The Australian Securities and Investments Commission has launched civil penalty proceedings in the Federal Court against 11 current and former directors and officers of The Star Entertainment Group.
This stems from an alleged breach of duties under section 180 of the Corporations Act, and becomes the latest fallout from a slew of governance failures being identified by royal commissions in New South Wales and Queensland.
Sarah Court, ASIC Deputy Chair, said: “ASIC alleges that Star’s board and executives failed to give sufficient focus to the risk of money laundering and criminal associations, which are inherent in the operation of a large casino with an international customer base.”
ASIC’s case includes claims against members of the Star board between 2017 to 2019, which includes former Chair John O’Neill and ex-Managing Director and CEO Matthias Bekier.
ASIC alleges the board members approved the expansion of Star’s relationship with certain individuals with reported criminal links, rather than addressing money laundering risk by inquiring into whether the group should be dealing with them.
Furthermore, it is also claimed that members, when provided with information about money laundering risks affecting Star, did not take steps to make further enquiries of management about those critical risks in a breach of obligations.
Bekier, Paula Martin (former Secretary and Group General Counsel) and Greg Hawkins (former Chief Casino Officer), also stand accused of not adequately addressing the money laundering risks, or appropriately escalating money laundering issues.
ASIC also alleged that Martin and Harry Theodore (former Chief Financial Officer) knowingly permitted misleading statements being provided to National Australia Bank regarding the use of debit cards issued by China Union Pay at ATMs located on premises.
Joe Longo, ASIC Chair, said the role of directors was critical to a company’s general standing and performance, including how a company deals with significant issues.
“As I’ve said on many occasions, directors and officers are a critical part of the conduct of business in Australia,” he noted.
“Their duty is to understand the operations of the company over which they preside, and the particular risks faced by the business. They are required to bring an inquiring mind to business operations. It is not ‘set and forget.'”
Current Chair Ben Heap and Katie Lahey, Non-Executive Director, are the only current directors subject to these proceedings. The pair are to step down once additional directors are appointed, and appropriate transition arrangements are in place. This process is expected to be finalised in the early part of 2023.
“At the recent annual general meeting, I committed to provide stability during a period of significant leadership change and to ensure the company is firmly on the path back to suitability,” Heap commented.
“That journey to become a better, more robust and more sustainable company is in progress as necessary improvements continue to be embedded across systems, processes and culture.
“Ms Lahey and I intend to contest the ASIC allegations, but to remain on the board beyond the transitional period would be a distraction to the company when remediation needs to be our unwavering focus. A search is currently underway for new directors.
“I am proud and privileged to have had the opportunity to lead The Star during a difficult and important time in the company’s history, and will continue to do so until an appropriate handover is complete.
“I would like to take this opportunity to thank the board and management for their support since becoming Chairman earlier this year.”
ASIC said that a breach of each director’s duty could attract a maximum financial penalty of A$1.05m. In addition to engaging with gaming regulators in NSW and Queensland during its investigation, ASIC also sought the input of AUSTRAC.