Inside Story

Last gasp for the Packer mystique?

His father’s media empire is long gone, but James Packer is still treated with kid gloves by both sides of politics

Rodney Tiffen 27 August 2019 2290 words

Lingering leverage: James Packer after Crown’s 2017 annual general meeting in Melbourne. Tracey Nearmy/AAP Image

“The old man told me to ring… This is the message: if we don’t win the casino, you guys are fucked.” Despite the eloquence of James’s calls to NSW cabinet ministers, the Packers didn’t win that licence in 1994. John Fahey’s Coalition government was more impressed by the other major contender, a joint venture of construction company Leightons and American casino operator Showboat, which was offering $80 million more.

The Packers didn’t accept defeat graciously. Using information provided by the company, opposition leader Bob Carr raised allegations about the behaviour of its rivals, and particularly American police concerns about Showboat’s links to organised crime, under parliamentary privilege.

This sequence of events was revealed by reporter Sally Neighbour and producer Mark Maley in a 1997 Four Corners program. The reaction to the program, which was called “Packer’s Power,” confirmed its title: Kerry Packer sued the ABC for defamation for implying he had improperly gained the American information, and a vigorous if comical parliamentary controversy ensued. The Liberals, now in opposition, sought to condemn Carr, now premier, for using “stolen” information, but carefully avoided any imputation that people connected with Packer might have done the “stealing.” Sydney Morning Herald correspondent David Humphries commented on the “strange reluctance” to mention the person at the centre of the story, even under privilege. MPs, he wrote, “baulk even at mentioning the Packer name.”

When Kerry Packer died in 2005, he was said to be the richest man in Australia. According to the business magazine BRW, James inherited a fortune of somewhere around $6.5 billion. The empire was still mainly in media, though it also included the Crown casinos in Melbourne and Perth.

That inheritance hasn’t proved a recipe for happiness for James. His sympathetic biographer, Damon Kitney, says the younger Packer — a chain smoker who has battled obesity, alcoholism and prescription drug addiction — has had three nervous breakdowns. Most of his friendships seem to have been temporary, and his two engagements and two marriages have failed.

Among James’s inheritances was a recurrent pattern of father–son relations that even Freud would have found thought-provoking. On several occasions, Kerry Packer said that when his father, Frank, died it was the happiest day of his life (although in public he was much more complimentary). Although there was more humanity in the relationship between Kerry and James, it still had a strong bullying streak. Kitney gives countless examples of James as a young man brought to tears by his father’s cruelty. Packer’s partner in the ill-fated One.Tel venture, Jodee Rich, told the ABC that James was “a loving son” but Kerry was “an extraordinarily evil father.”

James’s approach to his own business career seems to be haunted by the Kerry Packer legend, despite much of it being more myth than fact. Kerry’s inheritance from Frank was not only very substantial but also included almost unassailable strategic assets. He found himself with Australia’s most successful commercial TV network, Nine, the only company that owned stations in both Sydney and Melbourne. He also inherited Australia’s biggest and most profitable magazine stable.

Kerry was launched from the very rich to the mega-rich by two people — Paul Keating and Alan Bond. The first step came when the Hawke Labor government, driven by Keating, rewrote the media ownership laws in 1987–88. It introduced bans on cross-media ownership between television and newspapers, and lifted the limit of TV ownership from two stations to a percentage of national reach (originally 60 per cent). The effect (and perhaps the intent) was to advantage Packer, who had no newspapers, and Murdoch, who had to sell out of television anyway because he was no longer an Australian citizen. The victims were John Fairfax and the Herald and Weekly Times, both of which owned newspapers and television stations in ways that made it impossible for them to expand in the new environment.

Many potential broadcasters saw this as a last opportunity to buy into television, and within months all three commercial networks had changed hands. Murdoch sold his two Tens and Packer his two Nines. One stockbroker estimated that their combined price before the policy change was $800 million, but now they sold for $1.9 billion, a government-generated windfall of $1.1 billion for the two moguls. Keating told caucus that Packer was a “friend of Labor.”

