A$10,000), using the accounts of unwitting legitimate third parties. </p>
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Read more:
<a href="https://theconversation.com/the-global-war-on-money-laundering-is-a-failed-experiment-125143">The global war on money laundering is a failed experiment</a>
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<p>Commissioner Bergin was <a href="https://www.smh.com.au/business/companies/crown-admits-criminals-likely-laundered-cash-through-casino-accounts-20201118-p56fm6.html">reportedly furious</a> about these new admissions, given Crown Resorts officials had already been grilled about the details of bank accounts over the months the inquiry has taken so far. The company claimed its law firm, MinterEllison, had advised it to make no such admissions. The commissioner, unsurprisingly, now wants to see that advice.</p>
<p>Senior counsel assisting the inquiry submitted in early November that Crown Resorts was <a href="https://www.smh.com.au/business/companies/crown-unfit-to-keep-sydney-casino-licence-inquiry-told-20201104-p56bc9.html">not a fit and proper person</a> to operate the casino. </p>
<p>This was on the basis of a range of issues, not the least of which were “<a href="https://www.theguardian.com/business/2020/oct/06/james-packer-tells-crown-inquiry-threats-he-made-in-2015-were-shameful">disgraceful threats</a>” by Packer, when still a director of the company board, that a Melbourne financier said left him fearing for his safety.</p>
<p>Crown Resorts says it <a href="https://www.theguardian.com/australia-news/2020/nov/18/crown-resorts-asked-to-delay-opening-of-barangaroo-high-roller-casino-until-february">will cooperate</a> and open only non-gambling facilities at Barangaroo. </p>
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<img alt="The Barangaroo casino complex in Sydney." src="https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/370240/original/file-20201119-18-1d0ss2g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The Barangaroo casino complex in Sydney.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>It’s difficult to see how it could do otherwise. </p>
<p>There are now few options for the business. Its well-connected board has been widely castigated. Its management has been revealed to be ineffective and, at the very least, lacking curiosity. </p>
<p>Packer has admitted he <a href="https://thecoalface.net.au/2020/10/08/packer-says-he-might-have-to-sell-stake-for-crown-to-keep-licence-sydney-morning-herald/">might need to substantially reduce</a> his 36% shareholding for the company to survive. </p>
<p>The tenure for chief executive Ken Barton must also be seen as tenuous, given he was Crown Resort’s chief financial officer from 2010 until his promotion this year.</p>
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Read more:
<a href="https://theconversation.com/gaming-the-board-crown-resorts-shows-you-just-cant-bet-on-independent-directors-148522">Gaming the board: Crown Resorts shows you just can't bet on 'independent' directors</a>
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<h2>If Crown is found to not be fit and proper</h2>
<p>Given all that has been revealed, it is very hard to see how the NSW inquiry can find Crown Resorts is fit and proper hold to hold a casino licence. The secretive — and indeed evasive — manner in which the company seems to have conducted its business is key. </p>
<p>If that finding is made, a range of consequences might follow. </p>
<p>The company’s board may be forced to restructure, and its management replaced or overhauled. Packer may be required to sell down his shareholding. The whole Barangaroo operation might even need to be sold to a new licensee. </p>
<p>Whatever happens will not be a rapid process. </p>
<p>And the high-rollers and tourists who were supposed to patronise the casino will not be flocking to Sydney. In the absence of slot machines, the casino is not going to make a profit any time soon.</p>
<h2>Victoria and Western Australia can’t look away</h2>
<p>There are other very big questions raised from all this. </p>
<p>Not the least of them is the future of Crown’s casinos in Melbourne and Perth, and indeed London. Relevant regulators are watching the inquiry. Relevant governments might want to reflect on these circumstances as well. </p>
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<a href="https://theconversation.com/if-crown-is-unfit-to-hold-a-sydney-casino-licence-what-about-melbourne-and-perth-149443">If Crown is unfit to hold a Sydney casino licence, what about Melbourne, and Perth?</a>
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<p>The Victorian Commission for Gambling and Liquor Regulation has taken a softly-softly approach to Crown (and other gambling operators). The regulator is <a href="https://www.audit.vic.gov.au/report/regulating-gambling-and-liquor?section=32034--3-assuring-compliance">under-resourced</a> and does not appear to have the state government’s backing to take a harder line. </p>
<p>The evidence from the NSW inquiry, and its findings, will need decisive responses not just in Sydney but in Melbourne and Perth. It is these casinos, after all, that have profited from the shenanigans revealed by the NSW inquiry. </p>
<p>The Victorian and Western Australian government need to reflect carefully on the appearance of political coverage for the way Crown Resorts has been able to conduct its operations.</p>
<p>To allow business as usual given all we now know would be a major abrogation of responsibility. No government can allow that if it is to retain any semblance of regulatory authority.</p><img src="https://counter.theconversation.com/content/150379/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Livingstone has received funding from the Victorian Responsible Gambling Foundation, the (former) Victorian Gambling Research Panel, and the South Australian Independent Gambling Authority (the funds for which were derived from hypothecation of gambling tax revenue to research purposes), from the Australian and New Zealand School of Government and the Foundation for Alcohol Research and Education, and from non-government organisations for research into multiple aspects of poker machine gambling, including regulatory reform, existing harm minimisation practices, and technical characteristics of gambling forms. He has received travel and co-operation grants from the Alberta Problem Gambling Research Institute, the Finnish Institute for Public Health, the Finnish Alcohol Research Foundation, the Ontario Problem Gambling Research Committee, and the Problem Gambling Foundation of New Zealand. He was a Chief Investigator on an Australian Research Council funded project researching mechanisms of influence on government by the tobacco, alcohol and gambling industries. He has undertaken consultancy research for local governments and non-government organisations in Australia and the UK seeking to restrict or reduce the concentration of poker machines and gambling impacts, and was a member of the Australian government's Ministerial Expert Advisory Group on Gambling in 2010-11. He is a member of the Australian Greens.
