Australian Securities and Investments Commission v Hawkins
[2025] FCA 121
•24 February 2025
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Hawkins [2025] FCA 121
File number: NSD 1082 of 2022 Judgment of: STEWART J Date of judgment: 24 February 2025 Catchwords: CORPORATIONS – officer’s duties under s 180(1) of the Corporations Act 2001 (Cth) – civil penalties – disqualification from managing corporations – where ASIC commenced civil penalty proceedings against eleven members of the executive team and board of the Star Entertainment Group Ltd in respect of alleged contraventions in the course of dealings with junkets and the group’s principal banker – where two defendants reached agreements with ASIC – where defendants have admitted contraventions and have otherwise clear records – whether the Court is satisfied that the penalties proposed by consent are within an appropriate range Legislation: Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) pt 2, ss 41, 81, 82
Corporations Act 2001 (Cth) ss 9, 180, 206C, 206E, 206G, 1317E, 1317G, 1322
Casino Control Act 1992 (NSW)
Casino Control Act 1982 (Qld)
Gaming and Liquor Administration Act 2007 (NSW)
Cases cited: Australian Securities and Investments Commission v Blumenthal [2024] FCA 384
CEO, AUSTRAC v Westpac Banking Corporation [2020] FCA 1538; 48 ACSR 247
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 36 Date of hearing: 24 February 2025 Counsel for the plaintiff: R Higgins SC, S Patterson and L Moretti (written submissions also by J Arnott SC and S Speirs) Solicitor for the plaintiff: Norton Rose Fulbright Australia Counsel for the third defendant: A Dinelli KC and S Kearney Solicitor for the third defendant: Hall & Wilcox Counsel for the fourth defendant: G Rich SC and G O’Mahoney (written submissions also by A Khadra) Solicitor for the fourth defendant: Johnson Winter & Slattery ORDERS
NSD 1082 of 2022 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: GREGORY FRANCIS HAWKINS
Third Defendant
ORDER MADE BY:
STEWART J
DATE OF ORDER:
24 FEBRUARY 2025
THE COURT DECLARES THAT:
1.Pursuant to s 1317E of the Corporations Act 2001 (Cth) (the Act), the third defendant contravened s 180(1) of the Act on two occasions, by failing to discharge his duties to The Star Entertainment Group Ltd (Star) with the degree of care and diligence that a reasonable person would exercise if they were an officer of a corporation in Star’s circumstances and occupied the office held by the third defendant and had the same responsibilities, by:
(a)in light of information he knew of the conduct of the representatives of the Suncity junket in the ‘Salon 95’ private gaming room in the Sydney casino (which conduct created or increased the risk of The Star Sydney Pty Ltd (Star Sydney), The Star Entertainment Qld Ltd (Star Qld) and The Star Entertainment Qld Custodian Pty Ltd (Star Qld Custodian) breaching their statutory obligations to remain suitable persons to hold casino licences (Suitability Obligations) and, in the case of Star Sydney and Star Qld, their obligations as reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Obligations)):
(i)giving approval for a new rebate and exclusive access agreement with the Suncity junket when that approval was sought on 13 June 2018 for an agreement that was then entered on 21 June 2018; and
(ii) failing to inform the Board of Star at its meeting on 26 July 2018 and at which he was present, the information he knew about the conduct of the representatives of the Suncity junket in the ‘Salon 95’ private gaming room in the Sydney casino and recommend that Star terminate and have no further business associations with Mr Alvin Chau (Mr Chau) and/or the Suncity junket;
(b)at least the time of the meeting of the Board of Star held on 15 August 2019, in light of allegations that had been published in the media concerning Suncity and Mr Chau and in light of information he then knew about the conduct of Suncity representatives and players in ‘Salon 95’ (which created or increased the risks of Star Sydney, Star Qld and Star Qld Custodian breaching their Suitability Obligations and, in the case of Star Sydney and Star Qld, AML/CTF Obligations)) failing to:
(i)inform the Board of Star at its meeting on 15 August 2019 and at which he was present, the information he knew about the conduct of the representatives of the Suncity junket in the ‘Salon 95’ private gaming room in the Sydney casino; and
(ii)recommend that Star terminate and have no further business associations with Mr Chau and/or the Suncity junket.
2.Pursuant to s 1322(4)(a) of the Act, the third defendant’s application under s 206G of the Act is not invalid by reason of non-compliance with s 206G(2).
THE COURT ORDERS THAT:
1.Pursuant to s 206C(1) of the Act, the third defendant be disqualified from managing corporations for a period of 18 months.
2.The third defendant’s application under s 206G of the Act be heard and determined instanter consequent upon order 1.
3.Pursuant to s 206G of the Act the third defendant have leave to manage Futureview Group Pty Ltd (ACN 132 138 482).
4.Pursuant to s 1317G of the Act that the third defendant pay to the Commonwealth of Australia within 28 days a pecuniary penalty in the amount of $180,000.
5.The third defendant contribute to the plaintiff’s costs in the amount of $65,000.
6.The proceeding against the third defendant otherwise be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1082 of 2022 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: HARRY JAMES THEODORE
Fourth Defendant
ORDER MADE BY:
STEWART J
DATE OF ORDER:
24 FEBRUARY 2025
THE COURT DECLARES THAT:
1.The fourth defendant, in the period between 6 November 2019 and 18 March 2020, contravened s 180(1) of the Corporations Act 2001 (Cth) (the Act) by failing to discharge his duties to The Star Entertainment Group Ltd’s (Star) with the degree of care and diligence that a reasonable person would exercise, if they were a officer of a corporation in Star’s circumstances and occupied the office held by the fourth defendant and had the same responsibilities, when, in circumstances where China UnionPay (CUP) and National Australia Bank Ltd (NAB) had sought confirmation from Star that CUP’s debit cards were not being used at Star’s properties to fund gambling, he failed to prevent Star sending to NAB, on 7 November 2019, an email which contained inaccurate, incomplete and misleading representations in respect of that issue.
THE COURT ORDERS THAT:
1.Pursuant to s 206C(1) of the Act, the fourth defendant be disqualified from managing corporations for a period of 9 months.
2.Pursuant to s 1317G of the Act, the fourth defendant pay to the Commonwealth of Australia within 28 days a pecuniary penalty in the amount of $60,000.
3.The proceeding otherwise be dismissed as against the fourth defendant.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Delivered ex tempore; revised from transcript)STEWART J:
Introduction
The Australian Securities and Investments Commission (ASIC) commenced this civil penalty proceeding against 11 members of the executive team and board of The Star Entertainment Group Ltd. The alleged contraventions principally arise from Star’s dealings with, and in respect of, junkets. A junket is an arrangement between a casino and a junket operator to facilitate a period of gambling by a group of players. There are also issues with regard to Star’s relationship with its principal banker, National Australia Bank Ltd (NAB).
