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Crown Resorts staff detained in China crackdown
Shares in James Packer’s Australian group fall 10% as Beijing clamps down on marketing of gambling

7 HOURS AGO

3 HOURS AGO by: Jamie Smyth in Sydney and Sherry Fei Ju in Beijing
Shares in Crown Resorts, the Australian gaming and resorts company controlled by billionaire James Packer, slumped by more than 10 per cent on Monday following the arrests of 18 employees by Chinese authorities.

Shares in rivals Star Entertainment Group and Sky City Entertainment Group also fell by around 5 per cent each on the Australian stock exchange, over concerns a crackdown by Beijing on foreign casino operators could dent their profits.

The arrests, which included three senior Australian Crown executives, are believed to be linked to a legal blitz launched by China last year against foreign casinos that contravene its laws by seeking to lure its citizens overseas to gamble. The campaign, part of Beijing’s wider move to clamp down on corruption, last year led to the arrest of more than a dozen South Korean casino managers.

Crown said it is working with the Australian department of foreign affairs to make contact with its employees and ascertain their welfare.

“Crown believes that Jason O’Connor, the head of Crown’s VIP International team, is one of 18 Crown employees being questioned by Chinese authorities,” the company said.

Crown added on Monday that it has not been able to speak with its employees and has yet to be given details about why they have been detained. The company is “working closely with the Department of Foreign Affairs and Trade to urgently make contact with and ascertain the welfare of its employees,” it said in a statement.

Shares in Crown were down 11.5 per cent at A$11.45 on Monday afternoon in Sydney.

The arrests will heighten concerns among casino operators about doing business in mainland China, where it is illegal to market gambling to Chinese nationals. However, some operators have continued to market resort and tourism services where their casinos are located.

In October Chinese state television reported that 13 South Korean casino managers and several local agents had been arrested on suspicion of luring people from China to gamble abroad. It said the casinos “enticed” Chinese gamblers with free tours, free hotels and sexual services.

Yuan Chao, a partner at Tongshang law firm in Beijing, said the Australian citizens detained could face jail terms of up to 10 years depending on the amounts of money they had earned as commission.

China’s Public Security Bureau and Ministry of Public Security, which are leading Beijing’s campaign against the marketing of gambling in the country, including that of overseas operators, did not respond to requests for comment on Sunday.

In February last year Hua Jingfeng, a deputy director at the Ministry of Public Security, gave an interview to the Communist party mouthpiece the People’s Daily in which he said overseas casinos that solicited Chinese customers posed “the highest danger to our nation and the Chinese people”.

He said such activity had led to large flows of Chinese capital out of the country and left many business owners in heavy debt, leaving their companies in capital “black holes” or even bankruptcy. “These chain reactions have caused severe influence on the economic safety and social stability to our country.”

Crown did not respond on Sunday to questions about the extent of its marketing activities in China. But the company reported that “VIP gamblers”, which tend to include a large number of mainland Chinese high rollers, bet A$65bn (US$49bn) at its Australian casinos in the year to end June 2016.

The arrests are a blow to Crown, which is planning to spin off its international assets as part of a corporate restructuring.

One person in the Australian casino business, who did not want to be named, told the Financial Times he was surprised that Crown had such a large team based in mainland China. He said many casino operators used third-party VIP operators, typically based in Macau, for marketing VIP programmes, rather than marketing them directly.

The Australian Financial Review, the newspaper that first reported the arrests, said the 18 executives were arrested in a series of raids across four Chinese cities on Thursday night and Friday morning.

The Crown case risks sparking a diplomatic spat between Canberra and Beijing, which have seen tensions rise over recent months following the blocking of two big Chinese investments by the Australian government.

Australia’s department of foreign affairs said it was aware of the reports of the possible detention of a number of Crown employees across China, including three Australians.

“Chinese authorities have three days in which to notify of the detention of Australians according to the terms of a bilateral consular treaty,” it said in a statement. “Consular officials will seek to offer appropriate consular assistance to the detained Australians.

The detention of Crown’s Australian executives has revived memories of the conviction in China of senior Rio Tinto executive Stern Hu — an Australian citizen — in 2010. Mr Hu was sentenced to 10 years in jail on charges of bribery in a case that prompted protests from Canberra. He remains in prison.