Executive summary

This is the second activity report of the Special Manager independently overseeing the Melbourne casino operator. It has been prepared by the Office of the Special Manager (OSM) to inform the public on key activities undertaken by the Special Manager for the second six-month reporting period – from 1 July to the end of December 2022.

As the Special Manager for the Melbourne Casino Operator, Stephen O’Bryan KC has two key complementary functions:

• to independently oversee Crown Melbourne’s operations
• to keep a ‘watchful eye’ on Crown’s reforms to address the significant issues and failings identified by the Finkelstein Royal Commission.¹

In December 2023, the Special Manager will submit a final report to the relevant state regulator, the Victorian Gambling and Casino Control Commission (VGCCC), and the Minister for Casino, Gaming and Liquor Regulation. The final report will evaluate Crown’s reform efforts, to assist the VGCCC in making its decision on whether Crown has ‘returned to suitability’; that is, whether it is appropriate for Crown to continue to hold the Melbourne casino licence.

Given the significant community interest in the outcomes of the Finkelstein Royal Commission and Crown’s transformation to suitability, the Special Manager is publishing these six‑monthly activity reports to provide an update on the key activities he and the OSM have undertaken.

The content of these public reports is limited due to the ongoing, and legally and commercially sensitive nature of the Special Manager’s work. Importantly, the Special Manager is restricted from making detailed public comment on how Crown is progressing on its reforms and efforts to return to suitability.

The Special Manager’s second six months of operation – July to December 2022 – have focused on:

• monitoring major governance and organisational changes at Crown following its acquisition by Blackstone Inc. (see below)
• Crown’s completion of a ‘root cause analysis’ of the significant organisational failings exposed by the Finkelstein Royal Commission and the development of its overarching transformation strategy
• monitoring and assessing the projects and activities Crown is undertaking in response to the specific findings and recommendations of the Finkelstein Royal Commission in relation to cultural change, governance, risk management and compliance, responsible service of gambling, and preventing financial crime
• overseeing Crown’s current operations and, in particular, its compliance with legal and regulatory requirements, and its broader integrity framework
• continuing to engage with key stakeholders to gather information and insights to help inform the Special Manager’s work
• refining the Special Manager’s assessment approach and identifying the main areas of Crown’s reform work for assessment and evaluation during the next reporting period (to the end of June 2023).

Crown is transitioning through a period of significant change following Blackstone’s acquisition of the company (which took effect on 24 June 2022). The Finkelstein Royal Commission concluded that a change in Crown’s ownership was a necessary step towards the organisation’s transformation. The Blackstone acquisition has resulted in major changes to Board and senior executive personnel, and to Crown’s governance structures and operations.

In 2023, as these leadership and organisational changes stabilise, Crown is expected to adopt a more strategic and accelerated approach to the implementation of its transformation strategy and critical reforms. The Special Manager will continue to independently monitor and evaluate whether Crown’s reforms are being effectively implemented, demonstrate improved outcomes and will ensure sustained change – while also keeping a careful watch on the integrity of Crown’s conduct, including its compliance with important legal, regulatory and social obligations.

1. Special Manager’s activities and exercise of powers

1.1 Structure and resources

As set out in the first activity report, the Special Manager is supported by a small office, the OSM, comprising a mix of public sector and contracted professional services staff.

The OSM is administratively supported by the Department of Justice and Community Safety, which provides corporate services support across IT, finance, property services, payroll and human resources.

As recommended by the Finkelstein Royal Commission, the VGCCC may require Crown to pay the reasonable costs and expenses associated with the establishment and operations of the Special Manager.² During this reporting period, the Special Manager issued three financial statements to the VGCCC to seek reimbursement of costs and expenses from Crown.

1.2 Directions issued

The Special Manager has the statutory power to direct the casino operator to take action or to refrain from taking action. The Special Manager has given eight new binding Directions to Crown in this reporting period, each made on the ground that it was in Crown’s best interests (this being one of the three grounds upon which the Special Manager may give a Direction).

Crown did not exercise its right to make written submissions in response to any of the Special Manager’s eight Notices of Intentions to give Directions. In each case the OSM provided advance notice to Crown, as required by statute.