</span></em></p>Crown Resorts has been told to delay opening its Barangaroo casino until NSW regulators decide if it is fit to hold the casino licence.Charles Livingstone, Associate Professor, School of Public Health and Preventive Medicine, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1485222020-10-22T05:03:29Z2020-10-22T05:03:29ZGaming the board: Crown Resorts shows you just can’t bet on ‘independent’ directors<figure><img src="https://images.theconversation.com/files/364633/original/file-20201021-19-lamjf8.jpg?ixlib=rb-1.1.0&rect=0%2C52%2C5000%2C3285&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>What’s the difference between an independent and non-independent director?</p>
<p>This question lies at the heart of the scandal embroiling Crown Resorts, Australia’s largest gaming company, which owns casinos in Melbourne and Perth, and is seeking a licence to run a third in Sydney.</p>
<p>The inquiry into the company’s suitability to hold that licence by New South Wales’ Independent Liquor and Gaming Authority’s has revealed abject board failures, including failing to prevent its casinos being used for money laundering. </p>
<p>As the Australian Financial Review <a href="https://www.afr.com/companies/games-and-wagering/easy-decision-to-make-on-crown-s-nsw-licence-20201016-p565o8">has editorialised</a>, the inquiry has revealed “a litany of extraordinary events, remarkable management failures, a bullying culture and an appalling lack of corporate governance.”</p>
<p>At Crown Resort’s <a href="https://www.smh.com.au/business/companies/crown-chairman-coonan-apologises-to-shareholders-for-casino-s-failures-20201022-p567h2.html">annual general meeting today</a>, shareholders expressed their displeasure with 34% of votes cast rejecting Crown’s remuneration report. Any vote of more than 25% represents a “first strike”. A second strike could require a spill of the entire 11-member board.</p>
<p>There were also significant votes against the reappointment of individual board members. Two directors were saved only by the votes of major shareholder James Packer, who holds a 36% share of the company.</p>
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<a href="https://theconversation.com/experienced-shareholders-better-than-independent-directors-for-business-61160">Experienced shareholders better than independent directors for business</a>
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<p>But that’s a big part of the problem – how much the board has been in the pocket of Packer, who quit as the board’s <a href="https://www.abc.net.au/news/2018-03-21/james-packer-resigns-from-crown-resorts/9570344">executive chairman in 2018</a>.</p>
<p>In particular the inquiry has raised questions about four of Crown Resorts’ six “independent directors”, meant to ensure the company is run in the interests of all shareholders, not just major shareholders.</p>
<h2>Committed to Packer’s interests</h2>
<p>At the top of the list of cosy personal relationships is that between Packer and Andrew Demetriou, the former boss of the Australian Football League who Packer invited to join the board as an independent director in 2014.</p>
<p>Independent directors, as the name suggests, are <a href="https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director-tools/pdf/05446-1-10-mem-director-t-bc-types-of-directors_a4_web.ashx">expected to have</a> no personal or economic ties with the company, its management or major shareholders. </p>
<p>But the inquiry heard how Demetriou pushed for less focus on complying with gambling regulations and more on increasing profits. In December 2018 <a href="https://www.smh.com.au/business/companies/exist-to-win-demetriou-worried-crown-was-too-focused-on-compliance-20201012-p564ax.html">he emailed Packer</a> about compliance and regulatory issues taking up “time, resources, costs and focus of management”.</p>
<p>He went on: “We exist to win; I asked management and the board to come back in the new year and turn our minds to strategies to grow revenue.”</p>
<p>In a <a href="https://www.theguardian.com/australia-news/2020/oct/13/crown-resorts-director-andrew-demetriou-denies-dishonesty-at-casino-inquiry">2019 email</a> he assured Packer of his commitment “to serving the best interests of Crown, and most importantly you”. </p>
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Read more:
<a href="https://theconversation.com/independent-isnt-necessarily-better-why-appointing-independent-directors-can-achieve-little-103092">Independent isn't necessarily better. Why appointing independent directors can achieve little</a>
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<h2>Not that independent</h2>
<p>Demetriou’s relationship with Packer appears indicative of the relationship between the entire board of Crown Resorts and its major shareholder. </p>
<p>Since 2016, for example, Crown has provided Packer and his private company CPH Holdings confidential information not available to other investors. This arrangement was <a href="https://www.theguardian.com/australia-news/2020/oct/21/former-crown-resorts-chairman-rob-rankin-should-be-referred-to-corporate-regulator-inquiry-told">terminated the day before</a> the annual general meeting.</p>
<p>Technically <a href="https://www.crownresorts.com.au/About-Us/Board-of-Directors">six of the 11 directors</a> on the Crown Resorts board are independent, in line with the Australian Stock Exchange’s <a href="https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-fourth-edn.pdf">corporate governance principles</a>. </p>
<p>This includes Helen Coonan, a former federal minister in the Howard goverment, appointed board chair in January; former Australian chief medical officer John Horvath; former senior federal public servant Jane Halton; former Aristocrat Leisure executive Antonia Korsanos; and advertising guru Harold Mitchell.</p>
<p>Yet the NSW inquiry <a href="https://www.theguardian.com/australia-news/2020/oct/17/the-crown-inquiry-will-the-house-that-packer-built-come-tumbling-down">also heard evidence</a> of Packer’s personal ties to Horvath, once the doctor of Packer’s father Kerry, and Mitchell, given a “no-strings-attached” $1.9 million loan by Kerry Packer in the 1990s. It also heard Korsanos should not have been categorised as an independent director, given poker machine maker Aristocrat’s business contracts with Crown. </p>
<h2>The rule, not the exception</h2>
<p>My research into boardroom dynamics suggests <a href="https://eprints.qut.edu.au/72595/">cosy boardroom relationships</a> are the rule, rather than the exception. </p>
<p>As part of my research I’ve interviewed more than 30 directors from for-profit, not-for-profit and government organisations. Those interviews confirm how important personal connections are in getting appointed to a board. Close friendships between senior executive and board members were not infrequent. </p>
<p>For example, one experienced director on the board of a public company described the intertwined relationship between the chair and chief executive. This included the chief executive renting his home from the chair and employing the chair’s former personal assistant. The problem, as the director told me, was “people didn’t know it”.</p>
<h2>Misleading shareholders</h2>
<p>This research – and the Crown Resorts saga – highlights a significant problem with corporate governance disclosures.</p>
<p>Independence on paper does not always translate to independence in decision-making.
Boards are meant to assess and review the independence of directors. But while formal relationships are considered, friendship ties and social connections are typically ignored, despite the obvious conflict. And <a href="https://theconversation.com/company-boards-are-stacked-with-friends-of-friends-so-how-can-we-expect-change-95790">social connections among the corporate elite</a> abound.</p>
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Read more:
<a href="https://theconversation.com/company-boards-are-stacked-with-friends-of-friends-so-how-can-we-expect-change-95790">Company boards are stacked with friends of friends so how can we expect change?</a>
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<p>This potentially misleads shareholders looking for independence as an indicator of good governance.</p>
<p>Minority shareholders without inside knowledge of a company’s decision-making rely on independent directors in particular to ask the hard questions and keep management accountable. In the absence of any clarity around a director’s true independence, shareholders are left guessing who is looking out for them and who has other loyalties.</p>
<p>Coonan has promised more “independence of thought” in the boardroom. </p>
<p>But as long as it remains at the board’s discretion to review and determine director independence, shareholders need to be aware that what they see may not be what they get.</p><img src="https://counter.theconversation.com/content/148522/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Natalie Elms does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Cosy personal relationships among the corporate elite abound. So what makes an independent director actually independent?Natalie Elms, Lecturer, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/673192016-10-19T09:34:56Z2016-10-19T09:34:56ZCrown: the trials of a tributary state<figure><img src="https://images.theconversation.com/files/142326/original/image-20161019-20336-gf022f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><span class="source">AAP/Julian Smith</span></span></figcaption></figure><p>Of all the indicators of Australia’s evolving relationship with China, Crown Casino’s current problems are some of the most striking, unexpected and revealing. They present an unflattering but painfully accurate vignette of this country’s increasingly dependent relationship with the People’s Republic. </p>
