- Crown Resorts (CWN) said it will settle a class action lawsuit that claimed failures related to the arrests of staff in China led to a major share price drop
- The settlement for $125 million, which remains subject to Federal Court approval, was a “commercial decision”
- Crown’s shares slid 14 per cent in 2016 after it confirmed that some of its staff in China had been detained for illegally promoting gambling trips to Macau
- The settlement was made without admission of liability and Crown said it expects to recover a large portion of the payment from its insurers
- Shares in Crown Resorts are down 1.19 per cent to $9.99
Crown Resorts (CWN) said it will settle a class action lawsuit claiming the casino operator failed to inform shareholders of a Chinese marketing campaign that led to a share price drop after staff were detained in 2016.
The embattled company said the settlement for $125 million, which remains subject to Federal Court approval, was a “commercial decision made in the best interests of Crown and its shareholders.”
Crown’s shares slid 14 per cent on October 17, 2016, after it confirmed that some of its staff in China had been detained for illegally promoting gambling trips to Macau. While gambling is legal in the southern Chinese territory, it is illegal on the mainland.
“Shareholders should have been apprised of the risks that Crown was taking in China and the threat they posed to the company’s revenue streams,” Andrew Watson, then-national head of class actions at Maurice Blackburn, said in a statement in December 2017.
The lawsuit alleged that Crown knew its employees were acting illegally in China and that they were subject to a government crackdown. It also claimed that Crown deployed a number of counter-surveillance measures, including the use of code words on telephone calls, removing logos from its private jets and misleading Chinese authorities.
The settlement was made without admission of liability and Crown said it expects to recover a large portion of the payment from its insurers. However, negotiations with those insurers are still underway and the outcome, Crown warned, “cannot at this stage be certain.”
Michael Donelly, Senior Associate at Maurice Blackburn, said a class action was the only way all shareholders were able to take effective action against Crown.
“Crown’s alleged failures in our case were part of what has become one of the most serious and comprehensive breakdowns in corporate governance in Australian history,” he said.
“This case demonstrates the importance of class actions, whistleblowers and investigative journalism in holding corporations to account. Without those things, we doubt that the three separate Royal Commissions into Crown would have been established.”
Shares in Crown Resorts were down 1.19 per cent to $9.99 at 12:25 pm AEDT.