Australian gambling giant Crown Resorts is facing a class action following a court filing by a local legal firm Monday, alleging that Crown management did not give shareholders enough information about the risks being taken in its marketing efforts in China aimed at gambling whales.
Our readers will recall that 18 employees, including Crown’s VIP gambling chief Jason O’Connor, were detained – some of them for 10 months – following a 2016 swoop by Beijing police. They were released in August this year after pleading guilty to various offences
The case adversely impacted Crown’s VIP revenues as the company pulled back from its Chinese initiative in the wake of the detentions.
On Monday Andrew Watson, the man in charge of class actions at legal firm Maurice Blackburn, said the class action was filed on behalf of hundreds of investors dismayed at the sharp share price drop of almost 14 percent in Resorts stock on October 17, 2016, when news of the arrests became public.
He said the arrests had also raised questions about Crown’s significant investment in a dedicated VIP casino developed in Sydney, and the wisdom of taking risks in China when the Chinese government had publicised its crackdown on corruption, gambling and related activity.
“Shareholders should have been appraised of the risks that Crown was taking in China and the threat they posed to the company’s revenue streams,” Watson told local media reporters.
“Chinese authorities could not have made the risks of marketing gambling any plainer to Crown or other casino operators, yet Crown ignored these warnings.
“Fortunately in Australia, companies can be held accountable via the class action mechanism, for breaching their legal obligations to make timely and accurate disclosures to the market. Those failures affect many, many people.”
A Crown stock exchange statement confirmed that the company has been served with the action.
“The proceeding has been filed on behalf of persons who acquired an interest in Crown shares between February 6 2015 and October 16 2016,” the statement revealed, adding that Crown will “vigorously” defend the allegations against it.