James Packer’s dilemma: try to save Crown staff in China, or let the chips fall where they may?

For James Packer, 2016 was something of an annus horribilis.

He skipped off the board of his public company, Crown Resorts, in December 2015 despite the fact the decline in revenues in Macau, the world biggest gambling hub (it pulls in about six times as much revenue as Las Vegas), was at least a medium-term problem, not a short-term blip.

Instead, Packer turned his focus to his high-maintenance fiancee, US pop singer Mariah Carey. And to Israel, as documented in Crikey. 

The collapse of their relationship a year after their engagement was hardly a surprise. Packer’s track record with women is pretty poor — he’s now racked up two wives, Jodhi Meares and Erica Baxter, plus two fiancees, sometime actor Kate Fisher (now known as Tziporah Malkah) being the first.

A month later came the body blow, the arrest of 18 Crown staff in China, including three Australians, working for Crown to bring rich customers to its casinos in Macau, Australia and the Philippines.

Only one of those people has been released, and the rest remain incarcerated in Chinese detention hellholes — the rubbish being spouted by Julie Bishop’s Foreign Affairs Department that they are being “well treated” defies belief of anyone with any insights into a detention system (no bail in China) that is described by a former Australia resident of these centres as being “designed to break you”.

The scandal wiped a hefty sum off the Crown share price, and it’s barely recovered. Packer’s Asian strategy is in tatters, and his Australian business is now taking the hit that was always coming. What Chinese high roller in their right mind (or without impeccable political connections in Beijing) would be playing at Packer’s tables right now?

Due to the fact that Packer still controls about 48% of Crown’s shares and it boasts a board almost completely devoid of any experience in the gambling sector, it is a family-run and controlled publicly listed company and gets surprisingly scant coverage by analysts.

Analysts at Credit Suisse estimated that Crown’s VIP revenue, coming from the lucrative whales who are the reasons its staff languish in jail, will be down a whopping 40% in the 2016-17 financial year.

That is the big problem Crown now faces in what looks like another bad year. Robert Rankin has shifted a few seats down the boardroom table from director to a regular board seat, his “penance” for the the spectacular China (well, there’s no other way to say this) fuck up. All evidence points to Crown’s board blithely ignoring a series of pointed warnings to the sector by the Communist Party leadership, or even more stupidly, thinking they could outsmart them. Trying to play the Communist Party on home turf is a bigger mug’s game than shoving money into one of Crown’s misery (slot) machines, as there is pretty much a 0% chance of winning.

Now Packer wants his company, as he does from time to time (and may be doing himself now in Israel now he is back on the market) to trim down and operate more “leanly”.

So Credit Suisse reckons a major cost-cutting drive is about to be launched; the company needs to do something to keep its share price afloat.

Packer could be trimming back in other ways too, with Hollywood Bible Variety reporting this week that he is keen to sell out of the RatPac-Dune Production company, which has had varying commercial success. It was his RatPac partner, Hollywood director/producer Brett Ratner, who introduced him to Carey, so maybe it’s a bigger clean out?

But let’s move on from one Australia’s richest men, who now makes his fortunes from an industry that wreaks untold financial and emotional damage to tens of thousands of Australians and their families.

While it is a near certainty that the Crown employees will go to jail (they are currently in “detention”, not that it is much better), what happens next is not as certain — do they stay in China for most of their sentences or can they serve out their sentences in Australia?

Australia already has a prisoner exchange program with China, but it has rarely been used so far despite the mounting numbers of Australians in Chinese jails. Now an extradition deal is on the cards.

The Chinese are champing at the bit to drag back who knows how many officials for spending up illegally acquired money in Australia under its global “Operation Foxhunt” program. The problem for Australian lawyers is that they send Chinese nationals back to an opaque system, run by the Communist Party, where they would certainly instantly lose everything. Labor has grave reservations, but the Libs are keen to strike an extradition deal, worried about trade (or donations).

And here lies the exquisite dilemma for the Packer lobbyists: help push the Chinese side to get a better deal, perhaps an exchange program for their incarcerated staff, or strike another deal, leaving all those ill-gotten gains sloshing around Sydney and Melbourne and finding their way to the Packer gaming tables.

In the meantime, with VIP revenues falling through the floor, and Chinese “whales” studiously avoiding Packer properties, where to for the all-VIP Barangaroo and the new tower approved in Melbourne yesterday, a casino and a hotel whose business models must surely be built around Chinese money?

Yep, Packer, who must already front Israeli regulators to explain lavish gifts to the PM’s family, sure has some year ahead.