Outcome of the 2024 Independent Inquiry into The Star

The Bell 2 Report found that The Star is not suitable to be concerned in or associated with the management and operation of The Star Casino. An initial report released in 2022 following a previous inquiry conducted by Adam Bell SC also found that The Star was unfit to hold a casino licence in New South Wales.

Background

In September 2021, the NSW Independent Liquor & Gaming Authority appointed Adam Bell SC to preside over a review of The Star (the Inquiry).

On 31 August 2022, Adam Bell SC’s report on his findings following the Inquiry was published, frequently referred to as The Bell Report. The Bell Report found that The Star was not suitable to be concerned in or associated with the management and operation of a casino in New South Wales. The Bell Report made 30 recommendations directed at addressing a number of issues identified during the Inquiry.

On 5 September 2022, the NSW Independent Casino Commission (NICC), a statutory authority, was established with the purpose of regulating casinos in New South Wales.

On 17 October 2022, the NICC:

1. issued a notice to The Star that:
   
   
   1. The Star’s NSW casino licence was suspended with effect from 9:00 AM on 21 September 2022; and
   2. a pecuniary penalty of $100 Million was to be imposed on The Star;
2. on behalf of The Crown in right of the State of New South Wales, entered into a Deed of appointment of manager with Mr Nicholas Weeks (Mr Weeks) under which Mr Weeks was appointed as Special Manager of The Star for a period of 90 days commencing immediately after the suspension of the casino licence held by The Star (Weeks Appointment); and
3. gave notice to The Star of the Weeks Appointment.

The Weeks Appointment has been extended three times and, currently, is due to end on 30 September 2024.

On 19 February 2024, the NICC appointed Adam Bell SC to preside over a second independent inquiry into The Star. Broadly, the second inquiry was commissioned to examine whether The Star had made sufficient the structural changes required for it to be considered to be suitable to hold a casino licence in New South Wales.

Bell 2 Report

On 30 August 2024, the Bell 2 Report was published by the NICC. The Bell 2 Report found that The Star remains presently unsuitable to be concerned in or associated with the management and operation of The Star Casino.

The key findings in the Bell 2 Report are that:

1. as at the date of the Bell 2 Report, six of the 30 recommendations made in The Bell Report had not been implemented or implementation had not yet been completed;
2. The Star is currently falling short of what is required from a suitable casino operator;
3. whilst the development of the “Remediation Plan” adopted by The Star following the Inquiry involved a “great deal of thought and work”, the deadlines in the Remediation Plan were too ambitious and implementation of the Remediation Plan has been faced with difficulties and delays;
4. The Star currently lacks effective governance processes and is not sufficiently independent from its parent company, Star Entertainment;
5. between 1 September 2022 and 31 July 2024, The Star’s group leadership team has been dysfunctional and marked with a number of departures and resignations;
6. The Star’s relationship with the NICC is poor and underpinned by a “new cultural shadow value” of antagonism; and
7. whilst there has been a material improvement in risk management culture, cultural reform is still at an early stage and has not been satisfactory.

The Bell 2 Report did, however, acknowledge that there has been substantial reform of The Star, including the development and implementation of revised internal control manuals and a substantial expansion of The Star’s financial crime and risk teams. The Bell 2 Report also noted that there has been a material improvement in The Star’s risk management resources, systems and culture.

Way Forward

The NICC has stated that it is considering the report and the next steps that may be taken in relation to The Star. The NICC Chief Commissioner has also stated that the Bell 2 Report showed that The Star “had not moved quickly enough to address the governance and cultural concerns raised in the first Bell Report” and that it had “only very recently turned its attention to dealing with challenges that should have been prioritised earlier”.

It is unclear whether the NICC will reinstate the NSW casino licence held by The Star or will take further disciplinary steps in relation to The Star, which could include further extending the appointment of Mr Weeks.

The Bell 2 Report has recommended that the NICC take note of a number of breaches by The Star and take “such action as it sees fit”. If the NICC decides that The Star should remain as the licensee of The Star Casino, the Bell 2 Report also recommended that:

1. the NICC take steps to require The Star and Star Entertainment to amend the Constitution of The Star so as to:
   
   1. impose requirements for the independence of the Board of The Star;
   2. update the duties of the directors of The Star to emphasise their responsibility to use best endeavours and take all reasonable steps to ensure that the operations of The Star Casino comply with the conditions of The Star’s casino licence and all regulatory agreements with the NICC; and
   3. specify an appropriate cadence for meetings of the Board of The Star which is consistent with the discharge by the directors of The Star of their legal obligations;
2. the NICC take steps to update The Star’s internal control manuals to require that compliance issues are appropriately reported and escalated to The Star’s Board and that source of wealth checks are carried out as part of The Star’s enhanced customer due diligence process;
3. the NICC note the need for Star Entertainment to prioritise the action items in the Remediation Plan that relate to improving the efficacy of The Star’s group leadership team and the Board;
4. the NICC note the need for Star Entertainment to implement a charter for the group leadership team that imposes governance requirements designed to ensure the efficient and effective operation of that group, and take such action as it sees fit; and
5. the NICC note the need for Star Entertainment to review the operating effectiveness of the group leadership team and take such action as it sees fit.

For now, the NSW casino licence held by The Star continues to be suspended and Mr Weeks remains the appointed Special Manager of The Star Casino (with that appointment due to end 30 September 2024, unless extended).

If you have any queries or would like to discuss how the Bell 2 Report or any other matter concerning The Star or the NICC could impact you or your business, please contact us.