RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

Over the past few weeks an inquiry into Crown Resorts, Australia’s largest gambling company, has laid bare a culture of risk taking and threats.

It’s also embroiled one of the company’s biggest shareholders, James Packer.

Today - national correspondent for The Saturday Paper, Mike Seccombe, on Packer’s extraordinary evidence, and what’s at stake for Crown.

**

RUBY:

Mike, billionaire businessman, James Packer, was grilled by an inquiry last week over some of his business dealings and some of the evidence was pretty extraordinary. So what is the background to this? Why is Packer in front of a government inquiry?

MIKE:

Well, before I get to that, let me just set the scene for you a little bit, because I think this is interesting. Packer wasn't actually before the inquiry in any physical sense. He was actually on his luxury super yacht moored somewhere off Tahiti and was giving his answers from there.

And in spite of the fact that he was, you know, effectively in paradise, he seemed pretty nervous and I would suggest somewhat glazed as he gave his evidence. And some of the evidence, also, was quite extraordinary. It was set up following a series of damning reports last June in The Age, The Sydney Morning Herald and on 60 Minutes, which alleged that Crown was involved with organized crime gangs in Asia and laundering drug money

Archival tape -- Unidentified Reporter:

“A lust for profits, drove an arrogant culture where almost anything, including courting people with ties to the criminal underworld, was not only allowed but encouraged.”

MIKE:

There were also allegations that Crown had made efforts to lure Chinese high rollers to its casinos in breach of Chinese law.

Archival tape -- Unidentified Speaker:

“So on the one hand, staff are thinking, jeez, we're breaking the law here in China. For Crown. But on the other hand, Crown is paying them big bonuses.”

Archival tape -- Unidentified Speaker:

“Yes.”

MIKE:

Furthermore, the inquiry was examining Packer’s role in allegedly directing the operations of the company when he wasn't a director of the company.

Archival tape -- Unidentified Reporter:

“He sold it to Melco for 1.76 billion dollars, still retaining around 26% and a board seat. Through his private investment vehicle consolidated press holdings…”

RUBY:

Right. So the inquiry is examining allegations of money laundering, an alleged breach of Chinese law, and also Packer's dealings and behavior at Crown more generally. What's at stake here for James Packer?

MIKE:

Well, first of all, Crown's got a brand spanking new 2.2 billion dollar hotel apartment and casino complex in the final stages of construction at Barangaroo in Sydney.

Archival tape -- Unidentified Reporter:

“A new landmark is emerging over Sydney. Crown’s Barangaroo building will be the tallest in Sydney by the time it opens...”

MIKE:

It's due to open in December. The question now is whether you know that the inquiry will, when it completes its own investigations and reports, what this will mean for the planned opening of Barangaroo. The worst outcome for Crown would be losing its casino license. That seems unlikely.

You know, more likely there will be some kind of conditions placed upon it. But for Packer personally, there seems to be greater risk. He could be forced to sell down or divest, you know, his current shareholding, which is 36 percent at the moment in Crown, if he's found to have been exercising improper influence, steps will be taken to remove the risk of that happening again, I guess you could say. So for him, it could be very serious.

RUBY:

Can tell me more about that evidence at the inquiry. What questions has Packer been asked and what did you notice about the way in which he responded?

MIKE:

I have to say his appearance last week was not at all the sort of dominant performance we've come to expect from the Packers.

Archival tape -- James Packer:

Could you repeat the question…?

MIKE:

His answers to the inquiry tended to be monosyllabic. He frequently asked for questions to be repeated, apologized for not getting them first time around, and he had to be prompted to recall events

Archival tape -- Unidentified Speaker:

“You reached out to Mr. Felstead to ask him what he thought of the program. Correct?”

Archival tape -- James Packer:

“...I can't recall, Michelle.”

MIKE:

There were also long pauses between questions and answers quite frequently. Although, you know, it's impossible to know to what extent that was due to communication lags between here and Tahiti. And then, Packer himself said that he has bipolar disorder for which he is now medicated.

Archival tape -- Unidentified Speaker:

“And you say that you believe that this has impaired your ability to recall past events, including in relation to the period that you were attractive resorts. Is that correct?”

Archival tape -- James Packer:

“That's correct.”

MIKE:

He told the inquiry the medication has impeded his recall of events to some extent. And as proceedings went on, Parker's responses grew a little more expansive. But I've got to say throughout. It was just a strangely flat performance. You know, given the gravity of the issues that were being investigated

RUBY:

And what else was he asked about?

