On 24 February this year, James Packer was ready to hatch his new casino plan. His chosen method was an exclusive interview with Australian Financial Review, who reported that Packer wanted to expand Crown from its current home in Melbourne. He planned to spend $1.5 billion on luxury hotels at Crown Perth, where he is expanding a casino, and Sydney, where he wants a VIP casino.
Packer’s hope is that Australia will become the top destination for Chinese high rollers. This will be tough, as the competitive Asia Pacific gambling market is rapidly growing. There are already two huge luxury casino resorts in Singapore with more planned in Malaysia, the Philippines and Taiwan. The gambling hub of Macau, where Packer is also in business, will soon dwarf Las Vegas.
It took NSW Premier Barry O’Farrell just two days to back Packer’s "exciting" plan on the grounds that it would bring jobs and tourists to Sydney. NSW Treasurer Mike Baird also told AAP that Packer should be "commended" for his "bold vision" and that he "would put his name on the table" in support of the plan, although it would have to go through "a whole range of processes."
So it was not surprising that it took Cabinet only a few days this week to approve the plan under stage one of O’Farrell’s new "unsolicited proposals" scheme, which considers whether proposals offer benefits to the state. There has been no mention of any consideration of costs. The SMH has also reported today that Packer may not have to pay a license fee because it is a high roller casino and thus there may be no tender. At a celebratory business dinner last night, Packer reportedly explained this by saying there was no need – he would win it anyway.
Assuming all this goes to plan, the exclusive license, which would normally be required by law to go to tender, would not be granted until 2019 when Echo’s exclusive license expires. This hardly poses a problem for Packer, because the hotel will take until 2018 to build.
O’Farrell would also not have been surprised that Packer wanted a casino because as he said in February, "just about every time I see Mr Packer he expresses interest in running a casino in Sydney and offers other suggestions on boosting tourism."
For his claim that a new casino would boost economic activity in NSW by $300 to $440 million per year, Packer relies on a report commissioned from Allen Consulting Group by Crown. Two years ago, the Australian Casinos Association, of which Crown is a member, commissioned another report (pdf) from Allen Consulting on the role of casinos in the Australian economy. The report did not explore negative economic and social costs. New Matilda wanted to know when O’Farrell first spoke to Packer about the casino plans and whether he had seen a copy of the report. O’Farrell declined to answer these or any other questions. NM’s questions and responses can be found here.
Packer’s two previous attempts for a casino in Sydney had been marred by political conflict. This time he was adamant that there must be bipartisan support. It was soon clear this would not be a problem.
NSW Opposition leader John Robertson was quoted by the Daily Telegraph of accusing O’Farrell of being slow to support the development; Robertson was interested to see the proposal himself. Amongst the most enthusiastic supporters was Robertson’s good mate John Lee, head of the Tourism Transport Forum (TFF). Lee, who is a former head of the Premier’s Department under Labor.
On the same day as O’Farrell welcomed Packer’s proposal, Lee was urging action: "In Sydney, we have just got the digging machines out. We are sick of this can’t do attitude … let’s encourage people to freshen up the city, and make it better so it can be the global city it deserves to be". The Chairman of the TFF is Bruce Baird, the father of Mike Baird, a former minister in the Howard Coalition government. O’Farrell used to be his Chief of Staff.
Backing also came from Canberra with the Federal Minister for Tourism Martin Ferguson offering support, along with the head of Tourism Australia Geoff Dixon, who is on the Board of Crown.
The only vocal political critic was NSW Greens MP John Kaye, who voiced his concern about the government’s rapid embrace of Packer’s plan. "This is going to be a test for the state government," he told The Australian. "Are they going to stand up to Packer, or will they do what they always do with multi-billionaires and let them have what they want?". Kaye told NM this week that he is appalled that normal legal and planning processes are being subverted by O’Farrell’s handling of the proposal. Kaye remains opposed to state dependency on casino taxes as well as the social costs of casinos, whoever the gamblers might be.
The chorus of support for Packer’s February announcement was not spontaneous. It is the result of a careful strategy built up through a keen Packer awareness and some positive experiences of how important favourable relationships with government are in the media, tourism and gambling industries. The strategy was seeded decades ago when James’ grandfather Frank Packer directly funded the campaign that brought Liberal Premier Bob Askin to power in the 1960s. Askin played cards with Frank at his Eastern suburbs home. Kerry’s brother Clyde was a NSW Liberal MP.
