China Court Sentences 16 Crown Resorts Employees to Prison -- 2nd Update

By Wayne Ma in Shanghai and Mike Cherney in Sydney Features Dow Jones Newswires

A senior executive of Australian casino company Crown Resorts Ltd. pleaded guilty Monday to gambling crimes in China and was sentenced to 10 months in prison, capping an episode that has chilled efforts by casinos to lure Chinese high-rollers.

Continue Reading Below

Jason O'Connor, Crown's head of international VIP operations, was charged along with 18 other current and former Crown employees who also pleaded guilty during a three-hour trial before Criminal Court No. 1 in Shanghai's Baoshan district.

In addition to Mr. O'Connor, four others received 10-month sentences and 11 were given nine-month sentences, with credit for time served since mid-October, Crown said. Three administrative employees who have been free on bail weren't sentenced.

The arrests followed an investigation that tracked 69 big-spending Chinese gamblers from 2015 to 2016 as they were coaxed to Crown's Australia resorts with free airline tickets, visas and hotel accommodations and gambled tens of millions of Australian dollars, authorities said in court Monday, according to a person present. Crown has casinos in Melbourne and Perth.

Casino gambling is illegal in China, except in the special administrative region of Macau. Foreign casinos aren't allowed to advertise gambling, but they can promote their destinations more broadly, for example promoting beaches and shopping.

The defendants could have been sentenced for up to three years in prison, according to lawyers following the case, making Monday's terms seem relatively light--especially in comparison with higher-profile cases involving foreign and Chinese employees of GlaxoSmithKline PLC and Rio Tinto PLC. Australian Rio Tinto executive Stern Hu, for example, was sentenced to 10 years in prison in China for accepting bribes and stealing commercial secrets.

Continue Reading Below

Crown's decision to sell its stake in a Macau casino operator after the detentions likely helped influence the lenient sentences, said Hans Hendrischke, professor of Chinese business and management at the University of Sydney Business School.

Crown was "sending a very strong signal that they take this seriously and they want this to be resolved as soon and as smoothly as possible," Mr. Hendrischke said. "This is very much the way things operate in China, and it would confirm that if you respond adequately as Crown has done, you can get an adequate return from the Chinese side."

Nicolas Groffman, an attorney at Harrison Clark Rickerbys, noted that other gambling cases have included charges of embezzlement or bribery, which didn't happen here.

"Maybe there isn't motivation anymore to go after them hard because they've got other big fish to fry," Mr. Groffman said. "There was no need to hang these people and give them anything beyond the normal sentences."

In a statement, Crown said the 16 employees who were sentenced to jail terms were also fined the equivalent of 1.7 million Australian dollars ($1.3 million) in total. The company said it would pay the fines on their behalf.

Crown shares closed up 0.3% Monday at A$12.79 on the Australian stock exchange.

The case has been closely watched by the gambling industry. Crown and competitors in Australia and New Zealand reported declines in their VIP businesses after the arrests.

Macau, in contrast, is on a 10-month revenue winning streak that analysts say has been partly driven by high-rollers who have returned there from other gambling meccas.

Crown has said visitors from mainland China comprised less than half of the company's international VIP revenue, and that mainland Chinese VIPs accounted for about 12% of the company's A$3.6 billion in total revenue for the 2016 fiscal year.

But in the six months ending Dec. 31, Crown's most recent financial result, the company said its overall VIP program revenue in Australia fell 45%.

Most of the Crown employees detained held sales and marketing positions targeting different regions of China, according to the person present in the court. The three employees who weren't sentenced or fined were administrative workers, this person said. Aside from the three Australians, one detainee was Malaysian and the others were Chinese, people familiar with the case have said.

Crown said 17 are currently employed and two are former staff.

The trial was closed to the public and no charging documents were released Monday, although an official accounting of the charges and sentences is likely to be released later, the person at the court said.

Crown and other casino operators have long gone to extraordinary lengths to court wealthy Chinese gamblers to their baccarat tables and other games of chance. The blandishments typically include free food and drink, Chinese-speaking service staff and complimentary hotel suites, people in the industry say.

For the biggest spenders, a chartered jet flight from China to Australia wasn't uncommon, these people say.

Crown, controlled by billionaire James Packer, has also pulled out of a casino project in Las Vegas, signaling a curtailment in its global ambitions. The company is building a casino and resort complex on Sydney's waterfront and developing a new hotel at its main casino in Melbourne.

Junya Qian in Shanghai contributed to this article.

Write to Wayne Ma at wayne.ma@wsj.com and Mike Cherney at mike.cherney@wsj.com

(END) Dow Jones Newswires

June 26, 2017 07:50 ET (11:50 GMT)