MIKE:

Well, the big surprise came early on when he was asked about unspecified threats he'd made against a businessman identified only as ‘Mr X’, who worked for a private equity firm identified only as ‘Z Co’.

Archival tape -- Unidentified Speaker:

“Do you accept that you're making threats against Mr. X in these emails?”

Archival tape -- Unidentified Speaker:

“He said verbally, yes.”

Archival tape -- Unidentified Speaker:

“And you... Understood that Mr X might have been put in fear by those threats?”

Archival tape -- James Packer:

“No, that came as a surprise.”

MIKE:

And the essence of that was that in 2015 Packer was contemplating a plan to privatize Crown, basically to buy it back himself and take it off the sharemarket. To this end, he sought 1.5 billion dollars from ‘Z Co’, but the company didn't didn't want to give him that much money. They offered only 400 million. In response, apparently, Packer sent a string of emails containing this threat that the counsel assisting, Adam Bell, described it as putting ‘Mr. X’ quote, in fear, unquote. According to a subsequent story in the Nine newspapers, the man was sufficiently scared as to seek legal advice and to engage personal security.

Archival tape -- Adam Bell:

“Do you accept that your conduct in these communications was shameful, do you?”

Archival tape -- James Packer:

“I do.”

Archival tape -- Adam Bell:

“You accept that your conduct in these emails was disgraceful don’t you?”

Archival tape -- James Packer:

“Yes.”

MIKE:

He conceded that his behavior was, quote, shameful and disgraceful, even if it happened at a time when he was unwell. However, the commissioner, Patricia Bergin, seemed unimpressed.

Archival tape -- Patricia Bergin:

“The communications that are in the confidential exhibit were totally unsuitable for a director of a public company, as a close associate of a licensee of the casino.”

MIKE:

Packer's lawyer, Noel Hutley QC, intervened to prevent further public questioning about the emails.

Archival tape -- Noel Hutley:

“These communications took place at a state of deep personal crisis of my client…”

MIKE:

So the inquiry went into private session. And so it was left tantalizingly unclear exactly what the relationship was between these threats and and questions that had been asked previously about Packer's behavior in 2015.

RUBY:

Right, what else happened in 2015?

MIKE:

Well, that's a pretty extraordinary story, too. And it involves a billionaire Hollywood film producer and someone connected to the Israeli security agency, Mossad.

RUBY:

We'll be back after this.

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RUBY:

Mike, James Packer is facing questions about some of his relationships back in 2015. So can you tell me more about who he was in business with?

MIKE:

Well, yes. The inquiry was interested in his relationship with Arnon Milchan, an Israeli billionaire Hollywood film producer, who has also worked as liaison to Israel's Bureau of Scientific Research. I'm not quite sure exactly what that is. Significantly also was close to President Netanyahu, to whom Packer also became close. Anyway in 2015, Packer had plans to set up a cyber security business involving Milchan and also involving a person unnamed connected to the Israeli Secret Service, Mossad.

Counsel assisting the commission referred Packer to a quote attributed to him in a biography by a journalist, Damon Kitney. And Bell asked, and I'm quoting here, “you're quoted as saying that ‘Mr Milchan is maybe the most charming and deadly person I've ever met’”. What did you mean by that? And Packer's response was...

Archival tape -- James Packer:

“I meant, I would hate to cross him. And he was extraordinarily charming.”

MIKE:

So exactly what we're to make of all this is unclear, except that, as Commissioner Bergin noted, it's not the sort of behavior one expects from a company director or a person with a major stake in the casino business, you know, which is an exceptionally sensitive business for obvious reasons.

RUBY:

Mm. And Mike, at the same time as Packer was trying to set up a cyber security business with a former Israeli spy, Crown, the company that he owned a large stake in, was getting into some trouble in China. So can you tell me about what happened there?

MIKE:

Well, yes, sure. When Packer was a director of Crown, he appeared not to know important details of what was going on inside the company and most notably in relation to the events leading up to the arrest of a number of Crown employees in China. He claimed ignorance of their legal status as they touted for gamblers to populate his casinos. He said he accepted the word of senior management that the operation was legal and that he never read any legal advice on the matter himself.

He also couldn't recall media reports from early in 2015, and these were shown to him about the Chinese government announcing a crackdown on foreign casinos, acting to lure Chinese citizens to gambling establishments offshore. And asked if he was aware while he was a crown director that his staff were actually saying they feared for their safety, Packer replied: no, it wasn't. So that seems quite extraordinary. And Packer conceded a failure of corporate ethics and risk management processes in relation to all of this.

