SkyCity boss Michael Ahearne' farewell message: ‘It’s fair to say the organisation let itself down’

Saturday, 28 October 2023

SkyCity Entertainment Group chairman Julian Cook dropped some heavy hints to grumpy shareholders that the casino operator will admit some of the serious allegations its Adelaide casino operation broke Australia’s anti-money laundering laws.

Speaking at the company’s Friday annual meeting at the SkyCity Theatre in Auckland, Cook apologised to a crowd of mostly older investors supplementing their retirement incomes with SkyCity dividends.

“We are acutely aware and very disappointed that in Adelaide we have not met the standard to which we need to hold ourselves,” said Cook, who was reminded by one shareholder that the company’s shares were worth around half of what they had been five years ago.

The last 12 months had been particularly damaging, with the company’s share price falling by 30%.

In December last year, Australian regulator Austrac launched a lawsuit over alleged “serious and systemic” failures in SkyCity’s systems to prevent money laundering at its Adelaide casino, prompting a sharp drop in the price of SkyCity shares.

Cook said the outcome was uncertain, but “we are hopeful of achieving a resolution to the proceedings”.

However, he warned shareholders it was likely any resolution with Austrac would involve SkyCity admitting serious breaches anti-money laundering laws.

The company had set aside A$45 million (NZ$49m) to cover legal fees and a possible multi-million dollar penalty, shareholders were told.

Cook, and outgoing chief executive Michael Ahearne, who is returning to his native Ireland at the end of March, detailed what it had done to rectify the missteps that have got regulators offside in New Zealand, where SkyCity has casinos in Auckland, Hamilton and Queenstown, and Australia.

In September, the Department of Internal Affairs, New Zealand’s regulator of casinos applied to the Gambling Commission to suspend SkyCity’s casino licence for 10 days as punishment for allegedly failing a gambling addict, who was allowed to gamble in Auckland between August 2017 and February 2021.

The news prompted another sharp fall in SkyCity’s share price.

The two self-inflicted crises followed two heavy blows to the casino group – the fire at the nearly-completed convention centre in late 2019, and the arrival of Covid-19, which saw lockdowns hit SkyCity’s revenue.

SkyCity’s board has been overhauled in the last two years, with the focus being on recruiting people able to help the group rebuild their credibility with regulators, and protect its casino licences.

That included adding former Tabcorp chief executive David Attenborough, and former TSB chief executive Donna Cooper, who led TSB after it had been fined $3.5m in 2021 for anti-money laundering failures that happened before she led the bank.

Also added to the board was former Australian regulator Kate Hughes.

Cook praised the new recruits, but admitted “it’s not been easy to find directors willing to come to this company given the issues it faces”.

Shareholders were told SkyCity had invested heavily in its anti-money laundering and its systems for identifying gambling addicts.

Angry shareholders, who have been told the dividend they will get is at the lower end of the amount SkyCity traditionally paid, appeared mollified that directors did not ask them to increase their pay.

Ahearne, who joined the company in 2017 as group chief operating officer, said SkyCity had had a good start to its financial year, thanks in part to the Fifa Women’s World Cup, and was positive about the coming months as international tourism rebounded.

It expected modest earnings growth, Ahearne said.

Other positive news was the convention centre was now back to the stage of completion it had been on the day the fire broke out, and was slated to open in early 2025.

Ahearne said he had been chief operating officer and chief executive at SkyCity in “pretty complex times”, which included him running the company’s emergency ops centre when the convention centre fire broke out.

But his final message to shareholders did not mask his disappointment over the actions regulators are taking.

“It’s fair to say the organisation let itself down. It didn’t meet the standards required. That’s clear,” he said.