Inside Asian Gaming

INSIDE ASIAN GAMING | June 2012 8 Cover Story to get out of the casino business. Tabcorp formally spun off The Star and the Queensland casinos last June with Echo (ASX: EGP) as their new publicly traded parent. The company has been fighting for its life ever since. Through entities controlled by Crown Limited (ASX: CWN), Mr Packer earlier this year doubled his stake in Echo. He now owns just under the legal limit of 10%, an interest valued at A$250 million. Under the terms of Echo’s constitution and NSW law he can’t own more without regulatory approval. As a prelude to acquiring a controlling share, or perhaps as an alternative, he demanded a directorship. Echo refused. “We do not believe that it is in the interests of shareholders that a competitor be represented on the board,” Mr Story said in a statement released last month. It was a view that appeared to have the backing of the seven-member board, until Mr Packer leveraged Crown’s standing as a major shareholder to force a vote on Mr Story himself, whose leadership Mr Packer has blasted in the Australian press as “disastrous”. Mr Packer, or rather Crown, proposed a resolution, which was scheduled for a 20th July vote, that Mr Story be removed“with immediate effect”and replaced by former Victoria Premier Jeffrey Gibb Kennett, a one-time ad man, currently president of the Australian Football League Hawthorn Hawks, whose ties to the Packers date back to his days as leader of the center-right Liberal Party in Victoria. As premier in the late ’90s he supported the redevelopment of Crown Casino and its move to its current location. He “has a great understanding of what major cities need as tourism drivers,” Mr Packer said of him in a recent interview. “Anyone who knows Jeff Kennett knows he has the drive, enthusiasm and knowledge to help the Echo board fix its numerous problems.” Mr Story contended, “These moves by Crown should be viewed through the prism of its ardent desire to gain control of Echo’s valuable licenses without paying a premium to Echo shareholders.” But on 8th June it was announced in the Sydney Morning Herald that Mr Story had resigned. The board issued a statement, saying the “ongoing disruptive campaign for the removal of Mr Story was damaging to the company, and that it was in the best interests of shareholders that Mr Story not contest the resolution.” Caught Texting Whether, as Mr Packer claims, The Star is beset by “substandard management” and “poor performance” is debatable. In his allusions to the company’s “numerous problems” he speaks more accurately, although he may be revealing more than he intends. In February, Echo announced the departure of The Star’s Managing Director Sid Vaikunta, a Mullin protégé who had held senior development and marketing positions at Borgata and its co- owner Boyd Gaming before joining Mr Mullin in Sydney in 2010. Mr Vaikunta had been the subject of an internal investigation into allegations of sexual harassment involving two female managers at the casino. Within days, media reports were swirling with various “leaks” purporting to reveal that operations at the casino were rampant with sexism, drug use among senior executives and general bad behavior. Eight days after Mr Vaikunta’s departure was reported, Crown announced it had doubled its stake in Echo. In the meantime, the publicity surrounding the leaks forced the NSW Independent Liquor & Gaming Authority, which had just completed a five-year review of The Star’s license in December, to launch another investigation, headed by Gail Furness, the third-party attorney who had overseen the earlier review. While this was under way, Australia’s ABC television network went on the air with the leaked identities and betting histories of some of the casino’s biggest players. Echo got an injunction from the country’s highest court forcing the information off the network’s Web site. The court also suppressed publication of reports by casino staff and government inspectors about alleged incidents of misconduct at the property. “Shrewd and successful”—James Packer Battle lines are drawn