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Crown blamed previous fines, raised spectre of bankruptcy as it tried to shrink AUSTRAC penalty
Disgraced gambling giant Crown used its history of egregious law-breaking to argue down the third-largest corporate fine in Australian history.
New figures reveal "high-risk customers" — some with known links to criminal organisations — brought $2.3 billion in revenue through the doors as Crown wooed them with private jets and rounds of golf.
Last week, the Federal Court ordered the gambling giant to pay $450 million for at least 546 breaches of anti-money laundering and counter-terrorism financing laws between 2016 and 2022, an action brought by financial crimes agency AUSTRAC.
In a legal document used in the court process, previously only viewed in summary form, chief financial officer Alan Frank McGregor exposed the Crown operation as having:
Paid $966 million in commissions to people and programs that lured "high-risk customers"
Made $155 million in profit from junkets and those dubious customers
Entertained them with $39 million in "golf, jet and travel" costs
Written off $69 million in bad debts from "high-risk customers"
Told the court it would face "significant financial hardship" if a larger fine was applied
With the company now owned by a private equity firm, it is probably the last time such intricate details of Crown's finances will be made public under the current owners, although the company will still be required to lodge annual accounts that will be published by corporate regulator ASIC.
It will also need to file an annual affidavit on its financial position to determine whether the penalty payments can be accelerated.
After detailing losses due to COVID lockdowns and the slow return of tourism, Mr McGregor said that had "been compounded by substantial costs, penalties and provisions".
The affidavit shows Crown used the issue of heavy penalties — received from state regulators in the wake of multiple inquiries and two royal commissions — to argue for an interest-free payment plan that had the effect of reducing the real value of a fine from AUSTRAC over breaches of laws that aim to stop criminals and terrorists from moving money.
Monash University's Dr Charles Livingstone, one of the nation's foremost experts on gambling, is gobsmacked.
"It's a bit like pleading for a reduced fine for drink-driving because you'd been fined a lot for it lately.
"It's a logic that says you shouldn't be penalised again because you've been penalised in the past for the same thing.
"It's crazy. No one else could possibly get away with such a proposition."
Dr Livingstone said Crown's way of operating had been a "catastrophe" for huge numbers of ordinary people, their families and loved ones. 
"It has fostered a culture of regulatory failure and institutional corruption and decay, bringing the system of gambling regulation into significant disrepute," he argued.
"It knowingly allowed the worst of criminals to launder their money with impunity.
"If they can't pay their fines, they should fold. But they certainly shouldn't be getting discounts."
Barristers for Crown and AUSTRAC turned up to the Federal Court in Sydney last week jointly seeking approval from Justice Michael Lee to put Crown out of its misery by imposing a $450 million fine.
Both parties had spent months closely negotiating, but Justice Lee was far from impressed.
Crown's two-year, interest-free payment plan was "misleading", he said, and would effectively give Crown a 10 per cent discount. (Without paying AUSTRAC interest, the penalty is effectively $406 million).
In his sworn affidavit, Crown's chief financial officer Mr McGregor said the company might run out of cash if it had to pay the full amount up-front. 
"Historically, Crown Resorts Treasury Policy had required management to maintain a minimum $500 million of liquidity [available cash]," he wrote.
But in February this year, the new board approved a new minimum of $400 million. In late March, an audit committee of the board "approved a temporary amendment to the minimum liquidity buffer" of just $250 million.
"Because it was forecast that, in June 2023, liquidity levels would fall below the $400 million liquidity buffer requirement," he wrote.
Crown was listed on the stock market but was de-listed when private equity giant Blackstone bought all the stock in June 2022.
Blackstone has $1.4 trillion in assets under management and made $2.5 billion in profit last year, according to filings with the US regulator.
Despite that, the way Blackstone bought Crown does not appear to allow it to ask the owners for more money. 
"SS Silver Finco (the body that bought Crown Resorts) is presently not permitted to raise further external debt for the purpose of financing the payment of the Proposed Penalty.
