Federal Court Penalises Two Former Star Entertainment Executives
The Federal Court of Australia has imposed financial penalties and management bans on two former senior executives of The Star Entertainment Group Ltd for breaching their director duties under the Corporations Act 2001. The case related to their handling of money laundering and criminal activity risks at the company's casino operations.
Penalties
The court determined the following penalties for the two executives:
Matthias Bekier (former CEO): Disqualification from managing corporations for six years and a fine of AUD 700,000.
Paula Martin (former Chief Legal & Risk Officer): Disqualification from managing corporations for seven years and a fine of AUD 400,000.
Both executives were ordered to jointly cover 45% of ASIC's legal costs.
The Australian Securities and Investments Commission (ASIC) had sought an eight-year ban and a AUD 1.3 million fine for Bekier, and a seven-year ban and a AUD 1.1 million fine for Martin. Justice Michael Lee stated that penalties were reduced due to a lenient settlement ASIC reached with two other executives, Greg Hawkins and Harry Theodore.
Background
The case, initiated by ASIC in December 2022, centered on Star's dealings with Asian gambling junket operator Suncity. ASIC alleged that Bekier and Martin failed to adequately address money laundering risks arising from this relationship, despite reports of criminal links. Additionally, ASIC alleged that Martin permitted misleading statements to be provided to National Australia Bank regarding the use of China Union Pay cards for gambling, which was prohibited by UnionPay.
ASIC Chair Joe Longo informed a parliamentary inquiry that ASIC is not a casino regulator, describing it as "a highly specialized area outside their expertise."
Court Findings
Justice Michael Lee found three contraventions by Bekier and three by Martin under section 180 of the Corporations Act, which requires directors and officers to exercise reasonable care and diligence. The breaches occurred between 2017 and 2019.
Justice Lee stated that the penalties aim to protect the public interest and deter future contraventions. He noted the lack of evidence showing insight into the seriousness of their failures, stating that "expressions of regret for consequences do not demonstrate understanding of the wrongdoing itself." He criticized the use of the phrase "I accept responsibility" without specific acknowledgment of what was done wrong and what should have been done differently.
The judge noted that the senior management's culture was 'dysfunctional' and 'unethical', and that investigative journalism and a statutory inquiry, rather than the board or management, exposed the company's issues.
Justice Lee described Martin's testimony as 'unimpressive' and unreliable due to inconsistencies. Regarding Bekier, he stated that the former CEO should have been aware of the junket operator's alleged involvement in money laundering, though his primary responsibility was seen as Star Casino's credit risk exposure.
Related Cases
The 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. This decision was made despite Justice Lee remarking that board members were required to diligently handle the volume of documentation provided to them.
Two other former directors, Gregory Hawkins and Harry Theodore, previously admitted to breaches and were penalized AUD 180,000 and AUD 60,000, respectively, before the trial.
Justice Lee criticized ASIC's case presentation, describing the submitted evidence as 'complex' and 'dense'.
Company Context
Star, Australia's second-largest casino operator, has faced financial difficulties, including back-to-back losses and a recent rescue deal. The company has also been subject to inquiries and fines related to money laundering scandals. State-based regulators have taken action, with Victoria's new regulator imposing significant fines.