James Packer continued to build those Liberal links. He has been friends with Victorian Liberal powerbroker and banker Michael Kroger and ex-Coalition treasurer Peter Costello who he describes as a "very good friend". Kroger’s ex-wife Ann Peacock, daughter of the ex Federal Liberal leader Andrew Peacock, now heads Crown’s PR division. Through Costello and Kroger, Packer met Jeff Kennett, ex-Victorian Liberal Premier who, despite his Melbourne roots, is supporting the Sydney casino plan. (Part of Packer’s attack on Echo Entertainment involved promoting Kennett for its chair. He was not successful).
John Howard’s Minister for Communications, Helen Coonan, joined the Crown board only days after resigning as a senator last year. She is being paid $116,000 a year, as well as receiving complimentary access to Crown facilities in Melbourne and Perth. At the time of her appointment, Independent Senator Nick Xenophon told Fairfax reporters, "It’s sad to see that someone with such a distinguished career in public life will become part of an industry that causes so much misery in the community," while World Vision CEO Tim Costello commented on her "indecent haste".
But Packer’s links on the Labor side of politics are equally as strong. In March 2011, Karl Bitar resigned as National Secretary of the ALP. In February this year, Labor sports minister Mark Arbib resigned from parliament and also joined the Packer team soon after. Part of Bitar’s job was to block Independent Andrew Wilkie’s plan for poker machine reform. He and Arbib’s jobs now include lobbying the Federal Labor government for high rollers to receive fast-track visas and be shepherded through customs so that we can become more competitive with the booming casino industry in Singapore.
Bitar and Arbib join a long line of the Packers’ Labor men, a history which goes back decades. ALP President and famous fixer John Ducker was involved with the Packers through a seat on the board of their company PBL in the late 1970s. At the time Kerry Packer got great deals from the Wran government for the Perisher Ski resort and Lotto gambling concession.
Ducker was followed by a new powerbroker, Graham Richardson, once Minister in the Hawke government, who was a well paid consultant for the Packers. He was followed by Peter Barron, who was NSW Premier Neville Wran’s press secretary and later Prime Minister Hawke’s chief of staff after which he joined Kerry Packer to work on making sure media regulation suited the big media owners.
As he faces his current battle, James Packer not only draws on this long tradition but he has amassed his own impressive corporate and political links. NM has compiled a list of Packer business and political network which can be found here.
A casino on Sydney harbour?
The location of the hotel and casino complex was the aspect of Packer’s proposal that attracted most criticism. The February announcement was for a 2.8 hectare complex on public land at Barangaroo Central. After a public outcry, the plan moved to a more modest locale on Barangaroo South, but still on public parkland. Lend Lease, the main commercial player in Barangaroo, still has the original planning approval for a high-rise hotel on the water – the plan endorsed by Paul Keating.
In 2010, there was a huge campaign against the Barangaroo development including a petition of 10,000 signatures that was presented to parliament. Sydney City Councilor Marcella Hoff, the Greens, ex-leader of the Green Ban movement Jack Mundey, and the Barangaroo Action Group were all involved in campaigning against the development. They were critical of then Opposition leader Barry O’Farrell for not calling for the deal with Lend Lease to be made public. The last thing O’Farrell needed was for them to regroup.
Architect Philip Thalis, who was on the original Barangaroo Design winning team told the media in February he was horrified at the way decisions are being made. "This just shows what a complete failure of planning we’ve had in Sydney," he said. The SMH made their position on the hotel clear when they published a front page mock-up of the hotel, describing it as the "worst of Dubai" The story quoted Sydney Lord Mayor Clover Moore accusing O’Farrell of risking years of planning work by backing James Packer’s plan ”to plonk a clumsy Dubai-style hotel with a new mega-casino right in the middle of Barangaroo Central”.
So if Packer’s plan was not to blow up in their face, O’Farrell and ex-Labor PM Paul Keating, who is deeply involved with the Barangaroo development as the Chairperson of its Design Excellence Panel, needed a solution for Packer. They told Packer to go and see Lend Lease, who had also been given a 99-year commercial lease on the publicly owned Southern part of Barangaroo.
Lend Lease and Packer got together and in August Packer announced the change of plan. He had signed a two year exclusive agreement with Lend Lease to develop its resort. Now the resort would be built alongside three commercial towers that had already been approved. In fact, Packer was the only contender for this agreement – no other hotel operator was interested in that site.
Leaving nothing to chance with the media this time, Crown placed 18 full page ads in News Ltd publications and the Australian Financial Review. The Age and SMH, some of whose journalists had been critical of the proposal, were not included. Packer had already told the Australian he regarded some SMH journalists as "pissants".
