James Packer rich list
2019 Rich Lister James Packer

The career of Australian casino and online mogul James Packer is increasingly taking on the characteristics of a night in one of his VIP high-roller rooms, lurching from stunning success to spectacular failures, yet he’s back playing again and aiming for another big win.

Packer’s China dream-turned-nightmare, and indeed extended annus horribilis, is finally over, with the last of the 17 staff and two former staff of Crown Resorts who were detained last October, and subsequently arrested, charged and pleaded guilty to gambling crimes, being released on the weekend.  Packer holds a 48% share in the listed gambling company. 

Packer stepped down from the board of the company he created from the sale of his father’s Australian media giant Publishing and Broadcasting Limited for 18 months and only formally rejoined the Crown board this month. During Packer’s time away Crown’s ambitious Asian strategy has crumbled after the horrific nine- or 10-month incarceration ordeal. 

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He subsequently accelerated an exit from his Melco Crown joint venture, putting the company jets on the market and his Las Vegas ambitions on ice. And then there’s Israel, where he had relocated to during a sabbatical, and where his sponsors, no less than the family of Prime Minister Benjamin Netanyahu, have become increasingly embroiled in all manner of legal strife. To top it all off his engagement to pop star Mariah Carey was called off.

[James Packer’s dilemma: try to save Crown staff in China, or let the chips fall where they may?]

On August 2, Packer officially rejoined the board of Crown, together with longtime family retainer and Melbourne lawyer Guy Jalland, who is also chief executive of Packer’s private investment vehicle Consolidated Press Holdings. But the reality is he has been in firm charge since the weeks after Chinese authorities picked Crown out of the pack of casino operators duchessing wealthy Chinese gamblers known as high rollers, or whales, as the poster child for Chinese leader Xi Jinping’s dual anti-corruption and anti-gambling campaigns. The two are linked, of course, because casinos have long been seen as places that people can clean ill-gotten gains, turning them into legitimate cash piles.

The last two Crown employees to be led blinking into the daylight of freedom from 10 months’ incarceration in the brutal conditions of Shanghai No.1 Detention Center were the most senior staff involved in the debacle: Crown’s VIP VP Jason O’Connor and the group’s China VP, Malaysian national Alfred Gomez.

It’s unclear what the fate of these two men — who were deported on their release at the order of the Chinese judges — will be, but given the intensity of their ordeal a fair stretch of R&R is in order and Crown is understood to have mental and physical health professional standing by to tend to them.

In something of a (typically minimalist) understatement, John Alexander, executive chairman of Crown, said in a rare statement released on Saturday: “We are very pleased that our employees are being reunited with their families. Crown is deeply appreciative of the support provided by our legal counsel over the last few months and thanks the Department of Foreign Affairs and the Australian government for their professionalism and assistance.”

Indeed. Crown’s Chinese lawyer from Sino-Australian law firm King & Wood Mallesons, now run from Hong Kong, managed to convince the company to reverse its original stance that it had done nothing wrong to one where all 19 charged pleaded guilty.

We will never know why, and indeed it is highly unlikely Crown itself will either, the company was singled out as an example to send a message to the entire industry. The most likely explanation is that it left itself and more of its staff exposed, as well as throwing an unsuspecting wrench in complex Chinese money flows, when it made the foolish, ill-informed decision to cut out Chinese middlemen known as junket operators.

[Packer gambled and lost on China. Can Crown come out with a winning hand?]

Since taking charge of his business once more Packer has made swift and decisive changes. The blokes at the top of Crown — it’s a company where senior female executives are in very short supply — who presided over this debacle have all been given the heave-ho: chairman Rob Rankin is now in the UK, longtime Crown chief executive Rowen Craigie remains only as a “consultant”, and Michael Chen, the Chinese-American who presided over Crown’s China business, has reportedly returned to the US.  His chief lieutenant and most loyal of retainers, John Alexander, has been installed as “executive chairman”, and the focus is now, very clearly, back on what analysts at Morgan Stanley estimate is Australia’s $5 billion a year, and growing, casino market.

Crown shares have recovered nearly all the losses they copped last October. Still, its been an expensive lesson for Packer and his team, and the business is now being radically recast. The standout figure at the company’s annual results released on August 6 was a 50% rout in VIP revenues — so the forecast revenue growth came off a halved base. It’s not only Macau and the Chinese market that Crown shareholders now no longer have any exposure to — and Macau revenues are beginning to climb again in the 20-30% range — the Philippines market is estimated by Morgan Stanley to reach US$5 billion in 2020, surpassing Singapore to become the largest in ASEAN.

The local Australian VIP market is significant and growing, bolstered by increasing numbers of wealthy Asian gamblers emigrating to and visiting Australia — primarily from China and Vietnam but also other nations in the region.

Yet even now there is one bright spot for Crown in Asia apart from its growing number of wealthy gamblers, a last roll of the dice in the region if you like. The company is understood to be still very much in the mix should it decide to make a bid if and when Japan’s Abe government can get legislation through parliament to legalise casinos, known these days by the softer, kinder and more family-friendly term “integrated resorts”.

While much Australian commentary has blithely opined that the Chinese scandal will harm its chances in Japan, this is not necessarily so. Crown has secured the services of a superbly connected adviser and lobbyists in Tokyo, and there have been several visits to Crown’s schmick Melbourne operations to study its well-regarded “safe” gambling rules and programs. Crikey understands the Japanese are encouraging Crown to bid if the opportunity comes. If it does, some lessons have been learned, especially from the Melco JV that had curdled by the time the China scandal broke: the company is to be focused on a low-risk partnership model with local players providing capital and Crown offering its operating expertise.

Packer’s hand is now clearly guiding the company once more, and he’s learned another tough business lesson to go with the shattering one handed to him and Lachlan Murdoch at One.Tel. Twice bitten, one can’t see him handing control to anyone else again. Despite the opportunity costs of now being out of the world’s biggest casino market, Crown made rather than lost money in Macau, although the costs to ongoing operations are now becoming evident.

Packer has always learned from his mistakes — even if Crown repeated the same errors as Rio Tinto that lead to the imprisonment of four of its executives in 2010. And there’s a sense he’s keen to remind people who he is: he’s a step ahead with his fearsome political clout in Australia and he plays in the already loaded casino game, so it would be a brave man to bet against him.

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Peter Fray
Peter Fray
Editor-in-chief
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