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

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

A senior executive of Australian casino operator Crown Resorts Ltd. pleaded guilty Monday to gambling crimes in China and was sentenced to 10 months in prison, following an investigation that has roiled the industry.

Continue Reading Below

Jason O'Connor, who as head of international VIP operations sought to draw foreign high-rollers to Crown properties, was detained by Chinese authorities in mid-October. He was tried Monday along with 18 other current and former Crown employees who also pleaded guilty.

The proceedings lasted roughly three hours.

Mr. O'Connor's sentence includes time served, meaning he could be released in the coming months. Two other Australian employees drew nine-month sentences for similar crimes, and will also be credited with time served.

The court was told Monday that the arrests followed an investigation in 2015 and 2016 that tracked 69 high-rollers who were coaxed to Australia with free airline tickets, visas and hotel accommodations and spent tens of millions of Australian dollars in Crown resorts, according to a person present in court.

The case has been closely watched by the gambling industry, concerned about the impact on their business from lucrative Chinese high-rollers.

Continue Reading Below

While Crown and competitors in Australia and New Zealand reported declines in their VIP businesses after the arrests, the world's largest gambling hub, Macau, is on a 10-month revenue winning streak that analysts say has been partly driven by returning high-rollers.

Foreign casinos aren't allowed to advertise gambling in China, but they can promote their destinations more broadly. Lawyers following the case said the maximum sentence was three years in prison, so Monday's sentences were relatively light.

Chinese authorities briefed Crown last week on what sentences their employees could expect, according to a person familiar with the case.

Nicolas Groffman, an attorney at Harrison Clark Rickerbys who has worked on similar cases, said the sentences were light compared with those handed out in higher-profile cases involving foreign and Chinese employees of GlaxoSmithKline PLC and Rio Tinto PLC in recent years, which were held in higher-level courts. Mr. Groffman said that other gambling cases often include charges of embezzlement or bribery.

"Maybe there isn't motivation to 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."

Crown shares gained 0.3% Monday, to 12.79 Australiam dollars.

In a statement, Crown said that 16 of the 19 employees were fined the equivalent of A$1.7 million in total. The company said it would pay the fines on their behalf.

Of the 19, five were sentenced to 10 months and 11 to nine months, Crown said. Three were already out on bail and weren't sentenced or fined Monday.

Those three had administrative jobs, while the others held sales and marketing positions targeting different regions of China, according to a person familiar with the case. Aside from the three Australians, one detainee was Malaysian and the others were Chinese.

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

China's legal system is opaque, and details of the evidence isn't known.

After the detentions, Crown executives signaled the company would be cutting back efforts to attract Chinese high-rollers. The blandishments typically include free food and drink, Chinese-speaking service staff and complimentary hotel suites, experts say, and for real whales can even include the likes of private jet service.

Crown, controlled by billionaire James Packer, has since sold down a stake in a casino operator in Macau and 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.

Some analysts said the detentions weren't a complete surprise, given Chinese President Xi Jinping's five-year crackdown on corruption among party officials, which had already cut into the VIP business at foreign casinos.

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 05:04 ET (09:04 GMT)