The final hearing of the principal proceedings is currently on before another judge of the Court. Shortly before that hearing, Harry James Theodore (the fourth defendant), and soon after its commencement, Gregory Francis Hawkins (the third defendant), settled the claims against them by reaching agreements with ASIC as to contraventions by them and appropriate penalties. They each, jointly with ASIC, seek the Court’s approval of their respective settlements and the making of consent orders. In respect of each of Messrs Hawkins and Theodore, in customary fashion ASIC and the relevant defendant have concluded agreed statements of facts and submitted joint written submissions in support of the approval and the consent orders that they seek. Mr Hawkins and Mr Theodore have each read affidavits. The parties have also presented, by their counsel, oral submissions and I have had the opportunity to raise queries and discuss any issues arising.
The joint written submissions are comprehensive, careful, lengthy and, needless to say, most helpful. I pay tribute to counsel and solicitors for their assistance in that regard. They have made my task easier than what it might otherwise have been. After hearing the parties through their counsel and considering the submissions, the agreed statements of facts, the affidavits and the authorities referred to, I am satisfied to adopt the joint submissions as my reasoning in relation to each of Mr Hawkins and Mr Theodore. No useful purpose would be served in fully canvassing the facts, the law and the application of the law to the facts as the joint submissions do, in these reasons for judgment in those circumstances.
With the consent of the parties, I annex the joint written submissions to these reasons for judgment – those in relation to Mr Hawkins as annexure A and those in respect of Mr Theodore as annexure B. That will enable anyone who wishes to to understand the basis for the state of satisfaction that I have reached with regard to the admitted contraventions by both Mr Hawkins and Mr Theodore and the penalties that they and ASIC have agreed are appropriate. It suffices for present purposes to merely record a high-level summary.
Star was, at all material times, a publicly listed company that conducted a business providing gaming, entertainment and hospitality services. That included operating, through companies of which it was the ultimate holding company, casinos known as The Star Sydney (Sydney Casino), The Star Gold Coast and Treasury Brisbane. The Star Pty Ltd was the holder of a casino licence under the Casino Control Act 1992 (NSW) (CCA NSW) permitting it to operate the Sydney Casino. The Star Entertainment Qld Custodian Pty Ltd and The Star Entertainment Qld Ltd were the holders of casino licences under the Casino Control Act 1982 (Qld) (CCA Qld) permitting them to operate The Star Gold Coast and Treasury Brisbane respectively.
The CCA NSW imposed a regulatory regime governing casinos in NSW requiring that the casino operator and each of its “close associates” be a “suitable person to be concerned in or associated with the management or operation of a casino.” The assessment of suitability included whether each of the licensee and its close associates is of “good repute, having regard to character, honesty and integrity” and whether they have “any business association” with any person or entity who is not of good repute having regard to character, honesty and integrity. Similar provisions applied in Queensland under the CCA Qld.
Star was also subject to the regulatory regime directed at combating money-laundering and the financing of terrorism under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). As casino operators, The Star Sydney Pty Ltd, The Star Entertainment Qld Custodian Pty Ltd and The Star Entertainment Qld Ltd were “reporting entities” under the latter Act as they provided a “designated service”, namely “gambling services”. As such, they had the “fundamental and foundational” obligation under s 81 to adopt and maintain an anti-money laundering and counter-terrorism financing program and the obligation under s 82 to comply with that program: CEO, AUSTRAC v Westpac Banking Corporation [2020] FCA 1538; 48 ACSR 247 at [135].
Further, pursuant to s 41 of the AML/CTF Act, a reporting entity was required to make reports, known as suspicious matter reports, to the Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC) of information about certain matters. Those included, for example, if the reporting entity suspected on reasonable grounds that information it had regarding a matter may be relevant to money laundering offences or certain other criminal offences. Also, under Pt 2 of the AML/CTF Act, a reporting entity had various obligations regarding verification of a customer’s identity before providing designated services. A reporting entity was required to carry out ongoing due diligence on its customers, with a view to identifying, mitigating and managing the risk it might face that its provision of a designated service might involve or facilitate money laundering.
Mr Hawkins
Mr Hawkins was employed by Star as the Managing Director of The Star Sydney, being the Sydney Casino and its associated hotels, apartments, restaurants and bars, from September 2014 to January 2019. He was employed by Star as the Chief Casino Officer from January 2019 to September 2020. He was then employed by Star as the Chief Casino Officer (NSW) until 6 May 2022 when he resigned. At all times between September 2014 and 6 May 2022, Mr Hawkins was a member of Star’s executive leadership team.
The parties agree, and I am satisfied, that Mr Hawkins was one of Star’s “key management personnel” in each of his roles within the meaning of s 9 of the Corporations Act 2001 (Cth) defined by reference to the Australian accounting standards to mean a person having authority and responsibility for planning, directing and controlling the activities of Star, directly or indirectly. Also, at all times between September 2014 and May 2022, Mr Hawkins was a “close associate” of The Star Sydney under the New South Wales legislation.
At all times between September 2014 and 6 May 2022, for the purposes of s 180 of the Corporations Act, Mr Hawkins was an “officer” within the meaning of s 9 of that Act.
As Managing Director of The Star Sydney, Mr Hawkins was the executive responsible for managing a highly significant unit within the business of the group – in the period between 1 July 2016 and 30 June 2019, Star earned between 62% and 70% of its revenue, and generated between 55% and 69% of its EBITDA, from the operations of the Sydney Casino. Further, from March 2018, Mr Hawkins was responsible for Star’s International Rebate Business (IRB) which, in FY2018 and FY2019, accounted for 27.6% ($711.5 million) and 23.3% ($586.0 million) of Star’s revenue.
Star’s IRB business generated its gaming revenue from direct customers and through junkets. In the financial years ending 30 June 2015 to 30 June 2019, a substantial proportion (between around 23% and 27%) of Star’s revenue was generated through its relationships with foreign junkets. By June 2017, a junket known as Suncity was Star’s largest customer, generating turnover of $2.1 billion for Star in the financial year ended 30 June 2017.
Mr Hawkins was aware of the heightened risk that junkets presented to the integrity of Star’s casinos. Those risks arose from junkets being vulnerable to exploitation by criminal influence and by the introduction of an intermediary, the junket operator, between Star and the ultimate gamblers, thereby obscuring the origins of funds and facilitating money-laundering.
Star had a formal business relationship with a particular junket known as Suncity which was associated with Mr Chau Cheok Wa and Mr Alan Iek. Star’s turnover from Suncity had increased from $918 million in the 2016 financial year to $2.1 billion in the 2017 financial year. By 30 June 2017, Suncity was Star’s largest customer. By 18 April 2018, a VIP gaming room known as “Salon 95” had been set up within the Sydney Casino for Suncity’s exclusive use.
In 2018 and 2019, Mr Hawkins became aware of multiple suspicious cash transactions in Salon 95 that displayed money-laundering characteristics, multiple allegations of possible criminal associations of Suncity, Mr Chau having likely been refused a visa to enter Australia due to a significant seizure of cash in a hotel room, the exclusion of six people from the Sydney Casino by the NSW Police likely because of involvement in serious criminal activities, and allegations of links between Suncity and triad societies and organised crime figures.
In that period, Mr Hawkins failed to terminate all business association between Star and Suncity and Mr Chau. Also, Mr Hawkins attended meetings of the board of directors of Star in which relatively anodyne and incomplete reports were made to the board about activities at Salon 95 and of Suncity. Mr Hawkins failed to inform the board about the information that he had concerning what had occurred in Salon 95 and he failed to recommend that Star terminate and have no further business association with Suncity and Mr Chau.