But he laid most of the blame for what eventually happened, which was that there was indeed a crackdown and 19 Crown staff were arrested and 16 of them jailed. He laid most of the blame for that on people other than himself, on the man who replaced him as Crown's chairman, Robert Rankin. And particularly on the chief executive, Rohan Craigie.

Archival tape -- James Packer:

“I believe Mr Craigie should have been on top of this information. I don't know how he could not have been aware if he was doing his job.”

MIKE:

Had he been aware of the risk, Parker said, he would have, in fact, acted to ensure the safety of the Crown staff. But this was just one of several examples that indicated that there seemed to be much that was going on within Crown that he was unaware of in his time as a director.

Archival tape -- James Packer:

“A lot of things that I've seen or heard in this inquiry have been a total shock to me.”

MIKE:

So it was an interesting admission because even though Packer wasn't formally running Crown anymore, he had this thing called a controlling shareholder protocol, agreed with Crown, by which he was entitled to receive confidential information about the operations of the company, which other people obviously didn't get. But this didn't entitle him to direct the operations of the company because he was no longer on the board. And yet the inquiry heard evidence that this was just what was happening.

RUBY:

What was that evidence?

MIKE:

Well, he was taken through various examples of communications between himself and senior executives in which, as counsel assisting suggested, Packer was quite providing instructions about matters he wanted them to attend to. In one example cited by counsel assisting, Packer said that he expected financial targets for 2020 to be met or there would be consequences. And counsel assisting accused Packer of effectively threatening Crown's senior executives.

Archival tape -- Unidentified Speaker:

“You expected the forecasts to be met or there would be consequences. Is that a fair way of putting it?”

Archival tape -- James Packer:

“I’m not sure. I might have just been being dramatic.”

MIKE:

But there's a clear issue here about the extent to which he was expressing opinions and the extent to which he was giving instructions. Bell, the counsel assisting, pushed the point, saying that Packer's actions were not those of someone who'd left the company

Archival tape -- Adam Bell:

“You were acting as though you were still a director of Crown Resorts, weren’t you?”

MIKE:

it was more a statement than a question.

RUBY:

Ok. So this inquiry - depending on its findings - could lead to Crown losing its licence or Packer himself having to divest his ownership stake in the company. What do you think is going to happen, Mike?

MIKE:

Well, I guess we’ll have to wait and see what Commissioner Bergin makes of it all. But Packer himself seemed, by the end of his three days of evidence, to have come to the realization that his days of dominating Crown, whether from inside or outside, would soon be over. You know, on Thursday, right at the end of proceedings, he acknowledged Bergin’s suggestion that his, quote, powerful personality, unquote, was likely to have been a factor in Crown's poor corporate culture, in that it discouraged his executive from sharing bad news lest they displease him.

Archival tape -- James Packer:

“I've never thought about it before, Madame Commissioner until two days ago. Perhaps you're right…”

MIKE:

And Packer said he'd never thought of that till it was put to him by Bergin. He also said he would never go back on the Crown board.

Archival tape -- James Packer:

“I think that the Crown board has a lot to think about in terms of who the right people are for the right jobs.”

MIKE:

He said he believed there certainly shouldn't be special provisions for a major shareholder such as he enjoyed in the future.

Archival tape -- James Packer:

“I think caps on shareholdings may be something that you will think about.”

MIKE:

So it appeared that he was ready for significant changes to be recommended by the inquiry.

Archival tape -- James Packer:

“I think this has been a terribly painful and terribly shocking experience for the board, as it has been for me.”

MIKE:

James Packer did not look like a man who thought he was coming out of this as a winner. He looked a bit sullen. He looked disappointed. He looked, dare I say it, sad, which, you know, seems kind of odd for a man who's floating around off Tahiti in a 200 million dollar yacht.

RUBY:

Mike, thank you so much for talking to me about this.

MIKE:

My pleasure.

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RUBY:

Also in the news today...

Pressure is continuing to mount on the NSW Premier, Gladys Berejikian, following news of her “close personal relationship” with disgraced former Wagga Wagga MP, Daryl Maguire. Mr Maguire is currently the subject of an ICAC inquiry into his business dealings. Amid calls for her resignation, Premier Berejiklian is maintaining her line that she did not neglect her obligations.

And, Johnson & Johnson has paused a late-stage trial of a COVID-19 vaccine candidate, as it investigates a participant's illness. It comes one month after trials of the AstraZeneca Oxford vaccine were paused for a week after an adverse reaction from a participant.

I’m Ruby Jones, this is 7am, see you tomorrow.