In September a well placed Lend Lease source told NM that the relocation of the hotel could not proceed until a new master plan for South Barangaroo was developed for the site. Approval had not yet been given for that by the Barangaroo Delivery Authority. Any change would require public consultation and full planning approval. He reminded NM that Lend Lease still has legal approval for a hotel on the water on Sydney Harbour. (Lend Lease also has good government contacts. The company is a client of Crosby Textor, of which Liberal strategist Mark Textor, who speaks regularly to O’Farrell, is a director).
Whatever the motives, the casino’s relocation to South Barangaroo took the sting out of the critics. But this week, just as O’Farrell was announcing cabinet approval, Keating had a change of heart. As ex-Fairfax property editor Jonathan Chancellor – now a contributor to The Power Index – reported yesterday, Keating now thinks Lend Lease and Packer should bulld the hotel casino on Sydney Harbour. He blames the shift to the South on, "Clover Moore, Darling Island residents and The Sydney Morning Herald" – leaving one to wonder whether creating confusion is not part of the O’Farrell government’s new planning process.
The Casino Tycoon and the Anti-Gambling Campaigner
While Packer was off negotiating with O’Farrell, Keating and Lend Lease, Greens MLC John Kaye moved a motion in the NSW Legislative Council in May this year that NSW did not need a second casino. He warned "the decision to allow the Barangaroo casino plans to proceed may become a backroom deal between the Packer family and the O’Farrell government." He called for any further decisions to be part of an independent and transparent process and for the government to focus on creating non-gambling tourism possibilities. The motion was defeated with Labor opposing it.
Then in August, it looked like the plan might hit a parliamentary roadblock when Labor and the Greens moved an amendment to an anti-smoking legislation package that would have meant that a special exemption which allows high rollers to smoke would be removed. It looked like the amendment could pass with the support of two Christian Democrats, including the 78 year veteran anti-gambling and smoking campaigner Fred Nile.
Packer was worried; he headed for Parliament house for an unusual meeting with Nile.
Nile told NM in September that he decided to vote against the amendment out of concern that the NSW government would otherwise dump the whole package of legislation which bans smoking in outdoor places. He said Packer told him that "he believes he can produce an air conditioning facility that would guarantee no health impact on the staff". Nile says he told Packer that it should be "a legal requirement, so it wasn’t just left to the operators of the casino to make up their own mind what they wanted. They’d be required by law to fulfill certain health requirements. And he was willing to do that".
Kaye tabled a 2005 expert report in NSW parliament stating removing the smoke "would require a veritable indoor tornado". Nile dismissed the report as "outdated".
Asked how he reconciled his previous statement, that "casinos are of no social value and a blight on society", Nile said he views Packer’s six star hotel as a great tourist attraction and his party had not made a definite decision yet. He told NM that his support would be conditional on inclusion of the special air conditioning requirement.
Watching the possibility of scotching the casino slip by, Kaye did not hide his frustration. He told the Legislative Council on August 15:
"If Jamie Packer can call the shots in this House and the amendments do not succeed then the people of New South Wales will know full well that the occupational health and safety of workers in casinos is being compromised and sacrificed to fatten the profits of Jamie Packer. It will show that Jamie Packer can exercise his political power over members in this Chamber. It is a disgraceful situation and one The Greens hope to bring to an end."
With the amendment defeated, Packer must have breathed a sigh of relief. Although he was still concerned enough to have another chat with Fred Nile this week.
It says something about Packer’s personal power that he was able to convince Nile that something which is technically impossible could be included in a new law. Like Nile, Labor has made its support for the new casino conditional on their being no poker machines but unlike Nile, it has not included any condition about smoking in the casino. Nile repeated that condition to the Daily Telegraph last week.
Last night, Packer told a celebratory business dinner in Sydney that success had not involved any lobbying but was just due the "strength of a really good idea". He described how he spent his younger years watching his gambling addict father losing money in casinos. Lots more people like his father are what he and O’Farrell are banking on bringing to Sydney. Packer promises there will be no more poker machines although he admits that this is "virgin" territory.
This is crucial; Labor and Nile will not vote for a second casino if it’s packed with poker machines. But Sydney could end up in the same situation as the Adelaide casino, which started as high roller only but ended up with pokies. Labor has also said that the hotel must take up no land allocated as public space.
The Tourism Forum’s John Lee is thrilled. He told the ABC, Sydney will be back on the international destination map, although he feels a little sorry for O’Farrell who will be criticised whatever he does.
Read part one Wendy Bacon and Lawrence Bull’s series on Kerry Packer here. Read part three, Echo in the Eye of the Storm, on Monday.