NSW Probe Potential Insider Trading in James Packer Sale of Crown Resorts
Disclosures by James Packer’s investment company to Melco Resorts in advance of a $1.7 billion Crown Resorts share sale came under the scrutiny of a licensing suitability investigation in Sydney on Tuesday.
The NSW Independent Liquor and Gaming Authority inquiry
wanted to know whether information about Crown Resorts’ financial health
relayed by Packer’s Consolidated Press Holdings (CPH) to Melco constituted
insider trading.
In late May 2019, Packer agreed to sell 20 percent of his
equity in Crown in two tranches to his friend and business associate, Lawrence
Ho, Melco CEO. The purchase of the first 10 percent completed in June, but the
second tranche was put on hold pending the NSW inquiry.
Melco Balks
Under the terms of the Crown’s 2014 licensing in New South
Wales, the company was forbidden from doing business with Lawrence Ho’s father,
the recently deceased casino magnate Stanley Ho, because of allegations of
triad links.
One of the inquiries’ initial aims was to establish why Ho
Jnr. was listed as a director of a corporate entity called Lanceford Company
Ltd. that was blacklisted in NSW for its ties to his father.
That point is now moot. In February this year, Melco backed
out of the deal for the second tranche, citing the pressure the coronavirus
pandemic had it exerted on its operations in Macau. In April, it sold the first
tranche to private equity giant Blackstone for a significant loss.
Insensitive Information?
But on Tuesday, Michael Johnston — director of both CPH and
of Crown Resorts — was asked whether the information passed to Melco was
sensitive. Johnston previously signed off the Melco deal.
Much of it related to the projected costs of building the
Crown Sydney, how many of its luxury apartments had already been sold, and the
status of a shareholders’ class-action lawsuit over the imprisonment of 18
Crown employees in China in 2016.
Do you agree that a reasonable person might consider that
some of that information would have a material impact on the price or value of
Crown Resorts shares?” asked counsel assisting the inquiry Adam Bell, SC,
according to The Sydney Morning Herald.
Johnston had earlier acknowledged he understood that under
Australia’s insider trading laws “inside information” meant material that was
not generally available and could affect a company’s share price.
But in this case, Johnston said he believed the information
was “significantly below the threshold of it being sensitive information or
price-sensitive information.”
Crown is fighting to retain its New South Wales license as
it prepares to open the Crown Sydney in December this year. The inquiry has
been examining the operator’s links to the junket industry and anti-money
laundering failures.
Packer, who has retreated from business life citing mental
health issues, is expected to give testimony to the inquiry later this week.
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