<p>We have all become accustomed to the idea that Australia’s economic future is inextricably bound up with China’s. The Australian dollar is increasingly seen as a proxy for the health of the Chinese economy. </p>
<p>Likewise, there are growing concerns that China’s real estate bubble may be infecting ours, as wealthy Chinese look for seemingly more secure investment opportunities outside China.</p>
<p>We also seem to have become resigned to the idea that we don’t make much in Australia anymore: we simply cannot compete with China when it comes to manufacturing, the argument goes. Luckily we can still dig things up. We can also develop the service sector, where we seem to have a comparative advantage.</p>
<p>At one level this looks like an unambiguously good thing. The industry in which I work would struggle without the fees paid by Chinese students. They are also very good ambassadors for this country when – or if – they return home.</p>
<p>Australia’s booming tourist trade with China also looks like the sort of benign win-win outcome so beloved of government spokespeople the world over. Or it does up to a point, at least.</p>
<p>The reality is a little more complex. Not only are many of the jobs on the tourism sector notoriously low-skill and low-pay – as opposed to, say ,the disappearing car industry, for example – but some of them are downright dodgy.</p>
<p>It’s not necessary to be a joyless wowser to recognise that the “gaming industry”, as its euphemistically known, is not without its downsides. The industry’s association with sleaze, money-laundering, and a range of social ills is well-established, but no obstacle to its growth or ability to promote itself endlessly despite its direct, well-documented pernicious consequences.</p>
<p>One of the most egregious impacts of a massive domestic gambling industry is the dependence state governments have on the taxes it generates, and their consequent willingness to tolerate the further immiseration of society’s most vulnerable.</p>
<p>The unwillingness of state and federal governments to control the growth of this industry is the backdrop against which the current imbroglio is unfolding. The gaming industry is, we are encouraged to believe, one of Australia’s glittering attractions as far as the world’s most affluent are concerned.</p>
<p>Lest the “high rollers” of the world are unaware of the potential charms of a gambling holiday in Australia, Crown thoughtfully sends delegations to China to schmooze the so-called “whales”, who are apparently happy to lose millions in their casinos. </p>
<p>Whatever your view about this as a business model or a way of making a living, a few questions arise.</p>
<p>First, did no-one in the Packer empire realise that it is actually illegal in China to organise these sorts of gambling activities and trips, or that a Korean casino suffered a similar fate recently?</p>
<p>Second, did no-one notice there’s a major crackdown on corruption occurring in China at the moment and that conspicuous consumption – if that’s quite how to describe losing millions gambling – is considered to be rather bad form in China at present?</p>
<p>Third, where do the Chinese high rollers actually get all their money from in the first place? Best-case scenario is that they are just remarkably successful “communist” entrepreneurs with a few spare million to blow. Worst-case – and most likely? – scenario is that all that loot is ill-gotten and the product of corruption of one form or another. </p>
<p>The Chinese authorities might not be too pleased to see all that money disappearing out of the country at the best of times. But when it’s possibly generated from illegal activities at a time when relations with Australia are rather tepid, what’s to be lost by a heavy-handed crackdown?</p>
<p>This episode doesn’t reflect well on either country, but is likely to prove the proverbial storm in a teacup, albeit a rather embarrassing one as far as Australia is concerned. </p>
<p>Not only do recent events reveal a remarkable lack of understanding of the current climate in China, but they also reveal just how dependent Australia has become on the Middle Kingdom.</p>
<p>Bad enough, one might think, that we’ve become a palm-fringed quarry whose economic fate and wellbeing is decided far from our shores. Even worse when one of our apparently most important growth industries is almost entirely parasitic and devoid of any obvious social good. May you live in interesting times.</p><img src="https://counter.theconversation.com/content/67319/count.gif" alt="The Conversation" width="1" height="1" />
Of all the indicators of Australia’s evolving relationship with China, Crown Casino’s current problems are some of the most striking, unexpected and revealing. They present an unflattering but painfully…Mark Beeson, Professor of International Politics, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/373592015-02-11T23:04:46Z2015-02-11T23:04:46ZWhat lies behind China’s clampdown on foreign casinos<p>China’s recent clampdown on foreign casinos has been portrayed as an extension of <a href="http://www.businessinsider.com.au/xi-declares-war-on-global-gambling-firms-2015-2">Xi Jinping’s anti-corruption drive</a>, but it is also more than that. The motives behind Xi’s declaration of war against the global gambling industry can best be understood on four different fronts.</p>
<p>The first front is the incursion of foreign casinos into China itself – most notably into the Chinese territory of Macau. Macau has its own separate legal system, so while gambling is officially illegal on the mainland, where only two official national lotteries are permitted (China Sports Lottery and the China Welfare Lottery), <a href="http://www.chinalawblog.com/2014/10/china-online-gambling-illegal-but-everywhere.html">it is entirely legal in Macao</a>. </p>
<h2>Foreign pressure</h2>
<p>Foreign casinos, including those controlled by the James Packer-linked <a href="http://www.melco-crown.com/eng/main.php">Melco Crown Entertainment</a>, have been opening and flourishing on Macao since the market was liberalised in 2001, drawing millions of mainland Chinese visitors. Even on the mainland, foreign casinos have been persistent in their efforts to penetrate the market; by stealth if necessary. As early as 1993, for example, Malaysian companies were reportedly trying to operate slot machine parlours in the northeastern cities of Haerbin and Dalian – <a href="http://www.smh.com.au/world/chinas-gambling-addiction-could-prove-tempting-to-beijing-20130910-2thh1.html">claiming to be “entertainment” venues</a>, not gaming operations because they paid out “gifts”, instead of cash.</p>
<p>In 2005, American gambling magnate William Weidner, owner of the highly lucrative Sands Macao casino announced that the nearby mainland city of Zhuhai had selected his company, <a href="http://www.newsgd.com/citiesandtowns/zhuhai/news/200603300079.htm">Las Vegas Sands</a>, to “proceed with master planning” for a resort on the city’s <a href="http://www.casinocitytimes.com/article/las-vegas-sands-plans-nongaming-venture-near-macau-54828">Hengqin Island</a>.</p>
<p>Similarly, the southern tropical-climate Chinese island of Hainan, with its growing number of large resorts, has been flirting with legalising gambling since 2005. In 2010, the Chinese State Council even went so far as to approve a resolution allowing Hainan Island to function as a <a href="http://www.asgam.com/news/item/216-chinese-holiday-isle-ruled-out-as-mini-macau.html">testing ground for China’s lottery and gambling industry</a>.</p>
<p>Poker events have been held on Hainan and at one stage the Mangrove Tree resort in Sanya (Hainan’s capital) even boasted a <a href="http://www.reuters.com/article/2013/02/19/uk-china-gambling-sanya-idUSLNE91I00U20130219">cashless casino bar</a>.</p>
<p>Then there was the high-pressure pitch by Weidner Resorts, including a slick Chinese-language <a href="https://www.youtube.com/watch?v=oWdqzpZFWrM&feature=player_embedded">public relations video</a> that succeeded in persuading the people of Matsu in 2012 to become the first Taiwanese territory to <a href="http://www.cnbc.com/id/101289447#">approve gambling</a> - right on the doorstep of mainland China.</p>
<h2>Legalisation not going to happen</h2>
<p>While legalising casinos might seem an obvious way for the Chinese government to boost economic growth, it is not going to happen any time soon for a number of reasons. First, there is the perennial concern of central Chinese authorities with the maintenance of control over the provinces – a fear that the provinces might go their own way a step too far, especially down south where provincial governments are all-too aware that “the mountains are high and the emperor is far away”. Legalising casinos would help provincial officials strengthen their own power bases and increase local revenues – something Beijing is not keen to encourage.</p>
<p>More importantly and not surprisingly, when foreign companies with dollar signs in their eyes use hard-sell techniques seeking access to China’s enormous market, China’s leaders remember that other addictive product thrust upon them by the British in the 19th Century – opium. Like opium, gambling is linked to organised crime, social problems and social disruption. Like opium, gambling causes bankruptcies and generates instability in the wider financial system.</p>
<p>Further instability in an already shaky financial system is not what the Chinese authorities want. This is the second frontier of China’s war on big gambling – the financial frontier. Here, the battle includes a crack down on Macao’s “junket system” – offering financing options to China’s high-roller patrons – which grew rapidly in the early 21st century until Xi’s recent anti-corruption drive brought that growth to a sudden halt. </p>
