Posted on: April 29, 2022, 10:54h.
Last updated on: April 29, 2022, 01:29h.
A federal court in Melbourne has approved an AU$125 million (US$89 million) resolution to settle a class-action lawsuit brought against Crown Resorts by disgruntled shareholders.
Crown’s stock plummeted 20% on the news of the arrests, wiping AU$1 billion (US$700 million) off the value of the company.
Plaintiffs claimed that the share plunge was a direct result of Crown’s poor corporate governance and risk management. They argued that the company had a duty to inform shareholders it was illegally marketing its services in China and placing its staff at risk.
Legal firm Maurice Blackburn, which initiated the suit on behalf of shareholders, called it “One of the most serious and comprehensive breakdowns in corporate governance in Australian history.”
Crown agreed to the $125 million sum last October when the board described it as “a commercial decision in the best interests of shareholders,” – especially the litigious ones.
Judge Justice Beach in the Supreme Court of Victoria described the settlement as “very strong” and “favorable” for the aggrieved parties, according to Business News Australia.
Crown has said it hopes to recoup a significant portion of the payment through insurers.
Chinese Cops Swoop
The case has been simmering since 2017, when investors sued the operator over the arrest of 19 staff members. In October 2016, Chinese authorities arrested employees in several locations on the Chinese mainland. They were eventually charged with “gambling crimes” — more specifically, luring Chinese high rollers to gamble at Crown’s casinos abroad.
Sixteen would be convicted and serve between nine and 10 months in a Shanghai prison, including the company’s VIP International Division, Jason O’Connor.
It was a watershed moment for Crown. It subsequently withdrew exposure to foreign markets by selling interests in casinos in Asia and proposed development in Las Vegas.
VIP revenues dropped nearly 50% in the months that followed.
One Down, One to Go
Last year, a suitability inquiry in New South Wales stripped the company of its Sydney gaming license.
The inquiry discovered that the Crown had never conducted an internal review of China arrests. According to the inquiry, the board was concerned that the findings of such an investigation might harm its defense in the lawsuit.
The inquiry convened to address media allegations that the Crown facilitated money laundering in pursuit of profit and allowed itself to be infiltrated by organized crime via its junket operations.
The company is currently facing a separate shareholder lawsuit addressing these issues, which is also being handled by Maurice Blackburn.
We believe these governance failures have caused real loss to shareholders who would have expected best-practice compliance with anti-money laundering obligations, especially given Crown’s repeated public statements that it took compliance with such laws seriously,” asserts the complaint.
“Instead, it appears Crown’s systems left the company potentially exposed to criminal activity happening on its premises and through its bank accounts.”