I am satisfied that at the relevant times Mr Hawkins was aware that in order to hold and retain its casino licence, The Star Sydney Pty Ltd had a legal obligation to remain a “suitable” person to hold it under the CCA NSW. Mr Hawkins was also aware of the key obligations of The Star Sydney Pty Ltd under the AML/CTF Act as identified above.
On the basis of what I have summarised above, and as more fully developed in the joint submissions based on the statement of agreed facts, I am satisfied that a reasonable officer in Mr Hawkins’ position, acting with due care and diligence, would have taken a number of steps to ensure compliance with the regulatory requirements. Those would have included ensuring that the board was informed of relevant matters. In the circumstances, I am satisfied that Mr Hawkins was in breach of his obligations under s 180(1) of the Corporations Act as an officer of Star.
As explained in the joint submissions, at all relevant times s 180 of the Corporations Act was a “civil penalty provision”: see s 1317E(3). Accordingly, under s 1317E(1) the Court “must” make a declaration of contravention. Naturally, being satisfied of the contraventions I am satisfied that I must make declarations in relation to them, including the details required by s 1317E(3).
I am also satisfied, as sought jointly by the parties, that Mr Hawkins should be disqualified under s 206C of the Corporations Act from managing corporations for an appropriate period of time. Having regard to the authorities set out in the joint submissions, I am satisfied that in the case of Mr Hawkins the agreed period of disqualification of 18 months is an appropriate period. I do not see any need to consider the alternative under basis for disqualification under s 206E.
I am also satisfied that an exemption should be made in respect of Futureview Group Pty Ltd under s 206G as agreed by ASIC. Mr Hawkins is a director of that company which is the corporate trustee of a discretionary family trust. Minimal, if any, public risk arises from his continued management of that company. To avoid any procedural issue with the timing of the application of leave to manage Futureview, I am satisfied that it is appropriate to make an order under s 1322(4) of the Corporations Act to the effect that the failure to give ASIC the relevant notice does not invalidate the application, and that the application should be heard immediately. See – ASIC v Blumenthal [2024] FCA 384 at [62]-[64].
Insofar as a pecuniary penalty is concerned, the parties seek a penalty under s 1317G of the Corporations Act that Mr Hawkins pay to the Commonwealth the sum of $180,000. Given the large sums of money involved in the contraventions and Mr Hawkins’ substantial earnings from Star as detailed in the joint submissions, at first blush that may not seem like a sufficiently high penalty for the purposes of both general and specific deterrence. However, taking into account Mr Hawkins’ admission of having contravened s 180(1), his cooperation with ASIC, the extra-curial detriment that he has suffered as a consequence of his conduct including considerable public scrutiny, the absence of any prior criminal convictions and, significantly, ASIC’s acceptance as the relevant regulator that that penalty is appropriate, I am satisfied that it is within the range of appropriate penalties.
I note that Mr Hawkins has agreed to contribute to ASIC’s costs in the amount of $65,000, which ASIC has accepted.
I am accordingly satisfied to make the orders that the parties seek by consent.
Mr Theodore
Mr Theodore was employed by Star as Head of Strategy and Investor Relations from mid-2011 until about February 2016. He was employed by Star as the Head of Strategy, Investor Relations and Treasury from about February 2016 until about October 2018. He was then employed by Star as Chief Commercial Officer until about September 2019. At that time, Mr Theodore was formally appointed as Star’s Chief Financial Officer. Mr Theodore was a director of The Star Pty Ltd from 18 October 2019, and of The Star Entertainment Qld Custodian Pty Ltd and The Star Entertainment Qld Ltd from 10 January 2020.
In his roles as Chief Commercial Officer and then CFO, Mr Theodore was a member of Star’s executive team. In his role as CFO, he was one of Star’s key management personnel. I am satisfied that from at least 1 November 2019, Mr Theodore was an “officer” of Star for the purposes of s 180 of the Corporations Act.
Further, for the purposes of the Gaming and Liquor Administration Act 2007 (NSW), Mr Theodore was a “close associate” of The Star Pty Ltd from 18 October 2019 and thereafter.
NAB was a significant lender to Star and, from around October 2012, NAB provided payment terminals that were located in hotels operated by the Star group that were adjacent to casinos, which could accept cards issued by China UnionPay (CUP).
A large proportion of the funds transacted at the NAB terminals by way of CUP cards was for use by patrons to gamble. In February 2016, CUP made plain to NAB that it considered transactions relating to the purchase of gaming chips were not permitted. NAB conveyed that to Star in 2016 and 2017.
On a number of occasions from 2016 to December 2019, CUP raised inquiries (passed by NAB to Star) about transactions conducted at the NAB terminals, including as to whether they were for gambling. In its responses, Star did not report that a large proportion of the funds was ultimately used for gambling.
In particular, on 7 November 2019, Star sent a response to NAB, after it had been reviewed by Mr Theodore, which conveyed that the funds were used for non-gambling expenses such as hotel accommodation, private jet travel, tourism services, food and wine and jewellery and that none of the funds obtained were used (whether directly or ultimately) to fund the purchase of gaming chips. Those representations were inaccurate, incomplete and misleading, and there was a real chance or possibility that representatives of NAB and/or CUP would be misled by them.
For the reasons more fully developed in the joint submissions, I am satisfied that by failing to prevent Star from sending the 7 November 2019 email to NAB, or from failing to ensure that the email properly and accurately represented what the NAB terminals were used for, Mr Theodore breached his obligations under s 180(1) of the Corporations Act: he failed to discharge his duties to Star with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in Star’s circumstances and occupied the office held by Mr Theodore and had the same responsibilities. In particular, Mr Theodore was aware of the misleading nature of the email, and the email exposed Star to a number of risks. Those included with regard to its relationship with NAB and that it would contravene statutory prohibitions against misleading and deceptive conduct.
Insofar as relief is concerned, for the same reasons as in relation to Mr Hawkins, I am satisfied that I must make declarations of contravention. I am also satisfied that the agreed disqualification period from the management of corporations of nine months under s 206C of the Corporations Act is appropriate in the circumstances.
The parties have agreed a penalty of $60,000. For the reasons canvassed in the joint submissions, including the mitigatory aspects identified and that the relevant regulator, ASIC, is satisfied with that penalty, I am satisfied that the penalty is within the range of appropriate penalties in the circumstances. I have given consideration to the need for the penalty to be appropriate for both general and specific deterrence. I have also given consideration to the significant adverse personal consequences Mr Theodore has faced as a result of the public scrutiny in various inquiries of the events canvassed above.
For those reasons, as more fully developed in the joint submissions, I am satisfied that I should make the orders that the parties seek by consent.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate:
Dated: 25 February 2025
ANNEXURE A – JOINT OUTLINE OF SUBMISSIONS IN RESPECT OF THE THIRD DEFENDANT
JOINT SUBMISSIONS OF THE PLAINTIFF AND THIRD DEFENDANT ON LIABILITY & RELIEF
INTRODUCTION
1.These submissions are made jointly by the plaintiff, the Australian Securities and Investments Commission (ASIC), and the third defendant, Gregory Francis Hawkins (Mr Hawkins).