<p>It also involves controlling credit and tracking money - most notably through official monitoring of Chinese travelers’ use of UnionPay, the only domestic bank card in mainland China. Gambling revenue in Macau contracted last year for the first time since 2002, plummeting 30% in December alone. The junket system is now on life support <a href="http://www.businessinsider.com.au/xi-declares-war-on-global-gambling-firms-2015-2">after 16% of junkets closed in 2014</a>.</p>
<p>Visa restrictions for mainland Chinese entering Macau have also tightened, and further restrictions on Chinese travelling to overseas gambling destinations can be expected. Unable to enter mainland China directly, foreign casinos have set up base in nearly every country bordering and near China, including Myanmar, Laos, Vietnam, Cambodia, Singapore, the Philippines, South Korea and Australia. Understandably, the Chinese authorities feel surrounded by glittering gambling venues luring their nation’s citizens overseas. Travel is thus the third front on which the battle is being fought. </p>
<p>Expect to see closer monitoring of wealthy Chinese venturing abroad, even if it requires the Chinese authorities to seek the assistance of <a href="https://theconversation.com/chasing-the-money-how-china-is-clamping-down-on-corruption-34042">Australian and other foreign authorities</a>. There has been some speculation that closer scrutiny of foreign casinos might mean a return by some high-rollers to Macau - the share price of Macao casinos rose slightly on the announcement of a clamp-down on foreign operators as investors saw the dynamics change back in favour of <a href="http://www.bloomberg.com/news/articles/2015-02-06/china-to-clamp-down-on-foreign-casinos-wooing-chinese-gamblers">China’s glittering city</a>.</p>
<h2>Tempting images</h2>
<p>The fourth and final frontier is all forms of advertising in China – including all of the many avenues through which foreign casinos attempt to send tempting images and messages to any Chinese person wealthy enough to respond. So how do you promote your casino in China, when gambling and casinos are illegal? Well, first of all you select a well known and acceptable celebrity, like Chow Yun Fat – one of Hong Kong’s biggest action heroes – and then you create a slick advertising campaign that hits all the right buttons in the viewer without actually referencing gambling or casinos. </p>
<p>Crown Macau’s ad, for example, shows Chow Yun-Fat in James Bond mode, throwing square ice cubes from afar into a glass (suspiciously like craps), spinning a plate of fine food (looking rather like a roulette wheel) and displaying tarot-like (or Blackjack) cards.</p>
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<p>The script and video were approved by the Chinese government authorities, air time confirmed and paid for, and the ad went to air. It lasted four days before someone in authority realised what was happening and the ad was <a href="http://daylandoes.com/casino-marketing-in-china/%5D(http://daylandoes.com/casino-marketing-in-china/">pulled and banned</a> from being shown on the mainland.</p><img src="https://counter.theconversation.com/content/37359/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alice de Jonge does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>China’s recent clampdown on foreign casinos has been portrayed as an extension of Xi Jinping’s anti-corruption drive, but it is also more than that. The motives behind Xi’s declaration of war against the…Alice de Jonge, Senior Lecturer, International Law; Asian Business Law, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/158922013-07-09T02:34:41Z2013-07-09T02:34:41ZPacker’s Barangaroo Casino and the inevitability of pokies<figure><img src="https://images.theconversation.com/files/27110/original/4m4hz5pr-1373331082.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Despite stated intentions otherwise, are poker machines at James Packer's planned second Sydney casino at Barangaroo inevitable?</span> <span class="attribution"><span class="source">AAP/Dean Lewins</span></span></figcaption></figure><p>When is a casino not a casino? According to NSW premier Barry O’Farrell, who last week approved James Packer’s Crown Limited bid to establish Sydney’s second casino, a casino isn’t a casino without pokies. Instead, Crown has been granted approval to develop what O’Farrell calls a <a href="http://www.nsw.gov.au/news/crown-proposal-moves-stage-3">“VIP gaming facility”</a>.</p>
<p>Rather than relying on local pokie players to provide a revenue stream, the proposed 70-storey venue at Barangaroo has ambitions to attract lucrative “high-roller” gamblers. These gamblers would, according to Crown, choose to gamble in Sydney rather than Macau, Singapore or other casino hubs closer to home. This will be no small achievement. As Packer himself <a href="http://www.afr.com/p/business/sunday/stealing_overseas_high_rollers_key_r8t3eUxP8HNeAdS6kfi1yN">noted</a>: “the economics on this project are tough”.</p>
<p>Given the challenges of attracting an elite group of Asian gamblers to Sydney in the face of stiff, more accessible and more impressive casino developments overseas, it is highly unlikely that the Barangaroo casino will remain pokie-free in the long term. Australia’s previous experience here is instructive.</p>
<p>The opening of Australia’s first casino in 1973 - Wrest Point Casino in Hobart - was so controversial that it was only approved after a <a href="http://www.parliament.tas.gov.au/tpl/InfoSheets/referendums.htm">state referendum</a>. Even then, one of the development conditions was a prohibition on poker machines. However, after the downturn in the 1980s, the state government authorised Federal Hotels to <a href="http://www.treasury.tas.gov.au/domino/dtf/dtf.nsf/LookupFiles/Soc-Economic-Impact-Study-Vol1.pdf/$file/Soc-Economic-Impact-Study-Vol1.pdf">install pokies</a> in both Wrest Point and its sister casino in Launceston. </p>
<p>In 2008-09, the most recent year for which <a href="http://www.oesr.qld.gov.au/products/publications/aus-gambling-stats/index.php">figures are available</a>, 89% of gambling revenue at the two casinos came from losses on poker machines. The vision of Asian high-rollers flying to Launceston to gamble may seem absurd with the benefit of hindsight, but it was very much part of the marketing of the casino development to the Australian public.</p>
<p>The reneged promises for pokie-free casinos are not limited to Tasmania (see table below). The casinos in the Northern Territory, South Australia and Canberra were all proposed on a pokie-free basis. Only Canberra Casino remains pokie-free, in part perhaps because of the potential effect on the revenues of local clubs, who are major donors to the ACT branch of the Labor Party.</p>
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<p>The Australian experience reveals that the casinos who have presented rich, gambling tourists as their target market to gain approvals have all failed to achieve their speculative projections. All Australian casinos - bar Canberra - rely on local gamblers playing pokies.</p>
<p>The experience of Packer’s flagship Crown Casino in Melbourne also suggests that running a casino without poker machines would be fraught. According to the <a href="http://www.pc.gov.au/projects/inquiry/gambling-2009/report">Productivity Commission’s estimates</a> and <a href="http://www.crownresorts.com.au/investors-media/annual-reports">Crown’s annual reports</a>, in 2008-09 Crown Casino made more money from the pokies than from VIPs, receiving an estimated A$376 million in profits from pokies compared to A$330 million from high-rollers, international or otherwise. </p>
<p>In the same financial year, Crown Casino took A$479 million in profit from gamblers on the main gaming floor, mostly from table games. While some of these gamblers may be tourists, Melburnians make up the majority of these gamblers, to the extent that Crown refers to this segment of their operations as “local gaming”. </p>
<p>Indeed, two days after the announcement that his bid for Barangaroo was successful, Packer put paid to the idea that the casino will be underwritten by super-rich tourists. He noted that minimum bets would be just $20 and that he expects to receive 50% of revenue from Sydneysiders.</p>
<p>The spectre of pokies also hovers over Barangaroo’s building plans. John Redmond, the CEO of Crown’s Sydney rival Echo Entertainment <a href="http://www.smh.com.au/nsw/star-boss-sinks-boot-into-packers-casino-tower-on-steroids-20130528-2n8t1.html">stated</a> that the plans for the lower floor of the new casino are equivalent in size to two football fields: the sort of space required for banks of pokies rather than private VIP lounges.</p>
<p>When pokies do inevitably arrive at Barangaroo, it will largely be the locals who pay the price, both in terms of underwriting the financial viability of the project and coping with gambling-related harms. In Australia, poker machine gambling is more closely associated with gambling problems than any other form gambling. The Productivity Commission <a href="http://www.pc.gov.au/projects/inquiry/gambling-2009/report/key-points">estimated</a> in 2010 that 40% of poker machine revenue nationally is derived from problem gamblers. </p>
<p>Our <a href="http://dx.doi.org/10.1080/00049182.2012.731302">recent research</a> suggests that pokies in casinos are even more harmful than those in smaller clubs and pubs, with pokie players at the NT’s casinos reporting twice the rate of gambling problems as those in smaller venues. </p>
