ASIC seeks legal action against Star Entertainment executives

The Australian Securities and Investments Commission (ASIC) has officially launched legal action against 11 past and current executives and directors of The Star Entertainment Group.

The corporate watchdog revealed on Tuesday that it had started civil proceedings in a federal court. If the regulator can prove its claims of extensive violation of the law, the gaming giant’s executives will receive fines of over $1 million each and be prohibited from holding a position on company boards.

ASIC launched the civil proceedings on Monday following public inquiries into Star Entertainment’s dealings in its NSW and Queensland casinos. The investigation found the operator unfit to hold a gaming licence over suspected violations of anti money laundering (AML) laws.

READ: Star Entertainment issued show-cause notice by OLGR

In its lawsuit, the corporate watchdog accused Star Entertainment of violating the Corporations Act between 2017 and 2019. The company had allegedly neglected to monitor AML protocols in its numerous casinos properly.

ASIC mentioned former chairman John O’Neil, former chief executive Matthias Bekier, and the directors appointed within that period in its 164-page statement of claim. This includes Richard Sheppard, Katie Lahey, Sally Pitkin, Zlatko Todorcevski, Gerard Bradley, and current chairman Ben Heap.

Star Entertainment’s recent troubles began after various media outlets released reports accusing the company of enabling organized crime, money laundering, foreign interference, and large-scale fraud in its numerous casinos for the past few years. This was all done while Star’s board was notified that its AML controls were lacking.

The deputy chair of ASIC, Sarah Court, revealed that Star’s board members neglected to “give sufficient focus to the risk of money laundering and criminal associations, which are inherent in the operation of a large casino with an international customer base”.

Court said, “One of the challenges with asserting culpability in big companies is that it can be hard to work out who made which decision. After a long investigation, we allege it is appropriate these individuals are held to account, and we call for pecuniary penalties and disqualifications to be imposed on those individuals for their failures to exercise their duty of care.”

All 48 alleged breaches require the defendants to pay at most $1,050,000. Depending on the court’s discretion, the 11 Star executives could also be disqualified from current or future appointments into directorship positions if found guilty. As the matter is currently before the court, potential penalties were not discussed further.

“This court case really deals with who are the people that should be held accountable for these [alleged] significant governance failures,” Court continued.

“Individuals that have engaged, if ASIC’s case is made out … in conduct of this kind should not be appropriately able to act as directors for other companies.”

Out of the 11 named executives, only Lacey and Heap still hold positions at Star Entertainment. The duo released a statement on Tuesday afternoon informing the public that as soon as replacements were found, they would relinquish their roles in the company.

“Ms. Lahey and I intend to contest the ASIC allegations, but to remain on the Board beyond the transitional period would be a distraction to the company when remediation needs to be our unwavering focus. A search is currently underway for new directors,” Heap said.

“I am proud and privileged to have had the opportunity to lead The Star during a difficult and important time in the company’s history, and will continue to do so until an appropriate handover is complete.”

ASIC claimed that the mentioned board members consented to expand the company’s partnership with criminally linked individuals, which put Star at risk of money laundering. The watchdog also alleged that the board did not make proper inquiries of the company’s management when notified of the money laundering risks and, as such, violated their “director duty obligations”.

Star Entertainment released a statement noting that the court proceedings were focused on “matters which were the subject of regulatory inquiries in New South Wales and Queensland”.

With the exclusion of Todorcevski and Heap, the former board members of Star Entertainment were accused of violating the Corporations Act on six different occasions. Todorcevski and Heap were tied to two contraventions. Bekier, who resigned from his CEO position in March, was accused of seven breaches.

Joe Longo, the ASIC chair, noted the importance of directors in the performance and general standing of a company.

“As I’ve said on many occasions, directors and officers are a critical part of the conduct of business in Australia. Their duty is to understand the operations of the company over which they preside and the particular risks faced by the business. They are required to bring an inquiring mind to business operations. It is not ‘set and forget’,” Longo explained.

The corporate regulator also asked that the court make inquiries concerning a number of former Star executives, including chief casino officer Greg Hawkin, general counsel Paula Martin, and chief financial officer Harry Theodore. Theodore and Hawkins were accused of two contraventions of the Act, and Martin faces three.

According to ASIC, the Star executives neglected to appropriately address the risks of money laundering associated in dealing with Suncity, a Chinese gambling junket. Despite the junket’s criminal links being discovered, the company continued working with them.

ASIC also claimed that the executives did not take the money laundering issues to the company’s board. Star recorded more than $12 billion in turnover between 2018 and 2019 from its relationship with Suncity junkets.

Theodore and Martin were accused of intentionally misleading the National Australia Bank via misconstrued statements about how the China UnionPay (CUP) debit cards were used at NAB ATMs.

“Those statements disguised the fact that Star was permitting CUP cards to be used for gambling, which was prohibited by CUP,” the regulator said in a statement.

“ASIC is aware over $900 million was obtained by Star customers using CUP cards in NAB ATMs from 2013 to 2019.”

The Bell Inquiry this year discovered Star Entertainment to be unsuitable to retain its Sydney casino licence. The company was fined $100 million in October and had its license suspended. Star is currently operating under an independent monitor via a temporary permit.

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