2.ASIC and Mr Hawkins seek the following relief:
(a)a declaration pursuant to s 1317E of the Corporations Act 2001 (Cth) (Corporations Act) that the Third Defendant contravened s 180(1) of the Corporations Act in relation to conduct occurring in 2018 and 2019 respectively;
(b)a disqualification order pursuant to s 206C and/or s 206E of the Corporations Act for a period of 18 months;
(c)an order that pursuant to s 206G of the Corporations Act the Third Defendant have leave to manage Futureview Group Pty Limited (ACN 132 138 482);
(d)an order that Mr Hawkins pay a pecuniary penalty pursuant to s 1317G of the Corporations Act in the amount of $180,000; and
(e)an order that Mr Hawkins contribute to the Plaintiff’s costs in the proceeding in the amount of $65,000.
3.The proposed declarations and orders which are sought are annexed to these submissions (Proposed Orders).
4.ASIC and Mr Hawkins seek this relief based on the Statement of Agreed Facts dated 13 February 2025 (SoAF), which sets out the facts agreed between the parties and admissions made by Mr Hawkins for the purpose of this proceeding as against him, and the anticipated evidence which Mr Hawkins will give by way of affidavit (Hawkins Evidence).
5.In summary, these submissions cover:
(a)Part B: Factual and Legal Background;
(b)Part C: Section 180(1);
(c)Part D: Mr Hawkins’ Contravention of s 180(1);
(d)Part E: Relief;
(e)Part F: Appropriateness of disqualification period and pecuniary penalty; and
(f)Part G: Conclusion.
FACTUAL AND LEGAL BACKGROUND
6.The period from 1 November 2016 to 31 March 2020 is defined, in the SoAF, to be the Relevant Period. A summary of the relevant facts (which are set out in more detail in the SoAF) follows.
Star
7.At all material times, Star Entertainment Group Ltd (Star) was listed on the Australian Securities Exchange and was the ultimate holding company (within the meaning of that term in s 9 of the Corporations Act) of various companies (comprising, the Group), including (SoAF at [3]):
(a)The Star Pty Ltd (Star Sydney);
(b)The Star Entertainment Qld Custodian Pty Ltd (Star Qld Custodian); and
(c)The Star Entertainment QLD Ltd (Star Qld), which, until 3 February 2017, was called Jupiters Limited.
8.Through the Group, Star conducted a gaming, entertainment and hospitality business. This business, relevantly, included the operation of three casinos known as: The Star Sydney, The Star Gold Coast, and Treasury Brisbane: SoAF at [6(b)]. At all material times, these casinos were operated pursuant to casino licences granted to companies within the Group, pursuant to s 18 of the Casino Control Act 1992 (NSW) (CCA NSW) (in respect of The Star Sydney) and s 18 of the Casino Control Act 1982 (Qld) (CCA Qld) (in respect of The Star Gold Coast and Treasury Brisbane): SoAF at [7].
Star’s regulatory environment
9.The nature of Star’s business – the operation of casinos – relevantly resulted in the Group being subjected to regulatory regimes in multiple jurisdictions of two kinds. The first kind of regulatory regime was found in the State-based statutes that governed casinos in NSW and Queensland, being the CCA NSW and the CCA Qld. The second was Commonwealth legislation directed to combatting money laundering and the financing of terrorism: the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).
The Casino Control Acts in NSW and Queensland
10.It was a necessary condition of Star carrying on its core business of operating casinos that it, or companies within the Group, continued to hold appropriate licences that permitted the Group to operate its casinos. Compliance with the statutory regimes that regulated casinos in NSW and Queensland was therefore critical to Star’s viability. Key features of those statutory regimes – particularly as regards the requirements for holding casino licences – are outlined below.
The Casino Control Act 1992 (NSW)
11.Three core features of the CCA NSW have remained unchanged between the enactment of that legislation up to and including the Relevant Period.
12.First, one of the principal objects of the CCA NSW is to ensure “that the management and operation of a casino remain free from criminal influence or exploitation”. When first enacted, that principle was enshrined in the CCA NSW by being specified as one of the objectives of the Authority, in s 140. Then, the Authority was, as defined in s 3(1), the Casino Control Authority. Throughout the Relevant Period (as a result of the enactment of the Miscellaneous Acts (Casino, Liquor and Gaming) Amendment Act 2007), the Authority was, as defined in s 3(1), the Independent Liquor and Gaming Authority (ILGA).
13.Following the amendment of the CCA NSW by the Casino Control Amendment Act 2001 (NSW), an objects clause was introduced, in s 4A. Section 4A(1) provided that the primary objects of the CCA NSW were:
(a)ensuring that the management and operation of a casino remain free from criminal influence or exploitation;
(b)ensuring that gaming in a casino is conducted honestly; and
(c)containing and controlling the potential of a casino to cause harm to the public interest and to individuals and families.
14.Section 4A(2) provided that all persons having functions under the CCA NSW were required to have “due regard” to the objects specified in s 4A(1) when exercising those functions.
15.Secondly, the holder of a casino licence, and its “close associates”, must each be a “suitable person to be concerned in or associated with the management or operation of a casino”. This requirement was set out in s 12(1) of the CCA NSW, which prohibited the Authority from granting an application for a casino licence, unless satisfied that the applicant and its close associates were all “suitable”.
16.Section 12(2) of the CCA NSW set out several criteria relevant to the assessment of suitability, including:
(a)in s 12(2)(a), whether each of the licensee and its close associates is of “good repute, having regard to character, honesty and integrity”; and
(b)in s 12(2)(g), whether the licensee or any of its close associates has “any business association” with any person or entity who, in the opinion of the Authority, is not of good repute having regard to character, honesty and integrity.
17.The scheme of the CCA NSW made clear that this suitability requirement was not limited to the point in time when the Authority was determining an initial application for a casino licence. To begin with, s 31 of the CCA NSW required the Authority, every five years, to “review a casino licence” by investigating and forming an opinion as to whether or not:
(a)the casino operator is a “suitable person” to continue to give effect to the casino licence and the NSW Act; and
(b)it is in the public interest that the casino licence should continue in force.
18.Further, s 59 of the CCA NSW empowered the Authority, at any time, to take disciplinary action against a holder of a casino licence, including by suspending or cancelling its licence. The Authority could take such action if it was satisfied that grounds for disciplinary action existed, which included (in s 59(1)(f)) if the Authority formed the opinion that the licensee was not a “suitable person” to hold a casino licence.
19.Thirdly, when it commenced and until 2013, the CCA NSW, by s 6, permitted there to be only one casino operating in NSW. That was the Sydney Casino, whose licence was held by Star Sydney. With the passage of the Casino Control Amendments (Barangaroo Restricted Gaming Facility) Act 2013 (NSW), which commenced on 27 November 2013, the CCA NSW permitted there to be only two gaming facilities operating in NSW, being the Sydney Casino, and the “gaming facility” to be established at Barangaroo.