<p>If Crown’s latest venture is to be a financial success, it is likely to ultimately come at the cost of the well-being of a large number of Sydneysiders.</p><img src="https://counter.theconversation.com/content/15892/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin Young is the lead investigator on ARC Linkages Project LP0990584: Gambling-Related Harm in Northern Australia. In addition to his SCU position, he is an Honorary Fellow at the Menzies School of Health Research, Darwin, and a Visiting Fellow, Fenner School of Environment and Society, ANU.</span></em></p><p class="fine-print"><em><span>Francis Markham does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When is a casino not a casino? According to NSW premier Barry O’Farrell, who last week approved James Packer’s Crown Limited bid to establish Sydney’s second casino, a casino isn’t a casino without pokies…Francis Markham, PhD candidate, The Fenner School of Environment and Society, Australian National UniversityMartin Young, Senior Lecturer, Centre for Gambling Education and Research, Southern Cross UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/111302012-12-19T02:56:20Z2012-12-19T02:56:20ZSmart locker competition may also deliver unexpected outcomes<figure><img src="https://images.theconversation.com/files/18460/original/429ry7gg-1355092549.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia Post has been well-placed to handle global changes, with a planned $2 billion upgrade to parcel delivery and new 24 hour smart lockers.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Australia Post has survived more than a hundred years of shipping information and goods. Then came the internet, which massively shrunk hardcopy mail, bills, brochures and so on. </p>
<p>But with the rise of the internet also came the <a href="http://www.abc.net.au/news/2012-10-11/online-boom-delivers-for-australia-post/4308686">boom</a> in sourcing “stuff” from almost anyone, anywhere, at anytime — and have it delivered to your doorstep. Australians are now globally <a href="http://www.bbc.co.uk/news/technology-20700046">ranked 2nd</a> for online shopping and want the convenience of the process to end with a parcel, not a fake delivery notice.</p>
<p>Depending on where you live, the fake delivery notice may be a familiar story: using an online parcel tracking code, you see your parcel has arrived at a shop. You then dash off to pick it up. A day or two later, you receive the delivery attempt notice regarding the parcel you already picked up, demonstrating that they are not even trying to deliver parcels to your door. Can you blame them? Not at all. Parcels do not fit mailboxes, people are often away during delivery times, and no postal worker wants to drag around heaps of heavy parcels that probably only end up being returned to the shop. Delivering is just not as efficient as faking delivery.</p>
<p>To address this problem, Australia Post is experimenting with 24 hour <a href="http://www.abc.net.au/news/2012-10-11/post-office-smart-lockers-rolled-out-for-online-purchases/4306946">smart lockers</a>. One aspect Australia Post can intentionally experiment with is the location. However, the first generation lockers are co-located with Australia Post outlets. Why not place some smart lockers in between shops and closer to you? After all, Australia Post is in the business of delivery, not storage. Placing lockers closer to final destinations would also mean they are emptied faster. </p>
<p>Given their aversion to experimenting with location, my bet is that Australia Post sees unexpected outcomes as risks that need to be systematically avoided. They have probably already devised contingency plans in case parcels contain perishable items that are not picked up until the recipient comes home from holidays. Hopefully they will also have considered that many people (such as the elderly) may not want to be required to own a smart phone and GPS enabled app to pick up their parcels.</p>
<p>Perhaps a Christmas season in Vancouver, Canada best illustrates the dilemma of completing the delivery process. Within one evening, a few centimetres of snow caused chaos. Because of the snow, parcels (and delivery notices) could not be delivered beyond main streets, and instantly piled up from floor to ceiling at many shops. Those who knew (via the internet) that their parcel had arrived had to line up outside while postal workers dug through the mountain of parcels. </p>
<p>In Sydney, the experience is not quite as extreme, but I routinely see long lines of people waiting to do nothing else than pick up their parcel from one of five very busy staff. Clearly, there is more room to innovate the process of final delivery.</p>
<p>Well, Australia Post isn’t the only one who knows customers want more. Mark Bouris and James Packer have just teamed up to challenge Australia Post with their own <a href="http://www.smh.com.au/business/bouris-and-packer-to-deliver-the-goods-20121217-2bj9f.html">smart lockers</a>. The image in the report suggest the lockers will be indoors, so those Christmas chocolates from your gran won’t melt away, too.</p>
<p>The expected outcome of this competition is convenience from order to delivery: order your items anytime online, pick them up anytime, too.</p>
<p>What interests me more are the unexpected outcomes of smart lockers. Unexpected outcomes are seen as lucky and can lead to entirely new business opportunities. For example, instead of being seen as too impersonal, smart lockers may be appreciated for their anonymity and cause a surge in ordering potentially embarrassing parcels. </p>
<p>If Australia Post were open to cultivating lucky outcomes, they might intentionally vary how the smart lockers at each location work, and treat each location as a separate experiment. For example, they might enable some lockers to entirely replace the shop by letting individuals pay at the locker to place their own parcels in the locker for a specified recipient to pick the parcel up. </p>
<p>Such an experiment may work for many Gumtree or eBay users, to avoid having to coordinate schedules around each other or the post office.</p>
<p>Managing for unexpected outcomes, including having the right location, technology or business model is a topic I discuss in an upcoming <a href="http://acereconference.com/">conference paper</a> on the role of luck in innovation. </p>
<p>I completely understand if Australia Post is avoiding unexpected outcomes with most of their billion-dollar infrastructure upgrade. As for the smart lockers, I hope Australia Post and Bouris get a little creative, experiment a bit, and are receptive to unexpected outcomes. For now, I’m hoping the timing and outcome of the smart lockers means we’ll all get our prezzies under our trees, not fake delivery notices.</p><img src="https://counter.theconversation.com/content/11130/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin Bliemel does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia Post has survived more than a hundred years of shipping information and goods. Then came the internet, which massively shrunk hardcopy mail, bills, brochures and so on. But with the rise of the…Martin Bliemel, Lecturer, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/107222012-11-20T19:42:34Z2012-11-20T19:42:34ZBarangaroo: politics, property and players – it’s business as usual<figure><img src="https://images.theconversation.com/files/17660/original/v77rtqsf-1352951933.jpg?ixlib=rb-1.1.0&rect=47%2C38%2C1928%2C1236&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Purely a good idea: James Packers denies that lobbying played a part in him acquiring a second casino licence for Sydney.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p><em>The redevelopment of Sydney’s Barangaroo into a $6 billion waterfront precinct has involved some of Australia’s most influential people - including former Prime Minister Paul Keating and businessman James Packer.</em> </p>
<p><em>But just how tight is this circle of political and business influence figuring prominently in decisions around some of our most treasured public land?</em></p>
<p><em>In our second piece in our series on Barangaroo, lecturer Mark Rolfe from the University of News South Wales writes of the connections between our politicians, players and our favourite pastime, property.</em></p>
<hr>
<p>No doubt there is now around Australia a certain smugness about yet another tale of “Sin City” Sydney and its sleazy trades. After all, the counsel assisting the Independent Commission Against Corruption (ICAC) has compared the infamous Rum Corps to the deals in coal exploration licences by Eddie Obeid, a dominant factional leader of the NSW ALP.</p>
<p>This comes on top of <a href="http://www.smh.com.au/nsw/obeid-familys-harbour-leases-sent-to-icac-20120519-1yxjd.html">allegations</a> about the acquisition through his front companies of three leases of government property in Circular Quay from a Labor Party donor.</p>
<p>Yet such excitement obscures a more routine, legal but no less important point about the networks connecting business and political parties that have often pushed the public aside, even when public land has been involved. We are often treated as irritants and voyeurs to political processes, watching from the bleachers as Americans would say.</p>
<p>I give you three words that say it all but which typify much Australian history – Packer, gambling and Barangaroo. And I give you one more word – <a href="http://www.theaustralian.com.au/business/mergers-acquisitions/packer-lashes-out-at-asic-over-push-to-reform-takeover-laws/story-fn91vdzj-1226440719866">“pissants”</a> – which is Packer’s view of the journalists at the Sydney Morning Herald for calling him to account. But it also typifies more generally the disdain which some elites hold for the public, even when they are pursuing public land.</p>
