The gambling group Melco (Hong Kong) is currently in legal proceedings with the Australian gambling authority ILGA (Independent Liquor and Gaming Authority). The agency requires the issuance of financial documents related to the purchase of Crown Resorts shares. Melco CEO Lawrence Ho is suspected of cooperating with Chinese crime syndicates. Here is an overview.
A look at the metropolis of Hong Kong.
The market giant Melco, founded in 1910, is one of the 100 oldest Hong Kong companies. © SimonZhu / Unsplash
Melco's investigations into dubious stock deals with Australia's market leader Crown Resorts have been going on for months. To preserve the evidence, the national gaming authority ILGA had sued for the release of certain documents. However, earlier in the week, Melco won, the New South Wales Supreme Court ruled that the gambling company around its CEO Lawrence Ho did not have to hand over the documents.
Melco had “privileged for legal reasons” in advance. The supervisory authority is now appealing. A spokesman announced that he would appeal immediately, otherwise there would be a risk that the investigations conducted against Melco would be affected. Further information about future developments is still pending. The authority said to the national media:
“As the case will go to trial again, any further comment at this time would be inappropriate.”
Dubious business relationships?
The required financial documents are a total of nine confidential documents, which are about a planned share purchase of 20 percent in the Australian casino operator Crown Resorts. Due to the state investigation, Melco has now canceled the transaction. As a result of the incident, Crown's third resort license is at risk.
As Melco's CEO Lawrence Ho, like his father, ex-Melco CEO Stanley Ho, has long been suspected of cooperating with Chinese crime syndicates, the links between Melco and Crown Resorts have been increasingly targeted by Australian authorities. Among other things, both companies jointly operate the Studio City Casino in Macau. The corona virus there has currently paralyzed all casinos.
The business relationships between the groups pose a number of unanswered questions to the authorities involved. What is clear, however, is that NSW's 2014 license terms clearly stipulate that Crown may not enter into relationships with any person or company associated with ex-Melco CEO Stanley Ho.
Share deal despite ban
Despite the stipulations, Crown owner James Packer tried to do share deals with Stanley Ho's son, Lawrence Ho, in March 2019. The prospect was a 20 percent stake in Crown, at a purchase price of the equivalent of 1.04 billion euros. According to the ILGA, the first transaction worth EUR 535 million should already have taken place in June. The remaining amount should be transferred by the end of September. Justin Field, a NSW MP, said:
“It is difficult to accept that a company that is associated with individuals who are linked to money laundering and crime can be suitable to run a casino that primarily targets high rollers.”
The announcement is to be understood as a clear legal threat to Crown. A comprehensive investigation is currently being carried out to determine whether Crown is “really a suitable licensee”. If the authority's judgment is negative, Crown would have to do some “persuasion” in the future to be classified as “suitable” again.
As if that wasn't enough, an investigative report by The Sydney Morning Herald, The Age and 60 Minutes caused a scandal surrounding Crown Resorts in early August. The focus is on the Group's junket operators businesses. In this case, too, the question arises whether to work with Chinese crime syndicates.
Melco under surveillance
Melco is currently not only blinking on ILGA radar, but is also targeted by the Cyprus Gaming Authority. As with Crown, the focus here is on the so-called junket operator shops, which are organizers of VIP packages. Certain middlemen are used by casino chains to organize gambling trips for heavy VIP customers.
The Junket Operators themselves earn on commission from the expenses of their charges. Free flights and overnight stays in luxury hotels are usually offered. In addition, the financially strong players get access to the VIP lounges, where it is known that the game is played for large sums. The GE
business model is considered controversial.
The controllers of the Cyprus Gaming and Casino Supervision Authority have been examining Melco's activities in this regard since the end of November 2019. The investigation relates to the City of Dreams Mediterranean casino, which is the first casino resort in the history of Cyprus.
The establishment is scheduled to open at the end of 2021. Casino Melco is 75 percent owned. The remaining 25 percent belong to the local company Cyprus Phassouri Ltd (CPZ). To date, the equivalent of over 450 million euros has flowed into the project. Whether the authority will give the green light for commissioning now depends on the results of the investigation. The developments remain to be seen.