Last week wasn’t a good week for the Hong Kong-based Chow Tai Fook Enterprises (CTFE), part of the Cheng family’s property, jewellery, hotel and gaming conglomerate.
From 2022, the Queensland government undertook a 16-month inquiry into the company’s suitability as a junior partner in Star Casino’s Queens Wharf complex in light of CTFE’s links with a convicted fraudster with alleged ties to organised crime. In May, the Queensland government (which refused to release the report) used contortions like “there was not an appropriate basis to find unsuitability” to wave away the links, and explained the company’s refusal to share information with the Queensland casino regulator as the result of “differences in cultural and organisational expectations”. At the same time, the government further deferred a suspension of Star’s casino licences, imposed in the wake of Star being found to be unsuitable to hold a licence.
At the time, the Nine newspapers got hold of a section of the report and asked the government about it. Rather than respond to the inquiries, the Miles government promptly tipped off CTFE, who ran straight to court to gag the media from revealing any contents of the report. Given that the report supposedly found insufficient basis for blocking CTFE, why it rushed to court to prevent anyone from knowing about it invites considerable speculation. The Queensland government dobbing on journalists to a foreign company is also a shabby look.
Last week CTFE rushed back to court, this time to injunct Nine from publishing the whole report — supported by the Queensland government, which agreed to act as witness for the company.
While the courts looked favourably on CTFE’s application, thus keeping Australians in the dark about the failings of a foreign company linked to organised crime, things were a little grimmer in Hong Kong. On Friday evening, the company’s property arm, New World Development, reported its first loss in 20 years — HK$19-20 billion (around A$3.7-$3.8 billion). Shares in the main company in CTFE, Chow Tai Fook Jewellery Group, are down nearly 50% this year as the Hong Kong property market tanks.
Problems around the Queens Wharf casino, where CTFE holds 25%, and with ailing partner Star — in which CTFE holds a stake of around 5% — are thus another front of unwanted news in the Cheng family empire.
But it’s not for lack of trying on the part of the Queensland government. Not only did it wave away serious allegations of links with organised crime, delay its suspension of Crown’s licence, tip off CTFE about journalists asking questions and agree to back the company’s efforts to gag journalists, last week, via the Queensland casino regulator (the Office of Liquor and Gaming Regulation), it issued Star a licence for the Queens Wharf casino two days before the second Bell report dropped in NSW. The inquiry concluded the company was still not fit to hold a casino licence in Sydney.
The Queensland government seems open to doing whatever is necessary to prop up Star — now suspended from ASX trading — with Steven Miles saying “This is a fantastic asset for our city. It is a big job generator. It is a major attraction to our city and state. It is an important platform for Brisbane 2032 and everything that we’re going to do in our city over the next decade or so. So we want to keep them open.”
Star’s request for yet another taxpayer handout was so egregious that even the gambling-obsessed Minns government in NSW laughed it off. Star has already received a ridiculous cut in its taxes from the NSW government, and chance after chance to get its shambolic operations in order. Finally, the begging bowl has been ignored. But not in Brisbane. Up north, it seems if question is if there is anything Star could ever do that would lead to appropriate regulatory action.
As the NSW decision shows, this isn’t the normal cupidity and venality of state governments dealing with gambling interests. This is a state government that has allowed major urban planning to be hijacked by a gambling company with a long record of refusing to comply with basic regulatory requirements, like money laundering regulation.
Late Wednesday, Star released a statement to the ASX revealing something that will strike terror into investors: it is seeking advice on its accounts, and “the advice being provided has extended, from time to time, to considering the application of provisions of the Corporations Act 2001 (Cth) (including the safe harbour provisions)”. The “safe harbour” insolvency regime allows a company’s directors to implement a restructure without the risk of personal liability for debts should the restructure ultimately fail. That means huge losses, write-downs or impairments. It is a drastic, last-resort move to call for protection — and a real mark of desperation.
Queensland Labor, with visions of tower-lined river banks and Olympic glamour, has ignored repeated signs that there’s something deeply rotten in Star and within its partners. With investors and bankers unenthused by the prospect of tipping good money after bad into the company — or, in the case of CTFE, having financial challenges of their own elsewhere in the company — the Miles government, in its last days, looks set to dump taxpayers with the bill for its failings.
Is it time for Queensland to cut Star loose? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