<p>The biggest laugh I got out of the Barangaroo deal was after Packer claimed that lobbying played no part in the approval of a <a href="http://www.smh.com.au/nsw/packers-1b-casino-plan-gets-cabinet-backing-20121025-286ul.html">second casino licence for Sydney</a>, to be housed in a $1 billion hotel complex at Barangaroo; it was due purely to being a good idea. </p>
<p>I admire his capacity to keep a straight face since he discussed his plans with Premier Barry O’Farrell in August and one week later the government <a href="http://www.smh.com.au/nsw/ofarrell-denies-favouring-packer-20121107-28yli.html">changed</a> the guidelines for unsolicited proposals for projects by the private sector. The rules had only arrived in July.</p>
<p>Packer also employed Mark Arbib and Karl Bitar, both of them former secretaries of the NSW branch of the ALP, who <a href="http://www.dailytelegraph.com.au/news/national/path-now-clear-for-james-packers-new-casino-at-barangaroo/story-fndo28a5-1226501868815">lobbied</a> the leader of the tragic rump of that party in the state parliament, John Robertson. </p>
<p>As a sociable sort of fellow, Arbib also took the secretary of the hospitality workers union to a <a href="http://www.smh.com.au/nsw/union-boss-entertained-at-afl-by-crown-lobbyist-20121108-290w9.html">match</a> between the Sydney Swans and Hawthorn after a memorandum of understanding was signed between the union and the Packer company Crown Ltd. This was a stunning reversal of union opposition in June.</p>
<p>I was still laughing heartily when I remembered an article by Stephen Loosley. Arbib had followed this man, who had himself followed the career path blazed by Graham Richardson with ascension from secretary of the branch to senator and then resignation to become a lobbyist. Richardson was a senior minister and factional operator in the Hawke government. Loosley is now with <a href="http://www.minterellison.com/People/stephen_loosley/">Minter Ellison</a> as a strategic counsel with “specialist experience in international affairs, public policy, legislative process and major infrastructure projects”.</p>
<p>Loosley <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10474850">wrote</a> of a private dinner in 2006 between James Packer and Morris Iemma, Labor premier of the time, which led the government to grant a gambling licence to Betfair in NSW. Iemma’s mentor was Richardson who, along with another Labor stalwart Peter Barron, had associations with Packer’s company PBL which had an interest in Betfair.</p>
<p>With Iemma we come full circle back to Obeid who, with Joe Tripodi as another factional leader, deposed first Iemma and then Nathan Rees before installing Kristina Keneally. Her term as Premier was immediately crippled when Rees denounced her as the <a href="http://www.smh.com.au/nsw/rees-stays-firm-on-puppetry-remark-20120624-20wma.html">puppet</a> of Obeid and Tripodi. I haven’t even mentioned the problems that were happening down in <a href="http://www.illawarramercury.com.au/story/608719/icac-clarifies-position-on-noreen-hay/">Wollongong</a>.</p>
<p>One of the few things Rees achieved during his short term was a ban on political donations from developers. This was the action of a desperate man who realised the tides of political manure were lapping the nostrils of the ALP. </p>
<p>Voters thought Labor was rolling in sacks of developer money, over $10.4 million between 1998 and 2007. Few noticed that NSW Liberals received $7.9 million during that same time. Paul Keating rightly called for a ban on this “wall of money”, as did the Urban Taskforce. But that has still left Keating to wield his political influence with Packer in settling the arrangements for <a href="http://www.smh.com.au/nsw/packer-plays-high-for-hotel-at-barangaroo-20121024-2860o.html">Barangaroo</a>.</p>
<p>We have seen it all before. We can see the connections between our politicians, our national hobby of property dealing and overseas sources of finance.</p>
<p>During the 1860s-90s all the colonial governments borrowed heavily from London to develop, but Melbourne gushed even more with English pounds. Many politicians – premiers, ministers and backbenchers – enriched themselves by voting for spending on infrastructure, particularly for railway lines that, coincidentally, just happened to pass through the suburbs that they developed as directors of companies. Then they sold the blocks at increased prices. This nice little earner collapsed in the depression of early 1890s.</p>
<p>Alfred Deakin achieved justifiable fame as our second prime minister but at this stage he achieved justifiable shame as one of these <a href="http://adb.anu.edu.au/biography/deakin-alfred-5927">scoundrels</a>.</p>
<p>Another politician was William Lawrence <a href="http://books.google.com.au/books?id=wBxkaZkC1d0C&pg=PA27&dq=land+boomers&hl=en&sa=X&ei=uN-hUOeiIqLSmAW1-YHgBA&ved=0CDAQ6AEwAA#v=onepage&q=baillieu&f=false">Baillieu</a> (ancestor to the current Victorian Premier Ted Baillieu?). A friend <a href="http://adb.anu.edu.au/biography/baillieu-william-lawrence-willie-5099">described</a> him as “one of the wicked bears who are always ranging around the world with a view of getting as much out of it as possible”.</p>
<p>Let us jump a few decades.</p>
<p>In the 1980s Sydney overcame Melbourne to become the financial and corporate headquarters of Australia and a global city, thanks to the policies of the Hawke government and to globalisation. It was important not only for NSW but also for the Australian economy. Hence, state and federal policies pushed Sydney on the global stage to create economic growth and jobs. That’s why we had the Olympics - following in Melbourne’s 1956 footsteps - and that’s why the city had a building boom in the nineties.</p>
<p>As a consequence, real estate companies and associated producer service businesses jostle with each other and with other sections of capitalism to lobby for influence on the NSW government. </p>
<p>This is why the NSW ALP was so enmeshed in the politics and donations of property development and that is also why we have had powerful groups such as the Urban Taskforce, the Property Council of Australia (which <a href="http://www.thefifthestate.com.au/archives/35777/">advertised</a> recently for a lobbyist to replace the ex-speech writer for Kevin Rudd) and the Committee for Sydney, of which Loosley is a former chairman. As Pauline <a href="http://onlinelibrary.wiley.com/doi/10.1111/1467-9906.t01-3-00006/abstract;jsessionid=1DD4ED3433138FF255798E735396D10B.d01t03?deniedAccessCustomisedMessage=&userIsAuthenticated=false">McGuirk</a> found in 2003:</p>
<blockquote>
<p>…there is a group of private sector and non-government
organisations with a permanent presence in Sydney’s governance landscape. In the private sector, a series of general business associations and specific business practice groups represent the major fractions of capital that dominate global Sydney: financial and business services corporations, property development and investment interests, major manufacturing corporations, retail, and tourism interests.</p>
</blockquote>
<p>Not much has changed under Barry O’Farrell. The Mars Group is an apartment developer mentioned in <a href="http://www.smh.com.au/news/national/developers-money-keeps-all-sides-of-politics-afloat/2006/10/31/1162278141454.html?page=fullpage#contentSwap1">this report in 2006</a> on developer donations. Now it is a <a href="http://www.dpc.nsw.gov.au/__data/assets/pdf_file/0006/135348/First_State_Advisors_and_Consultants_Pty_Ltd_-_9_REG_v01.pdf">client</a> of 1st State, a government and public relations <a href="http://1ststate.com.au/">firm</a> with former Howard minister Peter Reith amongst its number.</p>
<p>So what happened when political donations from developers were banned in NSW? They fled to other <a href="http://www.theaustralian.com.au/business/property/nsw-developers-donations-flow-over-border/story-fn9656lz-1226260028143">states</a> of course!</p>
<p>There’s nothing like the old Australian tradition of property development.</p>
<p><strong>Read part one of our series: <a href="https://theconversation.com/barangaroo-the-loss-of-trust-10676">Barangaroo: the loss of trust?</a></strong></p><img src="https://counter.theconversation.com/content/10722/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Rolfe does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The redevelopment of Sydney’s Barangaroo into a $6 billion waterfront precinct has involved some of Australia’s most influential people - including former Prime Minister Paul Keating and businessman James…Mark Rolfe, Lecturer, School of Social Sciences, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/82512012-07-13T08:05:06Z2012-07-13T08:05:06ZAttack on ASIC chief draws corporate governance into political mire<figure><img src="https://images.theconversation.com/files/12963/original/nx6rs9rs-1342166063.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An extraordinary attack on ASIC chairman Greg Medcraft this week will do much to weaken confidence in the efficacy of the financial architecture, without any obvious potential upside.</span> </figcaption></figure><p>The attack on the authority, integrity and judgement of the chairman of the Australian Securities and Investments Commission, Greg Medcraft, by the shadow minister for financial services and superannuation is as extraordinary as it is brutal. </p>
<p>Writing in the <a href="http://www.afr.com/p/opinion/asic_chairman_has_overstepped_the_EKODSQmhOocUm8ZuR9D2xM">Australian Financial Review</a>, Senator Mathias Cormann, dismissed Mr Medcraft as a mere “personal appointment” of Treasurer Wayne Swan, who had “hijacked the policy agenda.” In a damning assessment, he concluded that “Medcraft does not appear to fully appreciate the boundaries and responsibilities which come from the important statutory office he holds”.</p>