20.Thus, the legal entitlement to operate a casino in NSW is, and always has been, a rare privilege granted to scarce corporations. The price of that privilege was that a casino operator comply with a strict regulatory regime, which had at its core the requirement that the casino operator and its close associates be of good character, be honest and have integrity, and that they only maintain business associations with persons of similar good repute. As the Hon Sir Laurence Street AC KCMG explained in his report on the Government’s proposal to introduce a draft, publicly released Casino Control Bill (which ultimately became the CCA NSW) (27 November 1991) at [7.1.4]:
The philosophy behind the strict approach to regulation is that participation in the gambling industry is a privilege which is granted only after suitability according to strict criteria has been demonstrated. To be eligible for a casino operator’s licence, an applicant must be shown to be willing and able to conduct operations honestly and in the public interest, in accordance with all applicable rules and regulations.
21.This requirement of suitability related not only to the casino licensee itself, but also to its “close associates” (paragraphs 15 to 18). Section 3(1) of the CCA NSW provided that “close associate” meant a close associate within the meaning of the Gaming and Liquor Administration Act 2007 (NSW) (GLA Act). Section 5(1) of the GLA Act provided, relevantly, that a person was a close associate of the holder of a casino licence if the person:
(a)“holds or will hold any relevant financial interest, or is or will be entitled to exercise any relevant power (whether in his or her own right or on behalf of any other person), in the business of the applicant or licensee that is or will be carried on under the authority of the licence, and by virtue of that interest or power is or will be able (in the opinion of the Authority) to exercise a significant influence over or with respect to the management or operation of that business”; or
(b)“holds or will hold any relevant position, whether in his or her own right or on behalf of any other person, in the business of the applicant or licensee that is or will be carried on under the authority of the licence”.
22.Section 5(2) defined a “relevant financial interest” in relation to a business to include, relevantly, any share in the capital of the business, and any entitlement to receive any income derived from the business or to receive any other financial benefit or financial advantage from the carrying on of the business.
23.Section 5(2) defined a “relevant position” to mean the position of director, manager or secretary, or any other position, however designated, if it is an “executive position”. Section 5(3) defined a “relevant power” to mean any power, whether exercisable by voting or otherwise, and whether exercisable alone or in association with other, to participate in “any directorial, managerial or executive decision” or to elect or appoint any person to a relevant position.
24.Having regard to this definition, Star, as the ultimate holding company of the holder of the licence for the Sydney Casino (Star Sydney) was a “close associate” of Star Sydney. Given that Star and the entities it controlled (including Star Sydney) operated as the Group, Star had a relevant financial interest in Star Sydney. Additionally, as the ultimate holding company of Star Sydney, Star was entitled to exercise a “relevant power” over Star Sydney.
25.And so, as a close associate of Star Sydney, if Star itself was not of good repute, or if it maintained business associations with persons or entities who were not of good repute, Star Sydney could fail to be a “suitable person” to hold its licence for Star Sydney, and would be liable to have its licence cancelled or suspended.
The Casino Control Act 1982 (Qld)
26.During the Relevant Period, the CCA Qld imposed a similar obligation of suitability on casino licensees that applied under the CCA NSW.
27.Section 20(1) (and s 26) of the CCA Qld required that, prior to being granted a casino licence, the licensee was required to be assessed as a “suitable” person to be associated or connected with the management and operations of a casino. This suitability obligation in s 20(1) also applied to all persons (natural or not) who were “associated or connected with the ownership, administration or management of the operations or business of the casino licensee”. Such persons were, therefore, similar to “close associates” in NSW (paragraphs 21 to 24). As with the CCA NSW, the criteria relevant to the assessment of suitability included:
(a)whether the licensee and its associates were each of “good repute, having regard to character, honesty and integrity” (s 20(1)(a)); and
(b)whether the licensee or any of its associates had “any business association” with any entity that is not of good repute (s 20(1)(f)).
28.Additionally, as in NSW, a casino licence was liable to be cancelled or suspended, pursuant to s 31(1)(d) of the CCA Qld, if the licensee or any director, executive officer, secretary, officer or person associated or connected with the ownership, administration or management of the licensee’s operations or business ceased to be a suitable person, having regard to the matters specified in ss 20 and 26.
29.Similarly, Star, as the ultimate holding company of Star Qld and Star Qld Custodian, was a person associated or connected with the ownership, administration or management of those casino licensees’ operations or businesses. Therefore, if Star itself was not of good repute, or if it maintained business associations with persons or entities who were not of good repute, that might render Star Qld and Star Qld Custodian unsuitable to hold their casino licences under the CCA Qld, and liable to have them cancelled or suspended.
The AML/CTF Act
30.During the Relevant Period, the objects of the AML/CTF Act, set out in s 3(1), included to provide measures to “detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes”, and to provide relevant Australian government bodies and their international counterparts with the information they need to investigate and prosecute money laundering offences and other serious crimes.
31.The AML/CTF Act imposed obligations on “reporting entities”, which were defined in s 5 to mean a person who provides a “designated service”. Services that were “designated services” were specified in s 6. They included a variety of “gambling services”. Therefore, Star Sydney and Star Qld, as the operators of the Sydney Casino, Treasury Brisbane, and The Star Gold Coast, were “reporting entities”, and were required to comply with the obligations imposed by the AML/CTF Act.
32.Three types of obligations under the AML/CTF Act are of particular relevance in this proceeding.
33.First, a “fundamental and foundational” requirement of the AML/CTF Act was the obligation, under s 81, to adopt and maintain an anti-money laundering and counter-terrorism financing program (AML/CTF Program), and the obligation, under s 82, to comply with that program: CEO, AUSTRAC v Westpac Banking Corporation (2020) 148 ACSR 247; [2020] FCA 1538 at [135] (Beach J). Star Sydney and Star Qld together formed a “designated business group”, and thus, pursuant to s 85, had a joint AML/CTF Program. Section 85 required that an AML/CTF Program have two parts, being:
(a)Part A, whose purpose was to identify, mitigate and manage the risks that the provision of designated services might involve or facilitate money laundering or financing of terrorism; and
(b)Part B, whose purpose was to set out applicable customer identification procedures.
34.In CEO, AUSTRAC v Tabcorp Ltd [2017] FCA 1296, Perram J observed, at [3]-[4], that the AML/CTF Program was at the heart of a “risk management” approach that Parliament decided to adopt in the AML/CTF Act. His Honour noted that, in the Second Reading Speech, the relevant Minister had stated that this risk-based regulatory approach recognised that “reporting entities have the experience and knowledge needed to assess and mitigate risk”.
35.Section 85 of the AML/CTF Act required that both Part A and Part B of an AML/CTF Program comply with any requirements specified in the Anti-Money Laundering and Counter-Terrorism Rules 2007 (AML/CTF Rules). One of those requirements, in Part 9.4, was that Part A of the AML/CTF Program be approved by the “governing board and senior management” of the reporting entity or its main holding company, and that it be “subject to the ongoing oversight” of the governing board and senior management. In this way, the directors of Star – the “main holding company” of each of Star Sydney and Star Qld – were responsible for approving, and then overseeing, Star’s AML/CTF Program concerning the identification, mitigation and management of money-laundering risks. This requirement reflected the assumption that underlay Parliament’s choice of a risk-based regulatory approach, namely, that a corporation that had AML/CTF Act obligations, would, through its most senior stewards, have or would take steps to acquire, appropriate experience and knowledge necessary to assess the money laundering risks involved in that company’s business.
