The Federal Court’s Justice Michael Lee is due to hand down his judgment this morning on the landmark civil case ASIC brought against an entire board of former Star Entertainment directors in 2022, alleging they breached their directors’ duties to act with care and diligence.
Six former Star directors, including former CEO Matt Bekier, and high-profile chairman John O’Neill, are each facing claims that they did not pay sufficient attention to the risks of money laundering and criminal association that have led the casino operator to the verge of collapse.
There could be profound implications for corporate Australia, relating to how much trust directors can place in management assurances that a business is running well. If ASIC wins the case, ignorance may no longer be an excuse for board members not knowing about any wrongdoing at the company.
“Directors and officers are a critical part of the conduct of business in Australia. Their duty is to understand the operations of the company over which they preside, and the particular risks faced by the business,” ASIC chairman Joe Longo said at the time the legal action was announced.
Each breach of director’s duties carries a penalty of up to $1,050,000.
The watchdog accused the former directors, and executives who reported to the board, of being blind to the red flags that pointed to money laundering and illicit activities at its casino.
The former directors have rejected this.
The trial was conducted last year with ASIC’s lawyers telling the court of staff handling bags of $50 notes tied together with elastic bands being delivered in a blue Esky bag, and operators blocking the view of CCTV cameras with a blanket.
They also alleged the casino cultivated and maintained business relationships with overseas junket operators “despite having substantial evidence that those junkets were engaged in illicit activities which may involve money laundering and links to organised crime.”
While Star executives failed to provide the board with all the troubling information about Sun City and other junkets, ASIC told the court that each of Star’s directors also failed to take reasonable steps to oversee its executive team.
Last Friday evening, Star Entertainment released its unaudited accounts for the December half-year, reporting a $109.7 million loss as revenue continued to decline at its operations in Sydney and Queensland under the weight of regulatory reforms – including cash limits at Star Sydney – in response to the scandals which led to the ASIC charges.
The board reiterated that there is material uncertainty regarding the group’s ability to continue as a going concern, as the federal court determines the Austrac penalty for breaches of anti-money laundering provisions.
Star said it has made provisions related to the ASIC case, and the defence costs it pays for the defendants, but it has not made the financial figure public.
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Colin Kruger is a senior business reporter for the Sydney Morning Herald and The Age.Connect via email.