Directions issued by the Special Manager in this reporting period include those that have required Crown to:

• provide updated versions of documents, as well as related attachments, upon OSM request
• immediately provide all resolutions sent to Crown Melbourne directors, as well as those sent to Crown Resorts directors, outside of the scheduled Board meetings, that in any way concern the affairs of Crown Melbourne
• notify the Special Manager when any Crown Resorts Board or committee meeting is scheduled to discuss matters that in any way concern Crown Melbourne
• provide records of its dealings with local government authorities on an ongoing basis.

The Special Manager is satisfied that Crown has substantially complied with his Directions during this reporting period.

1.3 Information gathering

The Special Manager has the statutory power to require the casino operator to provide any information necessary to facilitate the Special Manager’s work. This power is not limited by any legal restraints imposed by confidentiality restrictions or other legally recognised privileges.³

Crown provided a large volume of information to the OSM in this reporting period. Prompt, informal access to records as and when requested by OSM staff facilitated the OSM’s day-to-day work, while the Special Manager issued seven formal statutory requests (Information Requests) under section 36F of the Casino Control Act 1991 (Vic). These included requests for:

• internal audit documents, whistleblower investigation reports and training materials, and a suite of materials relating to Crown’s integrity framework (see section 3.3)
• documents in relation to Crown’s tax compliance
• documents and information relevant to Crown’s design and implementation of facial recognition technology at the Melbourne property
• documents and information relevant to Crown’s management of controlled contracts (a class of supplier contract, as defined by section 29 of the Casino Control Act)
• documents relevant to the OSM’s assessment of Crown’s identification and handling of suspicious matter reporting to AUSTRAC⁴
• a variety of planning, research and other documents relating to Crown’s approach to responsible service of gambling
• documents relating to staffing and resourcing, business targets and leadership communications.

In addition, Crown must continue to supply the OSM with certain documents on a regular basis, including Board and management committee papers and minutes, and its correspondence with state and federal government agencies.

As in the previous reporting period, Crown has been generally responsive to the Special Manager’s Information Requests. However, on occasion, and in relatively narrow circumstances, Crown has sought to limit the information provided to the OSM, such as that involving Commonwealth legislative secrecy requirements. The Special Manager has been satisfied this has not impeded the OSM’s work.

During this reporting period, the Special Manager noted an appropriate increase in Crown’s willingness to provide the OSM with access to information informally, and to volunteer additional documents or materials that the OSM may wish to request via Information Requests, to support its understanding and assessment of Crown’s reform work.

2. Stakeholder engagement

2.1 Engagement with Crown

In this reporting period, the OSM has continued to engage effectively across Crown to assist in performing the Special Manager’s functions and activities. A key focus of engagement has been on understanding Blackstone’s approach to Crown’s business and reform work, and establishing constructive working relationships with the new leadership.

The cooperation of the new owners’ representatives and the new leadership is acknowledged. It should also be noted that Crown’s reform work is underpinned by stringent approval conditions that were imposed on Blackstone by the VGCCC, including to uphold various corporate governance obligations required by the Australian Securities Exchange, even though Crown Resorts is no longer a publicly listed company.

The Crown Melbourne Board met four times in this reporting period to oversee progress of reform, compared with two meetings in the January to June 2022 period. The Special Manager and one or more of the Deputy Special Managers have attended all meetings.

The Special Manager has met the Crown Resorts Board Chair, Mr Bill McBeath, and has established regular meetings with the new Crown Melbourne Board Chair, Mr Ian Silk. These meetings have provided an opportunity to discuss issues relevant to Crown’s operations and the progress of its reform program, and for each party to raise any issues or concerns.

In addition, the Special Manager has met with the newly appointed Crown Melbourne Board directors. The purpose of these meetings has been to discuss the Special Manager’s functions and powers, and the importance of the Board’s active engagement and scrutiny in helping to drive Crown’s transformation program.

The Special Manager has also met with:

• the newly appointed Crown Melbourne CEO, Mr Mike Volkert, and Crown Resorts CEO, Mr Ciarán Carruthers (generally weekly and fortnightly, respectively), to discuss the progress of Crown’s reforms and current operational matters
• newly appointed senior executives leading the reform work, to better understand their roles and to gain their insights into Crown’s reform work.