<p>He accused the ASIC chairman of a “unilateral foray” that usurped policy formulation on the efficacy of takeovers laws “through the front pages of daily newspapers.” This, according to the shadow minister (in the delicious irony of an opinion piece), was as misguided as it was dangerous. </p>
<p>It risked weakening the integrity of “the separation of powers and responsibilities between policy and lawmakers on the one side and regulators on the other.” He castigated the federal government of failing to exercise oversight of what he termed ‘excessive regulator activism.’ Implicitly, he called for the resignation of the market conduct regulator for conduct unbecoming: “Medcraft cannot be a regulator and a financial system commentator at the same time. That is too much of a conflict”.</p>
<p>It is difficult to see how an attack of this severity could have occurred without the sanction of the Liberal political hierarchy. Its placement in the nation’s premier financial newspaper raises the stakes exponentially. The stage is now set for what is likely to be an acrimonious battle. It will draw the governance of financial regulation into the political mire and do much to weaken confidence in the efficacy of the financial architecture, without any obvious potential upside. The downside, however, is obvious and far-reaching.</p>
<p>The timing could not be worse. The Australian regulatory system is undergoing external evaluation by the International Monetary Fund. The underpinning bipartisan narrative (until this morning) had focused on the power and authority of the twin peak model, which is (correctly) held up as talismanic of best-practice.</p>
<p>This was made manifest in a major conference organised by The Economist in Sydney yesterday <strong>(Disclosure: This author was also a speaker at the conference)</strong>. The moderator, The Economist’s Asia Economics Editor, Simon Cox, praised Greg Medcraft and his counterpart in APRA, John Laker, for their proactive approach to market conduct regulation and intrusive approach to prudential supervision. None in the audience demurred.</p>
<p>While Australia has had its fair share of governance failures, the proactive approach to regulation has served it well. As John Laker pointed out to The Economist conference, APRA’s success in managing the crisis derives from the action that it took in advance. The debate on takeover rules reform should be taken in this context. ASIC is facilitating a debate rather than attempting to impose rules, something that of course the agency recognises is outside its mandate.</p>
<p>Closing down debate is neither in the public interest nor in the interest of market participants. By calling for a reigning in what he terms the behaviour of an errant regulator, Senator Cormann is himself running the risk of lending political support to individual corporate actors pursuing specific agendas.</p>
<p>The implications of the attack extend far beyond these shores, however. Next March Greg Medcraft assumes the chairmanship of the International Organisation of Securities Commissions (IOSCO). It is one of the three foundational pillars of the Financial Stability Board (along with the Basel Committee and the International Association of Insurance Superintendents). The position offers Australia the opportunity to shape the global parameters of market conduct regulation.</p>
<p>In mounting such a vigorous attack on Mr Medcraft’s integrity, Mr Cormann has done much to weaken the legitimacy of any attempt by the ASIC chairman to introduce an expansive definition of what constitutes fairness in the global market conduct space. Irrespective of intention, the opinion piece will provide ammunition for those determined to limit that agenda.</p>
<p>This is not to suggest that Mr Cormann has no grounds on which to complain.</p>
<p>It is certainly the case that the presentation of what might constitute a cohesive reform agenda was far from optimal. While ASIC has a right - and indeed an obligation - to comment on whether rules are appropriate, the timing and method of execution could have been managed in a manner that did not make the ASIC chairman a hostage to an increasingly bitter and polarised political climate.</p>
<p>Mr Medcraft has developed a reputation for straight talking. To date this has served him well. While careful not to name specific current controversial deals - involving powerful vested interests - as the rationale for a review of the takeovers regime, there could be no doubt that these informed thinking. To make matters worse, the announcement was floated before the appearance of a considered issues paper.</p>
<p>To that extent, ASIC has left itself vulnerable. It was a rare misstep by the normally assured former investment banker. Whether it is sufficient to derail the reputation of ASIC and its national and international legitimacy is another matter entirely.</p>
<p>Mr Cormann may have scored a political point but in so doing contributed to an erosion of the very authority he ostensibly wishes to protect.</p>
<p>How the government responds will tell us much about the nature of political debate and the collateral damage each side is prepared to countenance in the interests of securing power over policy formulation and its implementation.</p>
<p><em>Justin O'Brien writes a column for The Conversation, The ethical deal, and is director of the U<a href="http://www.clmr.unsw.edu.au/">NSW Centre for Law, Markets and Regulation portal</a>, where this story also appears.</em></p><img src="https://counter.theconversation.com/content/8251/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin O'Brien receives funding from the Australian Research Council for three grants related to corporate governance, financial regulation and accountable governance. This opinion is simultaneously published on an online portal that maps and tracks regulatory reform in the aftermath of the GFC - <a href="http://www.clmr.unsw.edu.au">www.clmr.unsw.edu.au</a>.</span></em></p>The attack on the authority, integrity and judgement of the chairman of the Australian Securities and Investments Commission, Greg Medcraft, by the shadow minister for financial services and superannuation…Justin O'Brien, Professor of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/51872012-02-04T01:06:41Z2012-02-04T01:06:41ZMedia moguls or corporate looters? Rinehart’s raid marks a changing of the guard<figure><img src="https://images.theconversation.com/files/7382/original/md5q93j3-1328313409.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What are Rinehart's real intentions?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>James Packer, Lachlan Murdoch, Kerry Stokes, John Singleton and Gina Rinehart. While Stokes and Singleton have been around media traps for a few years now, the return of a Packer, a Murdoch and the <a href="https://theconversation.com/topics/gina-rinehart">addition of Rinehart</a> represents a changing of the guard for Australian media dynasties.</p>
<p>But this will not necessarily mean a return to a past where empires and family fortunes are entirely entwined. Perhaps, ironically, it signals the end of the dynastic age and the emergence of new corporate battles for control of media assets.</p>
<h2>Why buy?</h2>
<p>Much attention has been focused this week on Australia’s richest woman, Gina Rinehart. Her play for Fairfax Media assets and her well-known disdain for “communist” journalists are a potent mix in these post-News Of The World days.</p>
<p>There has been speculation and rumour about her motives, none of it substantiated, but all interesting.</p>
<p>I particularly like <a href="http://www.crikey.com.au/2012/02/02/mayne-now-is-not-the-time-for-gina-rinehart-to-be-be-saying-look-at-me/">Stephen Maynes’ theory</a> that Rinehart’s decision to raid into Fairfax was an act of hubris and rage at the <a href="http://www.smh.com.au/executive-style/management/the-iron-lady-20120116-1q1u6.html">unsympathetic portrait</a> by Jane Cadzow in Good Weekend (published by Fairfax). From published accounts this seems a typical Rinehart approach to solving a problem.</p>
<p>Others raise the possibility that Rinehart and Singleton will now join forces to create a super network of right wing shock-jockery to campaign against Labor in the 2013 election. This is an attractive theory that aligns well with the suggestion Rinehart is a fierce warrior for conservative forces in Australia. It would be easy to do as Fairfax radio assets have been in play and Singleton’s Macquarie Network is a keen buyer.</p>
<p>Then there’s my favourite theory: Rinehart will grab the Fairfax papers, leaving the rest of the company behind. She will gut the current communistic news staff and hire a bunch of young Liberal communications majors; thus turning the SMH and the Age into simulacra of The Australian’s right-wing bile factory.</p>
<p>All equally attractive propositions to Rinehart’s lovers and haters alike. There’s no doubt her actions have polarized the media landscape and created turmoil in the already fragile media asset market.</p>
<h2>Sinking ships</h2>
<p>This is an exciting spectacle and it has generated a great deal of imagining about the future of Fairfax Media, the Ten network, and many of the other major media players. Fairfax may yet be broken up under Rinehart’s assault on its share register; but it is not the only media company facing an uncertain future.</p>
<p>Let’s not forget, for example, that Nine has some rather <a href="http://www.abc.net.au/7.30/content/2011/s3386052.htm">big bills falling due</a> and creditors are in no mood to take a bath on this expensive-to-run white elephant. Nine’s troubles began when James Packer sold out of the company to concentrate on casinos, now the equity capitalists are wondering who might bail them out.</p>
