Chow Tai Fook, FEC-Backed Casino Operator Called Unfit to Operate $2.3B Brisbane Project

The operator of an A$3.6 billion ($2.3 billion) Brisbane casino project backed by Hong Kong heavyweights Chow Tai Fook Enterprises and Far East Consortium was found by an independent investigation to be unfit to run the controversial development.

A report by Queensland former judge Robert Gotterson released last Thursday found the operation of two casinos in the state by ASX-listed Star Entertainment, which is partially owned by the two Hong Kong firms, and has partnered with them to build the 71-storey gaming palace, has been “inconsistent” with local gambling laws, citing a “seriously deficient” anti-money laundering program as well as a poor corporate culture that misleads regulators and attracts players with criminal records.

“After considering the findings of Robert Gotterson AO KC’s report into The Star, I have formed the view that The Star is unsuitable to hold a casino license in Queensland,” state attorney general Shannon Fentiman said in a Tweet that same day using Gotterson’s titles under the Order of Australia and as a King’s Counsel.

Still the project, which incorporates four luxury hotels – including one each for New World’s Rosewood brand and FEC’s Dorsset, along with 50 bars and restaurants, and 1,500 apartments, is still expected to move forward with its opening later next year, according to local analysts, who judge the Queen’s Wharf development too big to scrap.

Moving Mainland Money

In his review of Star’s casino operations, Gotterson raised concerns over the use of credit and debit cards linked to the mainland’s China UnionPay network, to facilitate gambling by Chinese nationals in its casinos through a scheme that disguises gambling payments as hotel and general expenses.

“We have in black and white some damning findings about how this company has operated, how they dealt with the regulator, and their obligations to act in the public interest clearly were not taken seriously,” local media quoted Fentiman as saying in an interview with reporters.

Coming less than a month after a similar damning report by the New South Wales Independent Casino Commission (NICC), this latest licence inquiry has put in doubt Star’s eligibility to operate the Queen’s Wharf Project.

Star’s casino units in Queensland, Star Gold Coast and Treasury Brisbane, operate over 2,700 gambling machines in total and at least 70 gaming tables across the main floors and private rooms.

During the period from January 2017 to March 2020 when Star was said to be disguising gambling expenses for UnionPay card holders, overall payments made through the scheme amounted to over A$55 million.

The company was also found to have been actively encouraging high-risk players to travel to Queensland despite the potential for exposing the casinos to criminal infiltration. The report deemed Star’s anti-money laundering program to be inadequate and called their risk rating system for players inconsistent.

Gotterson’s report was made to assist in a suitability investigation, but it is still up to the Governor in Council to decide whether the Star casinos are fit to keep their licences.

Organised Crime Links Alleged

The Queensland attorney general is preparing a show cause notice that will force Star to justify why it should keep its licence.

“Star embarked on a program of literally having a one-eyed focus on profit,” Fentiman was quoted as saying in her interview with the local media. “It is open to the government to cancel their licence.”

Gotterson’s findings echoed a independent review of Star commissioned by New South Wales regulators which was revealed in September. Authorities overseeing Star’s casinos in Sydney indicated that the group’s Star Sydney casino, which houses over 1,500 gambling machines, had broken the law multiple times while their operations faced “very real risks of criminal infiltration.”

The New South Wales investigation also found that “certain junkets at The Star’s Sydney casino are likely to have been linked to organised crime.”

The Gotterson report acknowledged media investigations in Australia which have alleged connections between late Chow Tai Fook founder Cheng Yu-tung and organised crime. Current Chow Tai Fook chairman Henry Cheng, who also chairs New World Development, is the son of Cheng Yu-tung, who founded both companies.

Upon receival of the show cause notice from the attorney general, Star will be given 21 days to respond or face penalties, which could include having its licences revoked, said Fentiman in an interview with reporters. Other potential penalties involve the appointment of a special manager to run Star Gold Coast and Treasury Brisbane casinos.

In response to the Queensland inquiry, Star said in a statement that same day that the group is “currently considering” the points raised by Gotterson and “will continue to work cooperatively.”

Late last month, the company announced the resignation of its chief executive Geoff Hogg. His departure followed an August inquiry into allegations of money laundering, organised crime links and fraud at Star’s casino in Pyrmont, New South Wales.

Little Change Expected

With a show-cause process underway, the ongoing license inquiry means “little will change” for Star’s A$3.6 billion Queen’s Wharf Brisbane integrated resort project, based on a report by ABC News.

The Brisbane development – where Star holds a half-stake in the Queen’s Wharf project, with a  Chow Tai Fook and Far East Consortium joint venture holding the remaining 50 percent – spans 26 hectares with more than a third of the site reserved for public space.

For Ben Lee, founder and managing director of Macau gaming consultancy IGamiX, the project is “too big and too important to Brisbane for them to leave hanging.”

“The Queensland government will undoubtedly follow the path set by the other states,” Lee told Mingtiandi. “Give star a chance to rehabilitate when this is the perfect window to liberalise the industry by allowing more competition in, but our various state governments have to date been unable or unwilling to tackle the monster head-on.”

Star together with Chow Tai Fook and Far East Consortium teamed up in 2020 to secure A$1.6 billion in debt to fund the Queen’s Wharf project, allowing the controversial development to press ahead despite opposition from preservationists and design groups at the time. An initial phase of the project will open in the middle of next year.

Chow Tai Fook and Far East Consortium are minority holders in Star after the two bought 4.99 percent stake each in the ASX-listed firm at the time that the casino joint venture was formed, through a subscription agreement valued at A$490 million.