Regular meetings are continuing between the OSM and senior staff at Crown and have extended across the business, to facilitate the OSM’s information gathering and enable it to better understand the progress and impact of Crown’s reform activities at an operational level. The dedicated office space Crown has provided for the OSM within its Melbourne complex continues to facilitate ongoing engagement and information sharing between Crown and OSM staff, particularly as the OSM has progressed into more detailed assessment work.

The Special Manager has also taken opportunities to engage with Crown staff more broadly. In July 2022, the Special Manager sent Crown staff an email via the Crown CEO advising them of the publication of the June 2022 activity report. The message invited staff who wished to raise any matters about Crown’s conduct to contact the OSM confidentially via an enquiry inbox accessible on its website.

The Special Manager and OSM staff have observed a range of Crown staff forums, including leadership and all-staff town hall style briefings. In addition, a second meeting was held in November with United Workers Union workplace delegates from various areas within Crown Melbourne to discuss current issues for Crown and its staff. As well as regularly visiting Crown’s complex, the Special Manager and senior OSM staff undertook a tour of Crown Melbourne on a Friday night in November to better understand operations and the issues facing customers and staff on the casino floor during one of the casino’s busiest periods. The Special Manager and a Deputy Special Manager also toured Crown’s casino at Barangaroo Point, Sydney in October to gain an understanding of the different operating environments and reform contexts.

2.2 Engagement with the VGCCC

While continuing to respect each other’s independent roles, the Special Manager and the Chair of the VGCCC continue to liaise regularly to discuss issues of mutual interest in relation to oversight of Crown Melbourne. The OSM has also provided a series of high-level briefings to the VGCCC Commissioners, CEO and senior executives in relation to the OSM’s assessment approach and key focus areas.

Ongoing information sharing is continuing as appropriate between OSM and VGCCC staff. This includes the establishment of a referral protocol between the OSM and VGCCC for public complaints received via the OSM’s enquiry inbox (discussed further in section 2.3.5).

2.3 Engagement with other stakeholders

The OSM has continued to expand and deepen its engagement with a range of government and community stakeholders who participated in, or otherwise have interest in, the findings and recommendations of the Finkelstein Royal Commission. As set out in this section, this has included meetings with interstate casino regulators and monitors, government agencies, state and federal law enforcement agencies, non-government organisations, community representatives, and academics and other experts. The OSM has updated these stakeholders about its activities, and gathered information and insights to inform its work and independent assessment of Crown’s reforms.

2.3.1 Interstate casino regulators and monitors

The OSM has continued regular engagement with the New South Wales regulator, the NSW Independent Casino Commission,⁵ and the independent monitor for Crown Sydney, particularly about the reform activities relevant to both jurisdictions. The OSM has met at least monthly with the independent monitor, to share information and coordinate assessment approaches as relevant.

The Special Manager has also met with the independent monitor for Crown Perth, former Western Australian Police Force Assistant Commissioner Mr Paul Steel, who was appointed on 31 October 2022.

The three independent Crown monitors have arranged to meet monthly and will liaise regularly during 2023.

2.3.2 Gambling harm minimisation

The OSM has continued its engagement with key government agencies and broadened its engagement with the community and non-government sector in relation to gambling harm minimisation.

The OSM is monitoring implementation of the Government’s second tranche of major legislative reforms in response to the Finkelstein Royal Commission,⁶ including through regular liaison with senior staff from the Department of Justice and Community Safety, the VGCCC and the Victorian Responsible Gambling Foundation.

The OSM has continued to engage closely with senior staff at the Foundation which, in addition to holding monthly information sharing meetings, has provided several briefings and arranged access to key forums. The Foundation has also helped facilitate OSM consultation with gambling harm service providers and attendance at its Lived Experience Advisory Committee, whose members have personal experience of gambling harm.

The OSM has also continued regular engagement with the Alliance for Gambling Reform (a national advocacy organisation that works to minimise gambling harm). Furthermore, the OSM has engaged with a range of academic experts, service providers, peak bodies and other interested parties.