<p>Kerry Packer is gone; Rupert is hardly here anymore, and no one much under 40 would know the connection between <a href="http://adb.anu.edu.au/biography/syme-david-4679">David Syme</a>, <a href="http://adb.anu.edu.au/biography/fairfax-sir-warwick-oswald-12475">Warwick Fairfax</a> and dried up rivers of gold. It seems the new media saviours may yet be riding out of the rusted West, in the larger-than-life form of Rinehart and her posse of cashed-up angry miners. </p>
<p>It’s not quite the <a href="http://australia.gov.au/about-australia/australian-story/eureka-stockade">Eureka Stockade</a>, but we should perhaps not underestimate the resentment in conservative circles at the perceived sins of the liberal media dominated by the elites on the eastern seaboard. </p>
<h2>Moguls in the making?</h2>
<p>She’s already “princess of the Pilbara”, but does Gina Rinehart also hold ambitions to become the “<a href="http://www.nationaltimes.com.au/opinion/politics/rinehart-has-many-obstacles-to-becoming-princess-of-print-20120201-1qsuk.html">princess of print</a>”? </p>
<p>Some think she does, others believe her actions are purely financial. Rinehart hasn’t said anything yet, but the company she keeps only adds to the speculation.</p>
<p>Rinehart already shares the <a href="http://investing.businessweek.com/research/stocks/people/board.asp?ticker=TEN:AU">Ten Holdings board table</a> with Lachlan Murdoch (he owns nearly 9% of Ten). Murdoch is also on the board of News Corp, Fox and Sky. He will have some of his father’s fortune to play with one day and could have ambitions to build his own media empire in Australia</p>
<p>Rinehart is also well acquainted with Australia’s last remaining old-style media boss, Kerry Stokes who runs the Seven Network and was also a shareholder in Ten until a few days ago (<a href="http://www.theaustralian.com.au/media/broadcast/no-confirmation-on-reports-stokes-has-sold-his-stake-in-ten/story-fna045gd-1226257701800">apparently</a>). Stokes is a fellow Western Australian and could offer Rinehart valuable media advice.</p>
<p>Are we looking at a new set of moguls gathering force here? It seems eerily like the children of a top Chinese cadre following in the footsteps of the father.</p>
<h2>Dynasty – now in re-runs</h2>
<p>If the Rinehart story were a soap opera, Joan Collins would be cast and also Larry Hagman. Rhinestones and wealth dug out of the ground; <a href="http://en.wikipedia.org/wiki/Dynasty_%28TV_series%29">Dynasty</a> meets <a href="http://en.wikipedia.org/wiki/Dallas_%281978_TV_series%29">Dallas</a>.</p>
<p>The old media dynsasties are crumbling: many grand families who once owned the great American newspapers are reduced to ghostly collections and fading memories. <a href="http://www.ft.com/cms/s/0/6ecf98c2-4e8a-11e1-8670-00144feabdc0.html#axzz1lMzGfWfM">Berlusconi</a> may yet go to jail and the <a href="http://www.bbc.co.uk/news/world-europe-16276956">Russian oligarchy</a> looks nervously down the <a href="http://www.saint-petersburg.com/virtual-tour/nevsky-prospect.asp">Nevsky prospekt</a> in St Petersburg. The current reigning global mogul, Rupert Murdoch is, metaphorically at least, on his last legs.</p>
<p><a href="http://www.independent.co.uk/news/world/australasia/kerry-packer-australias-richest-man-dies-at-68-520784.html">Packer</a> was the last family name associated with Nine and even though Fairfax Media bears the name of the founding fathers, there is currently <a href="http://mumbrella.com.au/fairfaxs-severed-ties-with-founding-family-not-a-reflection-of-poor-corporate-strategy-67012?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+mumbrella+%28mUmBRELLA%29">no Fairfax representation</a> on the board and the substantial Fairfax family holding was sold out a few months ago.</p>
<p>Can we now suggest that the age of the media family dynasty may finally be over? Is the old family ties relationship between the media and owners being replaced by hard-nosed corporate types who have no sentimental attachment to news or entertainment?</p>
<h2>Who’s who in Fairfax</h2>
<p>In the context of the Rinehart putsch it is interesting to look at some other Fairfax board figures; as their public resistance may prove difficult to overcome.</p>
<p>The board is chaired by <a href="http://investing.businessweek.com/research/stocks/people/person.asp?personId=8626996&ticker=FXJ:AU&previousCapId=313055&previousTitle=WAL-MART%20STORES%20INC">Roger Corbett AO</a>. He is the former CEO/managing director of Woolies, which means has a <a href="http://www.crikey.com.au/2009/11/09/with-roger-corbett-it%E2%80%99s-a-question-of-character/">past involvement with pokies</a>. He’s a major shareholder in <a href="http://www.theaustralian.com.au/business/opinion/corbetts-sideline-may-well-become-a-gusher/story-e6frg9lo-1226260030677">a shale gas operation</a> in the US, and <a href="http://www.theaustralian.com.au/media/rinehart-pitted-against-fairfax-boss/story-e6frg996-1226260018798">opposes Rinehart</a> on the mining tax.</p>
<p><a href="http://www.xmedialab.com/mentor/greg-hywood">Greg Hywood</a> is the Chief Executive Officer and Managing Director of Fairfax. He recently gave the <a href="http://blogs.unimelb.edu.au/futurestudents/2011/11/02/a-n-smith-lecture-in-journalism-greg-hywood-talks-media/">2011 A N Smith lecture</a> in which he defended journalistic integrity at Fairfax and didn’t mention the cost-cutting he’s carried out which has resulted in more than <a href="http://ethicalmartini.wordpress.com/2011/11/16/sorry-mr-hywood-you-missed-the-point-its-not-about-quality-its-about-money/">500 news-related jobs disappearing</a> over the past couple of years. </p>
<p>Hywood may claim Rinehart’s politics are an anathema to his, but he is grimly aware of the many problems at Fairfax and could probably work with her. In December last year Hywood <a href="http://www.theaustralian.com.au/media/fairfaxs-digital-strategy-is-working-insists-greg-hywood/story-e6frg996-1226213614111">told The Australian</a> he was not interested in “big hairy takeovers”, but would work to restructure the company and trade out of difficulties (such as the $390 million loss in 2010).</p>
<p><a href="http://www.nzherald.co.nz/entrepreneurship/news/article.cfm?c_id=190&objectid=10372253">Sam Morgan</a> is the Kiwi wunderkind who founded <a href="http://www.trademe.co.nz/">TradeMe</a> and sold it to Fairfax for NZ$700million in 2006. He doesn’t have a media background, but if Fairfax is restructured or broken up, he might be in the market for the New Zealand operations.</p>
<p>Linda Nicholls AO, is another professional director and it <a href="http://www.theaustralian.com.au/media/orbis-australia-wont-back-fairfax-board-seat-for-australias-richest-person/story-e6frg996-1226259498017">has been suggested</a> she and Sandra McPhee would support a spot on the board for another woman. </p>
<p>More potent at the moment is the opposition coming from other institutional investors and figures not on the board. Orbis Australia fund manager Simon Marais was <a href="http://www.theaustralian.com.au/media/orbis-australia-wont-back-fairfax-board-seat-for-australias-richest-person/story-e6frg996-1226259498017">pretty scathing</a> of Rinehart and her reasons for wanting to join the Fairfax Board (if that’s what she wants to do). </p>
<p>He told The Australian that Rinehart’s seat on the board is not guaranteed and that he would need to be convinced it would be in the interests of shareholders. Marais also strongly defended the independence of Fairfax journalists; not something Gina Rinehart will be keen to hear much of in coming weeks.</p>
<h2>Mining for media influence</h2>
<p>Gina Rinehart has a lot to learn about being a media mogul. If she aspires to wield the influence of generations of Packers and Murdochs before her, she has a long way to go.</p>
<p>Her father’s brief foray into newspapers 50 years ago is not going to be enough training for this more difficult assignment.</p>
<p>Rinehart is now the biggest individual shareholder in Fairfax Media, <a href="http://www.smh.com.au/business/fairfax-shares-rocket-on-rinehart-raid-20120131-1qrh7.html?skin=text-only">just ahead of the Commonwealth Bank</a> with 12.37% and in front of the next seven biggest institutional investors.</p>
<p>We will know soon if she is going to be a dynasty builder, or just a corporate raider.</p>
<p>But it’s interesting that another mining behemoth has echoed Rinehart’s sentiments about the quality of Fairfax journalism. <a href="http://www.abc.net.au/news/2012-02-03/clive-palmer-considers-turning-media-mogul/3808710">Clive Palmer told Lateline</a> this week that he would consider buying some Fairfax stock himself and really give the place a shake-up.</p>
<p>“Fairfax looks very exciting,” Mr Palmer said. “You could have an east-west play with Fairfax. Gina could come from the west and buy 15%, and we could buy 30% from the eastern side of Australia and really get the place humming again.”</p>
<p>It seems the members of the Fairfax board may well have to make some more room at the boardroom table for a new generation of mogul-magnates ready to dig up the media landscape.</p><img src="https://counter.theconversation.com/content/5187/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin Hirst a member of the Media, Entertainment and Arts Alliance. He is the author of News 2.0: Can journalism survive the Internet. He blogs at Ethical Martini.</span></em></p>James Packer, Lachlan Murdoch, Kerry Stokes, John Singleton and Gina Rinehart. While Stokes and Singleton have been around media traps for a few years now, the return of a Packer, a Murdoch and the addition…Martin Hirst, Associate Professor Journalism & Media, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.