Coming to an agreement

Crown Resorts has settled a shareholder class-action lawsuit relating to a 2016 marketing campaign in China for AU$125m (US$94m).

The Australian casino giant announced the settlement on Friday. The lawsuit alleged that Crown Resorts did not inform its shareholders about a marketing campaign that led to the arrest of 19 of its staff members in China. The company’s share price dropped significantly on the back of this news in 2016.

In an Australian Securities Exchange filing released on Friday, Crown described the settlement as a “commercial decision” in the best interests of the company and shareholders. The firm did not admit any liability and said it hopes to recover a significant amount of the settlement from insurers.

The settlement is inclusive of interest and costs, and still needs approval from the Federal Court.

A bit of background

On October 17, 2016, Crown Resorts’ share price fell 14% after news broke that Chinese police had detained some of its staff members for the illegal promotion of gambling.

16 of the 19 employees had to serve prison time

Chinese authorities took a total of 19 Crown workers into custody in October 2016 before formally arresting them on accusations of “gambling crimes.” Allegedly, the workers had tried to recruit high-value gamblers from China for the company’s venues in Australia. Ultimately, 16 of the 19 employees had to serve prison time and pay fines totaling US$1.26m.

The shareholder class-action lawsuit officially began on December 4, 2017 in the Federal Court of Australia. According to the suit, James Packer-owned Crown Resorts “decided to roll the dice on its Chinese VIP operations against a backdrop of a known Chinese crackdown on illegal gambling-related activities, and that gamble backfired spectacularly.” The lawsuit was scheduled to go to trial this week.

Maurice Blackburn Lawyers filed the suit on behalf of Crown shareholders. Speaking about the operator’s failings as part of this case, Maurice Blackburn senior associate Michael Donelly said: “Crown’s alleged failures in our case were part of what has become one of the most serious and comprehensive breakdowns in corporate governance in Australian history.”

Facing a variety of issues

The news of the class-action lawsuit settlement comes shortly after a Victoria royal commission found Crown Resorts unsuitable to hold a gambling license in Melbourne. However, Crown will still get to operate its Melbourne casino under strict supervision for the next two years. The commission stated that immediately removing the Crown Melbourne license would potentially significantly harm the Victorian economy.

The royal commission that was investigating Crown Melbourne looked into numerous allegations, including misleading regulators and the enabling of money laundering. In his report, royal commissioner Ray Finkelstein stated that the casino had facilitated the laundering of millions of dollars and had engaged in “illegal, dishonest, unethical and exploitative” conduct.

In February 2021, Crown Resorts was found to be unsuitable to operate its new casino resort in Sydney following an inquiry in New South Wales. A royal commission in Western Australia looking into Crown Resorts’ casino in Perth is still ongoing.