The OSM’s expanded engagement with the community and non-government sector has provided valuable insights from a diverse range of perspectives about what constitutes an effective responsible service of gambling strategy in a casino context and the desired outcomes of such an approach. Stakeholder feedback to date has highlighted the need for Crown to establish public confidence and trust, including by demonstrating it is providing a safe casino environment, improving its complaints processes, and carefully re-examining its loyalty and rewards programs to avoid offering inducements to vulnerable people.

The OSM will continue to actively engage with community and government stakeholders to inform its oversight and assessment of Crown’s important responsible service of gambling reforms.

2.3.3 Financial crime, and governance and compliance

In relation to financial crime, and governance and compliance issues, the OSM continues to liaise with key state and federal agencies. These agencies include AUSTRAC, Victoria Police, the Australian Federal Police, the Australian Criminal Intelligence Commission, the Australian Securities and Investments Commission, and the Australian Taxation Office.

Meetings have focused on potential areas of mutual interest in relation to the casino operating environment, regulatory compliance matters, and financial and other crime issues and risks. This liaison has also confirmed Crown is progressing the work recommended by the Finkelstein Royal Commission to improve intelligence and information sharing arrangements with state and federal law enforcement agencies.

2.3.4 Conferences and events

In October 2022, the Special Manager spoke about his role at the International Association of Gaming Regulators Conference, ‘A Kickstart for Collaboration: Sparking Innovation in Regulatory Practice’, hosted by the VGCCC in Melbourne. The conference was attended by several hundred local and international delegates. Delegates expressed much interest in the casino reform work underway in Victoria and other Australian jurisdictions. At their request, the Special Manager also hosted a delegation from the Tokyo-based Japan Casino Regulatory Commission at the OSM offices.

2.3.5 Public enquiries

The OSM has established a public enquiry inbox, accessible via its website. Enquiries have been received and responded to during this reporting period. Matters have ranged in complexity from simple enquiries about the OSM’s work, to customer complaints in relation to Crown and the conduct of other customers.

3. General oversight of Crown’s current operations

The Special Manager’s general oversight role complements his monitoring and assessment of Crown’s transformation and efforts to return to suitability. Overseeing the way that Crown operates, makes decisions and complies with its legal, regulatory and other obligations provides important insights into the progress of Crown’s reforms.

This section provides a summary of the key activities the Special Manager has undertaken in his general oversight role in this reporting period.

3.1 Governance and Board independence

Blackstone’s acquisition of Crown Resorts has resulted in significant changes to Crown Resorts and Crown Melbourne Board membership and committees. The new Crown Resorts CEO and Crown Melbourne CEO commenced during this reporting period.

The OSM has continued to monitor potential outside influence and Crown Melbourne Board independence in accordance with the recommendations of the Finkelstein Royal Commission. The Special Manager especially notes the first Crown Melbourne Board with a majority of independent members, and the Chair’s stated commitment to improve the quality of reporting and focus on the Melbourne business (rather than deferring to Crown Resorts level, as occurred in the past), especially regarding gambling harm minimisation.

As the Crown Melbourne Board and its committees establish their new operating rhythm, the OSM will be assessing their effectiveness.

3.2 Compliance with legislative and regulatory obligations

Crown’s compliance obligations stem from a diverse range of sources, including legislation, regulations, ministerial directions, agreements, internal policies and approved gaming rules. These external and internal sources form a complex array of obligations with which Crown is required to comply in order to conduct its operations lawfully and free of maladministration or improper conduct.

The OSM has closely tracked Crown’s identification, management, reporting and remediation of potential and actual compliance breaches regarding those obligations.

During this reporting period, the OSM has continued to monitor Crown’s compliance with:

• taxation obligations, including in relation to casino tax and land tax
• Casino Agreement obligations, including Crown’s ongoing engagement with the VGCCC
• specified ‘controlled contracts’ obligations, including the associated probity vetting checks and procedures used by Crown
• privacy law in implementing facial recognition technology, which is used by Crown to help identify customers who are excluded or barred from entering the casino. This technology also supports Crown’s cooperation with police and law enforcement in relation to suspected criminal activity.

