The personhood of Crown Resorts, its crimes and punishments

The personhood of Crown Resorts, its crimes and punishments

  • Ken Adams, CDC Gaming Reports
August 29, 2021 9:16 PM
  • Ken Adams, CDC Gaming Reports

According to Wikipedia, “Corporate personhood is the legal notion that a corporation has at least some of the legal rights and responsibilities enjoyed by natural persons. In most countries, corporations, as legal persons, have a right to enter into contracts with other parties and to sue or be sued in court in the same way as natural persons.”

Natural persons have many privileges and protections under the law, but they also have obligations. People are obliged to follow the law. People who violate the law are subject to punishments. The punishments range from a minor fine to imprisonment and even death.

Punishing a corporation for violating the law is not as simple. Clearly, a corporation can be fined. It is common to read of a fine for violating regulations. In gaming, one of the most common offenses for which a corporation is fined is permitting a minor to enter a casino and gamble. For more serious offenses, a gaming corporation can lose its license to conduct operations in that jurisdiction. In practice, that means selling the business to a licensed company. The corporate assets and employees simply change hands.

Instead of selling, a corporation may elect to change key executives and board members— becoming, in a sense, a new person. Unlike a natural person, a corporation can reinvent itself by replacing its leaders and methods of operation. Determining when the point of purity is reached and a new entity has emerged poses intriguing questions: How many individuals need to be replaced? What operating procedures require changing to become a new and guilt-free corporate individual?

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That is the challenge for Crown Resorts in Australia, which is under investigation for breaching the law. Crown needs to make enough changes to receive regulatory approval, while still functioning under the Crown label.

The company’s difficulties started in 2016, when 18 Crown employees were arrested in China for illegally recruiting Chinese gamblers. It took another downturn when Australia media did an exposé on the company and another when an official investigation into Crown was announced in August 2019 and a separate investigation later. The hearings in the first investigation began in January 2020. At first, news trickled out in an article or two a month; in 2021, the dam broke. Sometimes daily, but at least weekly, there have been articles concerning Crown, the investigation, and its implication, not just for Crown, but gaming in general in Australia.

The investigations are nearly over and Crown is scrambling to appease. Observers and, certainly, Crown stockholders are eager to hear the conclusions. There are hints that Crown may be denied a license at least for its latest venture in Sydney. Crown Sydney is a $2 billion resort that is open, but without a casino. That casino license is a major part of the investigation. The press has concluded that not only is Crown unfit for a license, but regulation in Australia needs a serious revamping. According to reports, regulators knew or should have known that Crown was not playing strictly by the rules. Crown’s treatment of Asian VIPs and their cash raised concerns over money laundering. Numerous employees have testified that they knew about the questionable money handling and opining that senior company officials also knew, and some regulators knew or should have known. A major question has been whether the company’s CEO, chairman, and board members also knew.

The doubt has led to wholesale changes in the company, including a new CEO and chairman of the board; the majority of the board of directors are also new. Even property-level managers have been changed. Most recently, Ziggy Switkowski was appointed chairman of the company. Switkowski was selected to replace Helen Coonan after the counsel assisting the state of Victoria’s Royal Commission declared that Coonan was not a “credible” face for change at the group. Besides the management changes, the company has revised its VIP programs, tightened its money-handling procedures, and made good on some underpaid taxes. New management believes it has done enough. It is unlikely that the Commissions investigating and the new Gaming Commission will agree. They will still want a pound of flesh.

The cleanest solution would be a sale.

The original Crown management, which at one time included James Packer, did not want to sell. There were four offers, but as the accusations increased and the risk elevated, the would-be suitors backed away. If they return to the table, the price is likely to be much reduced. However, with a new management team and board, there may be a strong interest in selling. The old Crown was a Packer company. The people were Packer people, loyal and dedicated to James Packer and his company. They had a vested interest in retaining control. The new team is not a Packer team and seemingly has no vested interest in maintaining control.

Whether Crown sells or is licensed after paying fines and agreeing to some very strict operating conditions, the issue illustrates the murky legal status of the corporate person, Crown Resorts. We will soon know the extent of Crown’s crimes and its punishments. That will tell us how a guilty corporate person can become a guiltless corporate person, at least in Australia.