Alan Bond bought Packer’s two channels for around a billion dollars. A few years later, with his corporate empire in terminal decline, he was unable to pay the final $200 million, and Packer regained control at virtually no cost. He had pocketed around $800 million yet again owned the network. “You only get one Alan Bond in your life,” he famously remarked. He was at the zenith of his power, with the other two networks deeply in debt.

From then until his death, Packer’s business achievements were negligible. His bullying style cost him as many opportunities as it secured. He lost huge sums of money — largely out of the public eye – on misplaced currency trading, in 1993 alone losing half a billion dollars. Increasingly a corporate dinosaur, he even barred his daughter from any involvement in the company and insisted that neither of his children attend university.

James was already determined to move the empire out of media and into casinos. Partly this was a shrewd business judgement — he saw that media stocks were overvalued and gaming stocks undervalued, and that there were chances to build internationally. Less than a year after Kerry’s death — and on the very day, 18 October 2006, that the House of Representatives passed laws making media ownership laws more permissive — he announced the sale of half of his company, PBL, to a private equity company, CVC Asia Pacific, for around $4.5 billion. The communications minister at the time, Helen Coonan, now a Crown board member, expressed surprise at the speed of the deal. Between then and 2012, James essentially sold all his media assets, usually at a good price, and cashed up to move into casinos.

Casinos suited James perfectly. They have very high initial costs, making ready access to capital a big advantage. In most jurisdictions, they are limited in number, circumscribing competition and making political connections crucial. And they tend to be guaranteed money generators requiring little agility or intelligence in strategic management. The logic of casinos is that customers lose more than they win. It is essentially a trade in human misery.

A crucial breakthrough came in 2012 when James finally secured a Sydney casino, almost two decades after he and his father had missed out. The new Coalition state government had an “unsolicited proposals policy” whereby companies could enter into direct dealings with government and, if they received a positive response, secure an agreement to lock out all other competitors.

After seeing premier Barry O’Farrell in August, James was able to gain approval for his Barangaroo project without facing a tender process or an independent public review. Situated on the northwestern edge of the Sydney CBD, the project involves a casino, a very large “six star” hotel, a shopping and dining precinct, and some parkland. The casino will be aimed at high rollers only, especially from Asia. When the consortium proposed several important changes after the application had been approved, journalist Mike Seccombe was moved to observe that “ordinary rules don’t seem to apply to James Packer.”

Whatever the merits of the proposal, the lobbying was spectacularly successful. Not only did the state government support the project, but so did the Labor opposition and Fred Nile of the Christian Democrats, as well as the self-anointed high priest of Sydney planning, Paul Keating.

Packer’s plan to build a global gaming empire has been less successful. He has gone through periods of spectacular expansion, especially in Macau and the United States, but more recently has retreated.

By late 2016 he was dealing with overlapping crises. Investigators in Israel were looking at whether his very generous gifts to prime minister Benjamin Netanyahu broke Israeli laws. He felt that the overall financial health of his empire was questionable. He broke up with the singer Mariah Carey. And in October, most dramatically, nineteen Crown employees were arrested in China.

Crown was operating in China’s “grey” area. Casinos there are illegal, and advertising them is illegal, but advertising “resorts” is not, and companies called “junkets” arrange overseas trips to such resorts for heavy gamblers. In theory, Chinese people are only allowed to take US$3200 into Macau, but casinos there made lines of credit available to big gamblers.

Several warning signs suggested that the Chinese government was tiring of this deliberate dancing around the law, but Crown seems to have blithely ignored them until it was too late. In Los Angeles, Packer’s response to news of the arrests was to go on an alcoholic binge.