36.Secondly, pursuant to s 41 of the AML/CTF Act, a reporting entity was required to make reports, known as suspicious matter reports or SMRs, to the Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC) of information about certain matters. This included, for example, if the reporting entity suspected, on reasonable grounds that information it had regarding a matter may be relevant to money laundering offences or certain other criminal offences.
37.Thirdly, under Part 2 of the AML/CTF, a reporting entity had various obligations regarding verification of a customer’s identity before providing designated services. Also, s 36 (in Part 2) imposed an obligation on a reporting entity to carry out ongoing due diligence on its customers, with a view to identifying, mitigating and managing the risk it might face that its provision of a designated service might involve or facilitate money laundering.
38.If a reporting entity breached its obligations under the AML/CTF Act, it was liable to have very substantial civil penalties imposed on it, pursuant to s 175 of the AML/CTF Act. A single contravention could attract a penalty of up to 100,000 penalty units, which, during the Relevant Period was:
(a)$18 million, from the start of the Relevant Period to 30 June 2017;
(b)$21 million, from 1 July 2017 to 30 June 2020; and
(c)$22.2 million, from 1 July 2020 to the end of the Relevant Period.
39.The risk of the imposition of substantial civil penalties was not a theoretical one. During the Relevant Period, the following escalating penalties were imposed under the AML/CTF Act:
(a)$45 million on Tabcorp Holdings Ltd and its related entities: AUSTRAC v Tabcorp;
(b)$700 million on Commonwealth Bank of Australia Ltd: CEO, AUSTRAC v Commonwealth Bank of Australia Ltd [2018] FCA 930;
(c)$1.3 billion on Westpac Banking Corporation: AUSTRAC v Westpac.
Mr Hawkins
40.Mr Hawkins, was the Managing Director of The Star, Sydney from 1 September 2014 until January 2019: SoAF [11(a)]. In January 2019, he became Star’s Chief Casino Officer (SoAF at [11(b)]), before becoming Chief Casino Officer (NSW) in September 2020: SoAF at [11(c))]. He remained in this role until he resigned from Star on 6 May 2022: SoAF at [11(c)].
41.Mr Hawkins was, at all times, an “officer” of Star for the purposes of ss 9 and 180(1) of the Corporations Act. He was a person who: (i) made or participated in making decisions that affected the whole, or a substantial part, of the business of Star; and (ii) had the capacity to significantly affect the corporation’s financial standing.
42.In his role as Managing Director of The Star, Sydney, Mr Hawkins was the executive responsible for managing a highly significant unit within the business of the Group, the Sydney Casino. As shown by Star’s financial statements in its Annual Reports for FY17 to FY19, in the period between 1 July 2016 and 30 June 2019, Star earned between 62% and 70% of its revenue, and generated between 55% and 69% of its EBITDA, from the operations of the Sydney Casino: SoAF at [14(a)]. In addition, from March 2018, Mr Hawkins was also responsible for Star’s International Rebate Business (IRB – which is described in more detail in paragraphs 47 to 53 below), which, in FY2018 and FY2019, accounted for 27.6% ($711.5 million) and 23.3% ($586.0 million) of Star’s revenue: SoAF at [25(d)] and [25(e)].
43.As Managing Director of The Star, Sydney, Mr Hawkins reported directly to Mr Bekier, the CEO of Star, and had a large team that reported into him: SoAF at [13(a)] and [13(b)]. In this role, Mr Hawkins was also responsible for formulating and presenting a number of significant proposals to the Board of Star: SoAF at [13(g)]
44.The importance of Mr Hawkins’ leadership was reflected in his remuneration. For the period he was Managing Director of The Star, Sydney (between 1 September 2014 and January 2019), the total remuneration listed for Mr Hawkins in Star’s annual reports was between $1,636,722 and $2,703,864: SoAF at [22].
45.In his roles as Chief Casino Officer and Chief Casino Officer (NSW) at Star, between January 2019 and 6 May 2022, Mr Hawkins was responsible for developing strategies for gaming on a Group-wide leve: SoAF at [17(c)]. He continued to be responsible for the significant IRB business and to be involved in Board-level deliberations: SoAF at [18(d)]. In the period he held the roles of Chief Casino Officer and Chief Casino Officer (NSW) (between January 2019 and 6 May 2022), the total remuneration for Mr Hawkins in Star’s annual reports was between $1,265,209 and $1,718,848: SoAF at [23].
46.For the entirety of the Relevant Period:
(a)Mr Hawkins was a “close associate” of Star Sydney for the purposes of the GLA Act; and
(b)was nominated by Star as one of its “key management personnel” in each of its annual reports: SoAF at [11(e)]
IRB and Junkets
47.During the Relevant Period, Star attributed its revenue to either its “domestic” business or its International VIP business, the latter of which was called its IRB.
48.In each of the 2016 to 2019 financial years, around 25% of Star’s total revenue was generated by its International Rebate Business, as follows (see SoAF at [14(b)]):
(a)in the financial year ending 30 June 2016, the International Rebate Business generated 25.3% ($596.3 million) of Star’s revenue of $2.357 billion;
(b)in the financial year ending 30 June 2017, the International Rebate Business generated 26.3% ($639.6 million) of Star’s revenue of $2.432 billion;
(c)in the financial year ending 30 June 2018, the International Rebate Business generated 27.6% ($711.5 million) of Star’s revenue of $2.579 billion;
(d)in the financial year ending 30 June 2019, the International Rebate Business generated 23.3% ($586.0 million) of Star’s revenue of $2.514 billion;
49.The IRB comprised three segments, which had different characteristics (see SoAF at [26]).
(a)First, there was the “North Asian junket” business, in which patrons typically participated through “junkets”, and front money was typically in the range of $1 million to $5 million.
(b)Secondly, there was the “South Asia Direct” business, in which there were few junkets, and front money was typically around $500,000.
(c)Thirdly, there was the “Premium Mass” business, which was a “nascent” market, where patrons’ front money was typically in the range of $50,000 to $250,000.
50.Star’s IRB business generated its gaming revenue from direct customers and through junkets: SoAF at [27]. A junket was defined in the CCA NSW and in the CCA Qld. During the Relevant Period, s 76(3)(a) of the CCA NSW described a junket as an arrangement involving a person or a group of persons (the junket participants or players), who were introduced to a casino operator by a junket promoter (sometimes called a junket operator), where the junket promoter received a commission based on the turnover of play in the casino attributable to the junket participants. The definition of a “junket agreement” in s 85A of the CCA Qld described an arrangement with equivalent features.
51.In the financial year ending 30 June 2017, 74.6% of revenue generated by Star’s IRB business was derived from the North Asian junket segment of the business: SoAF at [30].
52.Form March 2018, when Mr Hawkins became responsible for the IRB business, he spent approximately 15-20% of his time overseeing the business: SoAF at [28].