The Special Manager has observed how Crown is working to improve the way it monitors, assesses and reports potential compliance breaches, and to engage in more open, transparent and productive relationships with its regulators.

During the Special Manager’s term, Crown has been engaged in several substantive disciplinary proceedings arising from its alleged non-compliance with legislative and regulatory obligations. All except one of these proceedings stem from the findings of the Finkelstein Royal Commission. The VGCCC, which operates independently of the Special Manager, conducted each of the completed proceedings during this reporting period, provided substantive reasoning for its decisions and imposed significant fines.

The OSM is monitoring Crown’s involvement in all litigation proceedings, including instructions given to its advisors, to ensure that any resulting internal decisions are being made lawfully and responsibly. No matters of concern have arisen in this regard during the current reporting period.

3.3 Integrity framework

An organisation’s integrity framework brings together the policies, systems and practices required to foster integrity and prevent misconduct. This includes an effective whistleblower regime and a robust code of conduct, as well as strategies relating to complaints, and anti-bribery and corruption. An assessment of Crown’s integrity framework provides a critical mechanism for the OSM to evaluate how Crown is working to instil and continuously reinforce a culture of acting lawfully, ethically and responsibly across the organisation as part of its transformation.

The OSM is reviewing core elements of Crown’s integrity framework, including key policies, systems and practices. It is also reviewing the communication and training Crown provides to support its staff in understanding their integrity obligations and demonstrating Crown’s values.

In this reporting period, the OSM has focused on reviewing Crown’s whistleblower regime and Code of Conduct. A sound whistleblower regime is a critical part of effective risk management and good corporate governance.⁷ Encouraging and supporting staff (and others) to speak up if they see or suspect wrongdoing is an important way of uncovering and addressing improper conduct that could otherwise go undetected.

During this reporting period, Crown commenced a major overhaul of its whistleblower regime, including to ensure it is fully compliant with requirements under the Corporations Act 2001 (Cth) and contemporary better practice standards, and to make certain that Crown is able to:

• properly assess whether a particular whistleblower disclosure is eligible for protection
• maintain the confidentiality of a whistleblower’s identity
• provide adequate information and training to employees
• properly report to, and ensure oversight by, the Board.

A clear code of conduct is a critical element of an integrity framework, as it outlines the standards and behaviours expected across the organisation, and reinforces a culture of acting ethically, lawfully and with integrity. During this reporting period, Crown reviewed and updated its Code of Conduct. Crown accepted input from the OSM as part of this process, including to clarify its policy in relation to political donations.

Between 2011/12 and 2020/21, Crown Resorts donated $1.6 million to Australian political parties.⁸ However, in March 2021 Crown announced it would cease making political donations.⁹ This announcement was made shortly after the Western Australian state election, during which both major parties stated they would no longer accept Crown donations, following the release of the New South Wales Bergin Inquiry Report in February 2021.¹⁰

Crown’s cessation of political donations was reflected in its April 2021 Code of Conduct,¹¹ which stated that neither Crown nor its associated entities would make any further monetary or in-kind donations to political parties. This prohibition on political donations is a positive integrity initiative, and the OSM engaged with Crown during this reporting period to ensure that it was retained and clarified in Crown’s updated Code of Conduct. For example, the OSM suggested that the Code of Conduct provide enhanced guidance on what constitutes ‘monetary’ and ‘in-kind’ donations, such as employee time, provision of goods and services, or payments for events where all or part of that payment will be used for political purposes.

Crown was receptive to the OSM’s feedback in relation to updating its Code of Conduct, and has also committed to developing a stand-alone policy on political donations to supplement the guidance provided in the code.

The OSM will continue to monitor Crown’s work in this area, including assessing enhancements of its whistleblower regime, reviewing its management of whistleblower disclosures, and monitoring its implementation of the updated Code of Conduct and its development of supporting policies, communication and training to strengthen integrity and prevent misconduct.

4. Monitoring and assessing Crown’s transformation

The Finkelstein Report sets out at Appendix I the blueprint for the Special Manager to use in monitoring and assessing Crown’s reform work.