In May this year, Packer sold almost half his stake in Crown to his friend and business partner in Macau, Lawrence Ho. Lawrence and James are both sons of famously wealthy fathers. In Lawrence’s case, this is the widely known Stanley Ho, now in his nineties, who was the central figure in the development of casinos in Macau but has been barred by several authorities because of his criminal links. Lawrence’s ability to buy into Crown depends on showing that his companies have no links with his father’s.

Packer’s life seemed to regain some equilibrium after the sale. But then came another blow that may or may not have lasting consequences.

Earlier this month, a team led by Age journalist Nick McKenzie aired spectacular revelations about Crown in that newspaper, in its stablemate the Sydney Morning Herald and on Channel Nine’s Sixty Minutes. Based on tens of thousands of leaked documents and interviews with key informants, the reports highlighted how Crown sought to attract high rollers (“whales”) from China, showed that Crown had close relationships with the junkets that arranged the trips, and demonstrated that some junkets had links with triads.

The reports charged that Crown turned a blind eye to money laundering, and to junkets providing sex workers and drugs for whales, and connived in subterfuges to circumvent Chinese laws about gambling. A former senior public servant described how two government ministers had lobbied him for a facilitated service for private jets bringing Crown’s whales into Australia. The high rollers’ distasteful behaviour included being taken to properties where they could shoot wombats.

The most notable aspect of the parliamentary debate following these dramatic revelations was the contrast between the strong stand taken by members of the crossbench and the silence of the major parties. Andrew Wilkie, a long-time campaigner against the damage done by poker machines, reported how a driver for Crown told him that high rollers would disembark from private jets at Melbourne airport, come through with as many as fifteen bags unchecked by Customs, and be taken straight to the casino, where they were provided with sex workers and drugs. Police were said to refer to Crown as The Vatican, an independently governed state where the laws of Victoria and the Commonwealth do not apply.

Wilkie also recounted a range of other accusations he had outlined before in parliament, including Crown’s allegedly tampering with poker machines, and allegations that cases of domestic violence and drug trafficking had occurred on Crown property. He proposed a parliamentary inquiry, but both major parties voted against it.

Eventually, attorney-general Christian Porter referred the allegations to the Australian Commission for Law Enforcement Integrity, or ACLEI, a tiny anti-corruption body criticised by the National Audit Office for its failure to bring cases to conclusion. Given the narrowness of ACLEI’s remit, the referral was clearly inappropriate: it can only examine criminal conduct by law-enforcement officials, not by ordinary public servants or ministers and their staffers, and it can’t probe abuses and improprieties that fall short of criminality.

The reactions to the scandal also raise two deeper questions. First, why do governments and regulators continue to tolerate abuses by casinos? Crown Resorts has failed, for instance, to satisfy the gambling regulator about nine serious problems it was meant to fix by 1 July this year. Sydney’s Star casino is exempt from the state’s lockout laws. Licence conditions come with a three-times-and-you’re-out provision, but Star breached them twelve times in twelve months without censure. High-roller rooms don’t need to observe tobacco control laws.

The easy answer is that casinos are a source of revenue for perennially cash-strapped state governments. But the leverage goes in both directions. If regulations were properly enforced, the operators wouldn’t simply abandon their enormous investment in the business; they would be forced into line. Perhaps the latest revelations will finally energise the regulators.

Second, why does James Packer enjoy such power on both sides of politics? It was clear why Kerry Packer got what he wanted from governments: as Bob Hawke’s communications minister, Michael Duffy, once said, “There is no doubt that the politicians gave Packer what he wanted because they felt it was good politics to do so.” They were afraid he would use his media as a political weapon.

But James has no such weaponry. He can’t plausibly threaten that politicians will be “fucked” if they don’t follow his wishes. Nor is he likely to be a sympathetic figure in any political conflict — casino operators probably rank lower than journalists and real estate agents in public esteem.

My guess is that the Packer name still conjures a mystique that the reality no longer justifies. But if the recent revelations lead to more official action, then Packer, despite his wealth and despite his political connections, may find himself more politically naked than he is used to. •