53.By reason of his extensive experience in the casino business and, in particular, his responsibility for the IRB business, throughout the Relevant Period Mr Hawkins was aware of the General Junket Risks (see SoAF at [31]-[34]), being the heightened risk that junkets presented to the integrity of Star’s casinos because:
(a)junkets were vulnerable to exploitation by criminal influence; and
(b)junkets introduce an intermediary between Star and the ultimate gamblers, which assists in obscuring the origins of funds and can facilitate money laundering.
Suncity
54.From about July 2011, until at least March 2020, Star and Star Sydney had a business association with a junket known as “Suncity” (Suncity). Star’s commercial relationship with Suncity formed part of its IRB operations: SoAF at [35].
55.Star’s turnover from Suncity had increased from $918 million in the 2016 financial year to $2.1 billion in the 2017 financial year. By 30 June 2017, Suncity accounted for 9% of the North Asia junket segment’s turnover and was Star’s largest customer: SoAF at [43].
56.Throughout the Relevant Period, Mr Chau Cheok Wa, also known as Mr Alvin Chau (Mr Chau), was the holder of a “Cheque Cashing Facility” (CCF) that was used to fund the Suncity junket at Star. Mr Chau’s CCF originally had a limit of $20 million. In February 2014, it was increased to $30 million, and in March 2017 it was increased to $50 million: SoAF at [40].
57.From around 30 June 2017, the promoter of the Suncity junket was Mr Alan Iek (Mr Iek). Star Sydney and Mr Iek (as the “promoter”) entered an agreement dated 30 June 2017, entitled “Win/Loss Rebate and Exclusive Access Agreement” (2017 Suncity Agreement): SoAF at [41]. The agreement (SoAF at [41]):
(a)set out terms, among other matters, as to the commissions and rebates and allowances (to cover items such as food and beverages) that Star Sydney would pay in respect of gaming by Suncity junket players, provided that gaming play by Suncity junket players reached a minimum monthly turnover figure of $50 million.
(b)provided that Star Sydney would provide the Suncity promoter with exclusive access to a VIP gaming salon at the Sydney Casino known as Salon 95.
(c)provided that the agreement commenced on 1 July 2017, and would expire on 30 June 2018, unless terminated or extended as agreed by the parties.
(d)set out grounds on which Star Sydney was entitled to terminate the agreement, and any agreement “arising from or contemplated by it”, which included an agreement with the “CCF Holder” (identified in cl 8 to be Mr Chau). One of the grounds upon which Star Sydney could terminate the agreement, in cl 10(q)(iv), was if Mr Iek, Mr Chau or any other “related entitled or individual”, in the opinion of Star Sydney or Star, “acts in a manner which brings or is likely to bring” Star Sydney, Star or any other Group casino “into disrepute” or is likely to be “adverse to the interests of” Star Sydney, Star or a Group casino.
Salon 95 Service Desk
58.By 18 April 2018, a VIP gaming room that had been set up within Star’s Sydney Casino for Suncity’s exclusive use was operational: SoAF at [51]. The gaming room was known as “Salon 95”.
59.A risk assessment for the Salon 95 Service Desk was completed on 27 April 2018, when it was approved by Mr Paul McWilliams (Star’s Chief Risk Officer): SoAF at [52]. The risk assessment:
(a)identified that Suncity would be operating the Salon 95 Service Desk as a junket promoter and that the “services” it would provide to junket participants, included: “the acceptance of cash by a player for entry into a junket”; “the provision of chips for play”; and “the provision of cash at the settlement (or partial settlement) of the junket”; and.
(b)identified the following controls that it was proposed be applied in order for Star to “remain compliant” without “significant compromise to the customer experience”:
(i)players are not to be accepted into junkets until they have undergone “appropriate identity checks” from Star employees, in order for Star to meet its KYC (know your customer) requirements under the AML/CTF Act;
(ii)cash received from players must not be kept at the Suncity Service Desk or provided to other patrons and must be deposited in the Suncity Front Money account at the Star Cage (being the location in the Sydney Casino where patrons could exchange chips for cash and cash for chips) as soon as practicable upon being received;
(iii)players cannot provide cash and receive chips in the same transactions;
(iv)Suncity cannot provide chips to players that have not been received from the Star cage (in exchange for cash or as a result of drawing down on a CCF);
(v)upon settlement (or partial settlement) of a junket, Suncity representatives must exchange chips for cash at the Star’s cage, and then disperse that cash to players (as opposed to retaining or drawing down excess cash to provide to players).
Suspicious transactions in Salon 95 and First Warning Letter
60.On 8 May 2018, Mr Hawkins received an email containing reports of suspicious transactions that were taking place inside Salon 95: SoAF at [53]. On 8 May 2018, a verbal warning was issued to Suncity as a result of the suspicious transactions (First Verbal Warning). The next day, on 9 May 2018, another verbal warning was issued (Second Verbal Warning). This second warning was issued by a Star employee after Mr Hawkins had directed her to visit Salon 95: SoAF at [55]. On each occasion, Mr Hawkins was informed by email after the verbal warnings were given: SoAF at [56].
61.On 10 May 2018, Mr Hawkins was copied to an email from Mr Mugnaini (Star’s General Manager VIP International), that “the suncity letter explaining our position” was being “finalized by Mr White”: SoAF [56A].
62.On 14 May 2018, Mr Hawkins signed a letter on behalf of Star Sydney, which was addressed to Mr Iek, providing Suncity with a formal written warning (First Warning Letter): SoAF at [57]. This letter was provided to Suncity on or around 14 May 2018: SoAF at [58].
KPMG Reports
63.On 16 May 2018, KPMG provided Star with two reports (SoAF at [92]), being:
(a)a report setting out its independent review of Star’s Part A AML/CTF Program (KPMG Part A Report); and
(b)a report setting out its independent review of Star’s Part B AML/CTF Program and additional specific issues (KPMG Part B Report): (together, the KPMG Reports).
64.One specific issue that KPMG had been asked by Star to consider in the KPMG Part B Report was whether “the money laundering and terrorism financing… risks posed by the use of ‘junket’ operators based in Hong Kong and Macau have been adequately identified and addressed”: SoAF at [93]. In relation to this issue, KPMG’s overall conclusion was that the risk was “high”: SoAF at [93]. In relation to this conclusion, KPMG:
(a)noted that junkets were generally considered by anti-money laundering regulators as being higher risk and explained further that a risk associated with junkets was that they could facilitate money laundering because “they add a layer of obscurity to the source of funds and source of wealth”;
(b)identified that Star did not have in place any “documented ML/TF Risk Assessment or Risk Assessment Methodology in relation to Junkets”;
(c)identified significant limitations on the due diligence Star conducted in relation to junkets
(KPMG Junket Risk Information).
65.Mr Hawkins was on the distribution list for the KPMG Reports: SoAF at [94]. Additionally, he was present at a meeting of Star’s Board on 24 May 2018 at which Mr Zlatko Todorcevski reported on the “‘high’ rated findings” from the KPMG Reports: SoAF at [94].
