It’s been less than two weeks since Crown Resort’s senior executive Jason O’Connor — head of the company’s high-roller, or “whale” business — landed in Shanghai’s Hongqiao Airport in one of the company’s fleet of Bombardier aircraft for a short trip that reports say was to collect a multimillion-dollar gambling debt owed to the company. Closer to town than the vast Pudong Airport, the hub is used mainly for domestic and short-haul business traffic.

It now seems clear — well, as clear as things can be in China — that O’Connor’s arrival was the trigger for an bitcoin online casino new zealand expertly planned swoop on the premises of 18 Crown employees to seize documents, computer drives and mobile phones. And to take away those employees, including O’Connor, and toss them into one of the country’s notoriously spartan detention centres.

Yet it is still hard to fathom the depth of the casino and entertainment group’s lack of understanding of China, the priorities and methods of its leader Xi Jinping, and how business is done there.

It’s not the first time that Crown has been sideswiped by the complexities of Asian politics. In 2013, the group was cock-a-hoop that it had garnered a licence in Sri Lanka, gained under the administration of Mahinda Rajapaksa, widely accused of corruption during his 10-year reign.

When Rajapaska held an election in January 2015, he didn’t expect to lose to a reasonably ragtag opposition. But he failed to recognise just how fed up his electorate was with the rapid accumulation and cronyism. Shortly after the election, Crown’s deal was promptly cancelled.

Like many, Crown didn’t see change of government in Sri Lanka coming. But things in China are actually far more predictable, if companies take the time to understand them. That predictability should have allowed Crown — on the part of its shareholder owners — to redouble its efforts on compliance and risk management.

Crown goes into damage control

The company’s chairman, former investment banker Rob Rankin, tried to reassure shareholders at the group’s inconveniently timed annual general meeting in Perth last Thursday — barely a week after the raids — that Crown was proud of its compliance record. Right now, however, it’s difficult to see how they could feel proud at all, given about $700 million has already been wiped off Crown’s market value, and its strategy of attracting Chinese “whales” is in indefinite suspension.

Crown should have understood that its operations in China had moved so far into the grey area in which the Communist Party loves foreign companies to operate that it was vulnerable to any decision by the “higher ups” in the party. It left its employees in danger, exposed to the whims of a corporate-state dictatorship that has complete control of the country’s security and legal apparatus.

There’s a lot of competition for whales, especially in the growing Asia Pacific market. Sri Lanka might have ended Crown’s dream there, but the company appears to have brushed aside, failed to grasp or arrogantly ignored multiple warning signs that appear to have left it completely exposed in Communist China.

The first warning: the ongoing anti-corruption campaign was dead clear. This was supported  by an anti-gambling campaign known as Operation Chain Break, which commenced last January.

More recently there have been plenty of signs that Beijing is increasingly concerned about capital flight from the country — and much of this is wealthy Chinese finding ways to shovel their millions out of the country, including whales. Indeed, Australia has agreed to assist China in its Operation Foxhunt designed to catch wealthy Chinese moving ill-gotten gains offshore. But this partnership has been somewhat controversial, given that China still uses the death penalty, including for “white-collar” crimes.

Despite Rankin telling shareholders that it was, effectively, too early to tell, Crown’s problem in mainland China is extremely serious and arguably company threatening; the company’s publicly stated growth strategy in Perth and Sydney has been predicated on convincing high rollers to put their money down on its tables.

Lessons learnt

In China’s three-tiered legal system, once a major operation such as this has been executed, the chances for anyone caught up in it are slim. Every Australian businessperson — Matthew Ng, Charlotte Chou and Edward Du — who has been put in detention in recent years for white-collar crimes in China has been moved through the system, from detention to eventually being jailed.

Australia has watched with goggle-eyed fascination as a company whose major shareholder — and one of Australia’s richest men — James Packer has wriggled, silently, like a fish on a hook. Not understanding how he got there, Packer is somehow hoping he can get off. But if history is any guide, he won’t.

It’s been very confusing, too, for Australia’s mainstream media, which has always had the tendency, on balance, to fawn over Packer — particularly once the dark days of his disastrous $1 billion investment (together with fellow media scion Lachlan Murdoch) in telecommunications were behind him as he cashed out of media after his father’s death. It was said Packer had learnt his lesson. Perhaps not.

Why Crown was targeted

Rumour and gossip are everywhere. Was it triggered by an angry, well-connected whale; the company’s connection with Zhou Bin, the son of  Xi’s key enemies within the Communist Party (both Zhous now languish in jail on corruption convictions); Australia’s sudden moves to reject major Chinese investment bids in energy company Ausgrid; or was Crown simply the easy target among other operators that had been undertaking similar marketing campaigns to wealthy Chinese with a fondness for playing in high-stakes VIP rooms and the concomitant perks?

Yet with 18 employees now clad in prison jumpsuits, sleeping on cement floors in crowded cells with access only to Australian consulate staff and lawyers, these questions are now irrelevant. China’s legal system is as much about retribution and payback as any Western notion of justice. Statistics overwhelming show that the odds are stacked against anyone who has the misfortune of entering the system; the conviction rate in Chinese criminal trials is more than 99%.

The card game baccarat is the preferred game for whales. And of course, was the favoured game of James Packer’s late father, Kerry, an internationally famous whale, eagerly duchessed by the world’s major casino operators in the same way that his son’s company has worked to lure Chinese equivalents. That is because baccarat’s odds for the punter are more favourable than blackjack or roulette. But, in the end, the house always wins — doesn’t it?

Peter Fray

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