Federal Court Finds Former Star CEO and Legal Counsel Breached Director Duties

Federal Court Finds Former Star Executives Liable for Director's Duties Breaches

The Federal Court has found former Star Entertainment Group CEO Matthias Bekier and former legal counsel Paula Martin liable for breaching their director's duties between 2017 and 2019. This significant ruling by Justice Michael Lee follows legal action initiated by the corporate regulator, ASIC, in 2022, primarily concerning matters including Chinese money laundering at the casino.

While Mr. Bekier and Ms. Martin were found to have committed seven breaches collectively, the court did not find sufficient evidence against seven other former directors.

Justice Lee determined that Mr. Bekier and Ms. Martin failed to exercise their powers and duties as directors, in violation of section 180 of the Corporations Act.

Justice Lee determined that Mr. Bekier and Ms. Martin failed to exercise their powers and duties as directors, in violation of section 180 of the Corporations Act.

Specifically, the judgment stated that Mr. Bekier should have been aware of a Chinese junket operator's alleged involvement in money laundering, noting his primary responsibility encompassed Star Casino's credit risk exposure. Ms. Martin's testimony was described by Justice Lee as "unimpressive" and unreliable due to inconsistencies.

A total of seven breaches of director's duties were substantiated against the pair. Each breach carries a maximum penalty of up to $1,050,000. The Federal Court is anticipated to schedule a date within seven days to finalize orders and determine specific penalties.

These breaches occurred during a period prominently marked by Chinese money laundering activities at Star casinos.

Justice Lee's judgment noted that issues within the company were ultimately exposed by investigative journalism and a statutory inquiry, rather than by the board or management itself.

The judge also characterized the senior management's culture as "dysfunctional" and "unethical."

Prior to this trial, two other former directors, Gregory Hawkins and Harry Theodore, admitted to breaches of their duties and were penalized $180,000 and $60,000, respectively.

The Federal Court found that ASIC did not sufficiently prove its case against seven other former directors: Richard Sheppard, Katie Lahey, Gerard Bradley, Sally Pitkin, Ben Heap, and Zlatko Todorcevski. Justice Lee remarked on the demanding nature of board roles, requiring diligent review of extensive documentation.

In a parliamentary inquiry, ASIC Chair Joe Longo clarified that the corporate regulator does not consider itself a casino regulator, describing it as a specialized area outside ASIC's primary expertise. Mr. Longo stated that ASIC initiated legal action against Star executives following state inquiries that confirmed illegal activities.

ASIC Chair Joe Longo clarified that the corporate regulator does not consider itself a casino regulator, describing it as a specialized area outside ASIC's primary expertise.

He also referenced a judge's articulation of associated risks. State-based regulators have taken actions, including significant fines imposed by Victoria's new regulator.

Justice Lee also offered observations regarding ASIC's case presentation, describing the evidence tendered as "complex" and "dense," and stating that ASIC submitted "a tsunami" of material to support its case.

Star Entertainment Group, which operates as Australia's second-largest casino company, has experienced significant financial difficulties. This includes consecutive losses and a recent rescue deal. The company has also faced extensive inquiries and fines related to the money laundering scandal, in line with similar challenges encountered by its competitor, Crown.