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31 March, 2022

Investors hit Star Entertainment with class action after value plunged by more than $1bn

Investors have hit Star Entertainment Group with a class action, amid ongoing misconduct investigations into its Sydney casino.

Slater and Gordon Lawyers filed the class action on behalf of investors who acquired shares between 29 March 2016 and 16 March 2022, seeking compensation for “misleading or deceptive representations” the company made about its compliance with regulatory obligations.

According to the class action, filed in the Victorian Supreme Court, Star has continually held itself out as an ethical and responsible casino operator that complied with its legal and regulatory obligations.

However, widespread media reporting in October 2021 claimed that Star had cultivated high-roller players who were allegedly associated with criminal or foreign-influence operations and had failed to comply with its obligations under anti-money laundering and counter-terrorism financing laws.

In response to those media reports, Star’s share price declined by more than 25 per cent, wiping more than $1 billion from the company’s value.

The allegations also prompted the Independent Liquor and Gaming Authority tolaunch an inquiry into whether Star remained suitable to hold its casino licence, led by Adam Bell SC – the counsel assisting the Bergin Inquiry which in 2020 examined money laundering, criminal infiltration and governance failings at Crown – would examine the allegations as part of public hearings.

The royal commission-style public probe began earlier this month and has so far heard that Star misled its banks and the NSW casino regulator, ignored clear risks of money laundering occurring at its properties, and had otherwise failed to operate ethically.

Star’s long-serving CEO and managing director Mathias Bekier resigned on Monday in response to the evidence given at the public hearings.

Slater and Gordon class actions senior associate Ben Zocco said the firm’s investigation into whether investors had a case against Star began last October, and the analysis undertaken to date suggested that investors had a strong case.

“For the last six years, Star has held itself out to be a model casino operator that took its obligations seriously and followed not only the letter of the law, but the spirit of the law,” he said.

“Star insisted that it took compliance seriously and ran its business ethically, honestly and with integrity. Our investigations to date, in addition to the extraordinary evidence revealed so far in the Bell Inquiry, suggests that they did everything but.

“When investors purchase shares in a listed company, they are entitled to assume that all of the material information relevant to its financial position had been disclosed to the market.

“Our case is that Star failed to do so, and, therefore, investors are entitled to compensation for their losses.”

Lead plaintiff David Lynch said that he was disappointed to see the value of his shareholding fall so significantly and was concerned that the company may have misled him and other shareholders by representing that it was far more compliant with its regulatory obligations than was actually the case.

“As an investor, I expect that licensed operators that are publicly listed will operate in accordance with the law, and that there are appropriate checks and balances to ensure they do so,” Lynch said.

“I am dismayed by the apparent scale of Star’s misconduct that is now being revealed in the public hearings.”

The case also asserts Star’s claims about policies being in place to mitigate risks like money laundering, corruption, bribery, insider trading, and restrictions on gambling products were misleading or deceptive, as were claims that any conduct by Star’s directors or employees that was inconsistent with company values would not be tolerated.

Bekier publicly stated in 2019 in relation to Crown’s demise that although it operated in the same market, Star conducted extensive due diligence on those it did business with.

“I am very confident that we are doing the best we can to run a clean and legal business,” he said at the time.

“I feel that what we do is both lawful and is executed in a way that should give us and our investors confidence that we are doing the right thing.”

Star Entertainment Group said it intends to defend the proceedings according to a statement released on the ASX.

Featured image: iStock/kokkai

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Ben Zocco class action David Lynch march Mathias Bekier Slater and Gordon Lawyers Sydney casino The Star Entertainment Group Victorian Supreme Court