"Further, the Proposed Penalty is not one of the permitted specific operational purposes or within the permitted thresholds referred to above."
Because Crown no longer has to update the stock exchange, the public will get less of a chance to know how much money it is making.
Or not making — in financial year 2022, it stated it lost $945 million and projected a loss of $199 million for the 2023 financial year.
The point of the fines applied to Crown is that they are a punishment for breaking the law, says Wesley Mission chief executive officer Rev Stu Cameron.
"It is supposed to have a significant financial impact. It is meant to hurt," he adds.
"Getting a discount on their fine by being allowed to pay in instalments means it doesn't hurt as much."
Wesley Mission does research on gambling harm and pushes policies to reduce it.
What it does not do is sugar-coat the issue.
"State revenues from gambling are predicated on misery," says Reverend Cameron.
"The profits casino owners like Blackstone enjoy are predicated on misery. Crown lost the right for special treatment through lying to governments and breaking laws. They should start paying up and at the very least feel some measure of financial pain."
But the judge seemed perplexed as to why AUSTRAC seemingly had little desire to interrogate Crown's financial position further.
Mr McGregor's evidence was not challenged by AUSTRAC and he was not cross-examined on a stand.
A shame, given AUSTRAC's barrister was Michael Hodge KC, a man who grilled financial heavyweights as counsel assisting the banking royal commission. 
Previous inquires heard Mr McGregor heard of multiple suspicious transactions which could indicate money laundering in 2014 that he called "red flags", but could not remember taking any action.
After two days of hearings, Crown's barrister Philip Crutchfield cracked a joke that Justice Lee's courtroom resembled "a cauldron".
The judge scoffed, saying it was more like a "tepid bath" if no-one was being cross-examined.
In his written judgement, Justice Lee sounded a warning to regulators like AUSTRAC, whose job it was to hold powerful organisations to account.
"If a regulatory body approaches litigation on the basis that it will not run to a contested hearing and always reaches an agreement, it risks being perceived as a soft touch."
The scandalous behaviour at Crown was uncovered by the media and later confirmed at the Bergin inquiry in New South Wales, the Finkelstein royal commission in Victoria and a royal commission in Western Australia.
To summarise just some of the wrongdoing exposed at those inquiries, Crown Resorts:
When the Federal Court approved the AUSTRAC settlement, Crown Resorts CEO Ciarán Carruthers said it brought to an end historical anti-money laundering and counter-terrorism financing failures at Crown.
"Under new ownership and leadership, we have introduced sweeping reforms as part of our Future Crown transformation program and invested tens of millions to bolster financial crime compliance and embed global best practice for the gaming sector," he said.
"There is no place for money laundering or terrorism financing at Crown or in our communities."
The various royal commissions and inquiries into Crown had found that it repeatedly lied to regulators or was less than forthcoming with requested information.
After the Victorian findings, the role of a "special manager" was created for Crown Melbourne.
Stephen O'Bryan KC and staff sit in on board meetings, attend staff "town halls" and have office space alongside management, constantly watching Crown's reform process.
In the third of four six-monthly reports, released yesterday, he found Crown had generally improved its transparency with regulators, with some exceptions.
"On occasion, and in relatively narrow circumstances, Crown has sought to limit the information provided to the [office], such as that involving Commonwealth legislative secrecy requirements.
"The Special Manager has been satisfied this has not impeded the OSM's work, and that there have been no major delays in receiving information from Crown."
In January 2024, based on Mr O'Bryan's reports, the Victorian regulator will decide if Crown has reformed itself enough to keep the lucrative monopoly casino licence it holds.
Editor's note (21/7/23): The final subheading has been changed and an additional line added from the Special Manager's report to more accurately reflect his findings that Crown has generally been transparent with his office. Additional changes have been made to the article to add clarity around Crown's financial position and the interest-free payment plan it negotiated with AUSTRAC.
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