Further suspicious transactions and the Salon 95 Service Desk Operations
66.Between 12 and 15 May 2018, Star employees identified further suspicious cash transactions in Salon 95. Mr Hawkins was made aware of these suspicious transactions on 15 May 2018: SoAF at [61].
67.On 15 May 2018, Mr Mugnaini met with Suncity representatives: SoAF at [62]. Mr Mugnaini sent Mr Hawkins (and others) an email at 9.35pm on 15 May 2018, setting out some information relating to that meeting, including that Suncity had requested a “document such as procedures, which they can refer to so they are compliant with all relevant acts and regulations”: SoAF at [62].
68.On 15 May 2018 at 10.09pm, Mr Power (Star Sydney’s General Counsel) sent an email to Mr Hawkins (Power Email), which contained the Power Email Information (as defined in the SoAF at [63]). In that email Mr Power said that, in his opinion, the conduct of Suncity in Salon 95, particularly in relation to cash transactions:
(c)the seniority of officers responsible for the contravention;
(d)the impact or consequences of the contravention on the market or innocent third parties; and
(e)the extent of any profit or benefit derived as a result of the contravention.
102.Factors relating to the particular circumstances of the defendant include:
(a)whether the defendant has been found to have engaged in similar conduct in the past (noting that this is a mandatory factor pursuant to s 1317G(6)(d));
(b)whether the defendant has demonstrated contrition and remorse;
(c)the degree of the defendant’s cooperation with the regulator, including in the investigation and prosecution of the contravention; and
(d)whether the defendant has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
103.Not all factors that have been identified in previous cases will necessarily be relevant or important in every case, and they should not be treated as a rigid checklist of matters to be applied in every case, because in each case, the overriding principle is that the Court must weigh all relevant circumstances: ABCC v CFMEU at [101].
104.The appropriateness of the amount of a penalty must be assessed by reference to the specific civil penalty provision which has been contravened in light of its context and purpose, and the objects of the relevant statute as a whole: ASIC v Australia and New Zealand Banking Group Ltd [2018] FCA 155 at [22(f)] (Middleton J).
The statutory maximum penalty
105.The majority in Pattinson considered that the statutory maximum penalty “is ‘but one yardstick that ordinarily must be applied’ and must be treated ‘as one of a number of relevant factors’” to inform the assessment of a penalty of appropriate deterrent value: Pattinson at [53]-[55]. Their Honours at [49]-[51] rejected an approach by which the statutory maximum penalty was required to be reserved exclusively for the worst category of contravening conduct. However, they emphasised that there should be “some reasonable relationship between the theoretical maximum and the final penalty imposed”; the relationship of reasonableness being established by reference to a need for deterrence having regard to the circumstances of the contravenor and the circumstances of the contravention: at [53]-[55].
FAPPROPRIATNESS OF DISQUALIFICATION PERIOD AND PECUNIARY PENALTY
106.ASIC and Mr Theodore jointly submit that:
(a)The Court ought to disqualify Mr Theodore from being a company director pursuant to s 206C of the Corporations Act for the period of 9 months; and
(b)The Court ought to impose a pecuniary penalty pursuant to s 1317G of the Corporations Act in the amount of $60,000.
107.ASIC and Mr Theodore submit that the proposed disqualification period and pecuniary penalty are appropriate having regard to the circumstances of the contravening conduct (as set out at paragraphs 60 to 67 above and the relevant principles in relation to disqualification and pecuniary penalties (see paragraphs 83 to 89 and paragraphs 90 to 105 respectively). In particular, the proposed period of disqualification is appropriate to achieve the protective objects of a disqualification order, and the proposed penalty is appropriate to achieve the principal object of general deterrence.
108.The salient features of this case, which support the making of a disqualification order and a pecuniary penalty order, and for the period and in the amounts jointly proposed, are as follows.
109.First, the 7 November Email was a misleading communication sent by Star to one of its major lenders, NAB. The circumstances in which it was sent exposed Star to the risk of a variety of different forms of harm.
110.Secondly, Mr Theodore was directly involved in the drafting of the 7 November Email. Mr Theodore ought to have been aware of the misleading or inaccurate nature of the representations in the 7 November 2019 Email. In these circumstances, the Court will find that Mr Theodore’s conduct in failing to prevent the sending of the 7 November 2019 Email was reckless, in the sense that it involved gross negligence.
111.Thirdly, as CFO, Mr Theodore occupied a senior role at Star, and it was thus within his power to prevent the 7 November Email be sent.
112.Fourthly, in light of his knowledge of the primary purpose of the CUP Process, and his involvement in prior requests for information from CUP regarding the use of its cards at Star properties, he was aware of the circumstances in which CUP, through NAB, made its request for information to which the 7 November Email was a response. Therefore, even though the 7 November Email was drafted under significant time pressure on the morning of 7 November 2019 it cannot be said that Mr Theodore’s failure to prevent it from being sent was a momentary lapse in judgement.
113.However, against the backdrop of the matters outlined above, the following mitigating circumstances demonstrate why a disqualification period longer than 9 months, or a pecuniary penalty greater than $60,000, are not warranted.
114.First, Mr Theodore has admitted to contravening s 180(1) and co-operated with ASIC. In doing so, some of the cost to the public of a fully contested hearing has been avoided, even if the admissions were made at a relatively late stage of the proceedings after the preparation of lay and expert evidence and shortly before the trial. Mr Theodore’s admission and co-operation also demonstrates contrition, and insight into his conduct.
115.Secondly, Mr Theodore did not derive or seek to derive any personal benefit from his contravening conduct: SAFA at [87].
116.Thirdly, there was a single contravention of s 180(1) and Star ceased to implement the CUP Process about 19 weeks later.
117.Fourthly, Mr Theodore has suffered extra-curial detriments for his conduct the subject of this proceeding. In the almost 3-year period since Mr Theodore resigned from his role at Star in May 2022, he has been unable to secure alternative employment in an executive or senior level role: Theodore Affidavit at [12]. Since resigning from Star, Mr Theodore has only managed to secure temporary contract positions at significantly lower pay, causing him to suffer financial loss: Theodore Affidavit at [13]-[14], [20].
118.Fifthly, Mr Theodore has already faced considerable public scrutiny in relation to the conduct the subject of this proceeding against him, in the context of the Bell Review of The Star Pty Ltd and also media coverage concerning this proceeding: Theodore Affidavit at [17]. This public scrutiny has had a significant adverse effect on his health and his family: Theodore Affidavit at [18]-[19].
119.Sixthly, even prior to his admissions in this proceeding, Mr Theodore had shown contrition for his conduct in respect of the 7 November 2019 Email.
120.Seventhly, Mr Theodore has no prior criminal convictions and has not previously been subject to any investigations or proceedings commenced by ASIC or any other regulator: Theodore Affidavit at [22].
G CONCLUSION
For the reasons set out in these submissions, the Court should make the declaration and orders sought by ASIC and Mr Theodore, as set out in the Proposed Orders.
31 January 2025
Ruth Higgins SC
James Arnott SC
Stephanie Patterson
Stephen Speirs
Luca Moretti
Counsel for the Plaintiff
Garry Rich SC
Greg O’Mahoney
Adam Khadra
Counsel for the Fourth Defendant
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