But CPH’s lawyer Noel Hutley SC told the inquiry on Thursday it was unfair to say Mr Johnston was complicit in the risk management failure that led to the arrests when Crown’s VIP team executives Barry Felstead, Jason O’Connor, Michael Chen and its former CEO Rowen Craigie also failed to escalate important information through the board.
“There has obviously been a breakdown in reporting, quite clearly,” Mr Hutley said.
“[But] these structures failed without any assistance from the VIP working group – they just failed.”
Commissioner Patricia Bergin challenged Mr Hutley on this point, saying that Mr Felstead thought he had escalated warning signs by telling Mr Johnston, and it was a “fact” that the working group seemed to “blur the lines” for executives.
“Mr Felstead was reporting things to Mr Packer, Mr Felstead was reporting things to Mr Johnston,” she said. “The fact that the working group was there had an impact on Mr Felstead, I have no doubt.”
But Mr Hutley responded that it was a “false assumption” that the group created an alternative hierarchy within Crown, when Mr Chen and Mr Felstead’s reporting failures went “wildly beyond anything that Mr Felstead communicated to Mr Johnston”.
Mr Felstead, Crown’s long-standing Australian Resorts CEO, is leaving the company after a disastrous appearance at the inquiry, while Mr O’Connor spent 10 months in a Shanghai jail for gambling crimes after he got caught up in the arrests. He is now working on the opening of Crown Sydney.
Counsels assisting have highlighted that Mr Johnston was the only Crown director who was told that Chinese police questioned an employee on suspicion of organising illegal gambling tours in mid-2015, just weeks after employees of a South Korean casinos had been arrested.
Commissioner Bergin said it was “very strange” that Mr Johnston nor Mr Felstead did not share this with the rest of the Crown board at a meeting weeks later.
“It was just a disaster,” she said.
Several Crown board members have said they would have pulled its staff out of China had they known about the warning signs.
But Mr Hutley said that while the police interview was a significant warning sign, Mr Johnston could not have understood its importance in the same way that Mr Felstead and Mr O’Connor could have.
“It was in that context… that Mr Johnston did not appreciate the seriousness of the event nor that it represented a potential escalation of risk,” Mr Hutley said.
Mr Johnston could also not have understood the that proper reporting structures in the company were not working, he said, while stressing that did not implicate Crown itself in the failure.
“That’s likely to be not a structural problem with Crown but flaws in the individuals who simply misconceived risk in an area,” Mr Hutley said. “It was human error.”
Commissioner Bergin is set to report her findings by February next year while ILGA will meet next week to consider stopping Crown from opening its Sydney casino while the inquiry is ongoing. Crown re-opened its Melbourne casino on Thursday for the first time since it shut its doors in March due to the COVID-19 crisis.
Business reporter at The Age and Sydney Morning Herald.