Commissioner Finkelstein concluded that Crown needs to undertake a comprehensive transformation to become a ‘different’ corporation in terms of having ‘a different persona, reputation, culture, management and ownership’.¹² To inform Crown’s transformation strategy, the Finkelstein Report highlighted the need for Crown to conduct a suitable ‘root cause analysis’ to fully understand the drivers of the organisation’s significant failures, and to develop a targeted and effective reform program in the key areas of:

• cultural change
• responsible service of gambling
• financial crime
• governance, risk management and compliance.

As noted in the Special Manager’s first activity report, Crown is implementing a Melbourne Remediation Action Plan comprising projects and activities it has designed to address the Finkelstein Royal Commission’s findings and recommendations in these major areas of concern. As with any major organisational transformation, Crown itself is best placed to design its path to reform. It needs to secure buy-in for, and demonstrate ownership of, reform implementation across the organisation, and to retain full accountability for its own success or otherwise.

Importantly during this reporting period, Crown progressed its root cause analysis and developed an overarching transformation strategy. It is now using the findings of the root cause analysis to further develop and better articulate its transformation activities. The Special Manager will continue to focus on how Crown is applying the root cause analysis to address the findings and recommendations of the Finkelstein Royal Commission and the requirements set out in Appendix I.

As stated at the outset of this report, due to the ongoing, and legally and commercially sensitive nature of this work, the Special Manager is unable to publicly comment on how Crown is progressing on its reforms and efforts to return to suitability.

Throughout 2023, the Special Manager will continue to independently monitor and assess whether the development and implementation of Crown’s reform program is well governed, appropriately prioritised and properly resourced, and demonstrates improved outcomes for customers, staff and the community.

Conclusion

The second six months of the Special Manager’s term have focused on actively overseeing Crown’s current operations; gathering information and insights through the exercise of the Special Manager’s powers and through engagement with key stakeholders; and monitoring and independently assessing the progress of Crown’s reform work as it seeks to demonstrate its ‘return to suitability’.

The Special Manager notes Crown is transitioning through a period of significant change following Blackstone’s acquisition of the company mid-year, resulting in major changes to Board and senior executive personnel, and to Crown’s governance structures and operations. In 2023, as these leadership and organisational changes stabilise, Crown is expected to adopt a more strategic and accelerated approach to implementation of its transformation strategy and critical reforms.

The Special Manager will continue to independently monitor and evaluate whether Crown’s reforms are being effectively implemented, demonstrate improved outcomes and will ensure sustained change – while also keeping a careful watch on the integrity of Crown’s conduct, including its compliance with important legal, regulatory and social obligations.

Endnotes

1. Royal Commission into the Casino Operator and Licence, The Report – Volume 1, October 2021, p. 4.
2. Casino Control Act 1991 (Vic), s 36N.
3. Casino Control Act 1991 (Vic), ss 36F(5), (7).
4. AUSTRAC is the Australian government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organised crime.
5. The NICC took over casino regulation from the Independent Liquor & Gaming Authority, effective 5 September 2022.
6. Following passage of the Casino Legislation Amendment (Royal Commission Implementation and other matters) Act 2022 on 27 September 2022, Victorian Government agencies are working with Crown to implement further reforms in response to the Finkelstein Royal Commission‘s recommendations. This includes significant reforms to improve responsible service of gambling and prevent financial crime involving the introduction of mandatory pre-committed money and time limits for electronic gaming machines, mandatory carded play, cashless play, stronger customer identity checks and a revised Gambling Code that will impose positive duties on Crown to minimise gambling harm. The reforms will also include the enhanced collection and sharing of data for independent research and evaluation.
7. Australian Securities and Investments Commission, Regulatory Guide 270, Whistleblower Policies, November 2019, p. 4.
8. ‘Annual Donor Returns, 2011/12 – 2020/21’, Australian Electoral Commission.
9. Australian Securities Exchange, Political donations, Media Release, 16 March 2021.
10. Hamish Hastie, ‘Crown Ditches Political Donations Days after WA Election’, Sydney Morning Herald, 16 March 2021.
11. ‘Crown Resorts Limited – Code of Conduct’, April 2021.
12. Royal Commission into the Casino Operator and Licence, The Report – Volume 3, October 2021, p. 71.