The Australian Securities and Investments Commission (ASIC) has launched civil proceedings against several current and former directors and executives of Star, an Australian casino operator. These actions are a result of investigations into Star’s activities in New South Wales and Queensland, where the company was found unsuitable to hold a casino license. The allegations revolve around breaches of the Corporations Act 2001 (Cth), specifically regarding the duty of company officeholders to exercise their powers with care and diligence. As a consequence, board members, including the chairman and another director, have resigned, and a transitional period has been initiated to appoint new independent directors.
Board Renewal and Resignations:
Following the findings from ASIC’s investigations into Star’s operations, chairman John O’Neill and director Katie Lahey will face civil proceedings. Both have expressed their support for the board renewal plans previously announced, but they will step down once additional directors are appointed. This transition period, expected to conclude in early 2023, aims to ensure that Star maintains an adequate number of independent directors during this crucial phase. Chairman John O’Neill acknowledged the ongoing journey to enhance the company’s systems, processes, and culture and stated his commitment to a smooth handover.
Other Executives and Allegations:
In addition to the chairman and director, ASIC has targeted several other current and former directors and executives. Former CEO and managing director Matthias Bekier, Richard Sheppard, Gerard Bradley, Sally Pitkin, and Zlatko Todorcevski, who are no longer with Star, are among those facing civil proceedings. ASIC alleges that these individuals approved the expansion of Star’s relationship with individuals connected to criminal activities, disregarding the risks of money laundering. The regulator also accuses board members of failing to make adequate inquiries into money laundering risks and breaching their director duty obligations. Further allegations include specific breaches by Matthias Bekier, Paula Martin (former company secretary and group general counsel), and Greg Hawkins (former chief casino officer) in relation to money laundering risks arising from dealings with Asian gambling junket Suncity and its funder.
Knowingly Permitting Misleading Statements and Reporting Failures:
ASIC alleges that Paula Martin and former chief financial officer Harry Theodore knowingly permitted misleading statements to be provided to National Australia Bank (NAB) regarding the use of debit cards issued by China UnionPay International (CUP) at NAB ATMs located on Star’s premises. These statements concealed the fact that Star allowed CUP cards to be used for gambling, which violated CUP’s regulations. ASIC estimates that over AU$900 million was obtained through CUP cards used in NAB ATMs at Star’s properties from 2013 to 2019. Furthermore, ASIC accuses Matthias Bekier of failing to report these matters to Star’s board.
Importance of Director Responsibilities:
ASIC emphasizes the critical role of directors and officers in conducting business in Australia. They are expected to understand the company’s operations and the specific risks it faces, approaching their responsibilities with an inquiring mind. The duty of directors is not a “set and forget” obligation but requires ongoing diligence and proactive management of potential issues.
Star’s Queensland License Suspension:
The civil proceedings against Star follow the suspension of the company’s license in Queensland and the imposition of a AU$100.0 million penalty due to numerous shortcomings. An inquiry into Star’s operations in Queensland revealed institutional failings, including deliberate attempts to mislead banks and regulators regarding China UnionPay transactions. The company also engaged individuals associated with criminal organizations, disregarding the advice of police commissioners. Social responsibility failings, deficiencies in anti-money laundering practices, and concerns over historic dealings with junket operators were also exposed during the review.
The civil proceedings initiated by ASIC against several current and former directors and executives of Star underscore the importance of corporate governance and the duty of company officeholders to exercise care and diligence. The resignations of the chairman and a director, along with the ongoing board renewal process, reflect the company’s commitment to rectifying past compliance issues and ensuring the appointment of independent directors. As Star undergoes significant leadership changes, the focus remains on remediation and implementing necessary improvements to enhance systems, processes, and culture. The regulatory actions and internal reforms aim to restore trust, strengthen compliance, and reinforce responsible business practices within the organization.