The following content is sourced from external partners. We cannot guarantee that it is suitable for the visually or hearing impaired.
(Bloomberg) -- Crown Resorts Ltd. staff detained in China since October will appear in court today to face charges of illegally promoting gambling in a case that’s been the government’s most public warning to foreign casinos attempting to lure Chinese citizens overseas to gamble.
Nineteen individuals, including Crown’s head of international high-roller operations, Jason O’Connor, go on trial Monday in the Baoshan district court of Shanghai. They have not yet entered pleas and will be tried by a panel of judges. They could face up to three years in jail if convicted. Among them are three Australians, including O’Connor, and one Malaysian citizen.
The case, which comes a year after thirteen employees of South Korean casinos served jail terms for similar charges, highlights the fine line that foreign casinos walk in courting customers from mainland China where it’s illegal to gamble or promote gaming. The case also shows the government’s determination to halt hundreds of billions of dollars worth of outflow, some of which exit the mainland via betting operations.
“The fast-growing middle class in China is still the main target and major revenue generator for casinos from all over the world,” said Tony Tong, founder of Hong Kong-based risk management consulting firm Pacific Financial Services. “When the government’s tone is clear that it doesn’t like gambling and will continue the crackdown on the industry and capital outflow, casinos and junkets need to work smarter.”
A representative for Crown in Melbourne declined to comment on the case. Days after the detention of its staff in October, Crown said it respected China’s jurisdiction and laws and the company needed to be “cautious and measured” in its commentary. Separately, Crown didn’t immediately respond to requests seeking comment on behalf of O’Connor and the other detainees due to to go on trial.
In the aftermath of the detentions, turnover from Crown’s VIP program plummeted 45 percent in the six months ended Dec. 31. The company, controlled by billionaire James Packer, has all but shuttered its international offices used to attract gamblers from the region to its resorts in Australia.
Its offices in eight Asian countries from Macau to Indonesia appeared to have closed. References to all but one of Crown’s representative offices outside Australia have been removed from the company’s website, leaving just Hong Kong.
Crown shares have lost 1.5 percent since the detentions, trailing a 5.2 percent gain on Australia’s benchmark index through Friday.
Shanghai-based lawyer Wang Guoqiang of Trend law firm said that the 19 charged are expected to enter pleas today. Generally, a verdict is usually reached within 15 to 20 days and made public, unless the court judges that there are national security concerns, said Wang, who does not represent any defendants in the case.
South Korean Case
In the unrelated South Korean case, employees of casino operators Paradise Co. and Grand Korea Leisure Co. were arrested in June 2015 for promoting gambling on the mainland. The companies have said their employees were released last year after serving jail terms of various lengths.
Pacific Financial Services’ Tong said foreign casinos have been warned for over a year by Beijing to pay attention to its anti-corruption campaign, while authorities increased controls over capital outflow and lifted anti-money laundering standards.
The only safe way for casinos to market their products and services to mainland customers is in Macau, the only Chinese territory where casinos are legal, he said. Tong said he generally advises casino operators partner with licensed gaming promoters there who are experienced in VIP customer acquisition, credit risk management and know how to operate within the legal framework in China.
--With assistance from Angus Whitley
To contact Bloomberg News staff for this story: Daniela Wei in Hong Kong at email@example.com, Rachel Chang in Shanghai at firstname.lastname@example.org.
To contact the editors responsible for this story: K. Oanh Ha at email@example.com, Gregory Turk
©2017 Bloomberg L.P.