China formally arrests Crown staff amid gambling crackdown

A group of Crown Resorts Ltd. employees detained in China since last month have been formally arrested for alleged gambling-related crimes, according to a lawyer, paving the way for them to be prosecuted as the government clamps down on foreign casinos that woo its citizens to gamble overseas.

The employees were arrested last Friday and will be held for another two months for investigations, which could be extended as needed, according to Zhai Jian, a Shanghai-based lawyer who said his firm, Dacheng Law Offices, represents a group of Crown employees. Police will decide whether to prosecute the employees after the investigations conclude, he said.

The arrests signal the government in Beijing is again focusing on overseas casino operators with marketing operations in China, after arresting South Korean gaming workers  last year. The rare arrests involving foreign nationals employed by a major international company also highlight a shift in the Chinese authorities’ handling of overseas workers who flock to the world’s second-largest economy.

“In the old days, people would insist to me that the only risk was deportation. This is no longer the case,” said Steve Dickinson, a lawyer at Seattle-based Harris Moure, which produces the China Law Blog and has advised companies in the gaming sector. “Foreigners can expect to be treated exactly like Chinese nationals.”

In 2014, GlaxoSmithKline Plc’s British country manager in charge of its China unit, Mark Reilly, was prosecuted along with other China-based executives in a high-profile bribery case that resulted in a 3 billion yuan (USD436 million) fine for the drug giant.  Last year, prosecutors accused U.S.-based OSI Group Inc. of selling expired products to fast-food restaurants and sentenced ten employees to jail, including one Australian who was of Chinese origin.

Zhai said he represents employee Alfread Gomez, who is of Malaysian nationality. On his LinkedIn profile, Gomez lists himself as a Crown senior vice-president in China. A China spokeswoman for Crown in Melbourne didn’t respond to e-mailed questions about Zhai’s comments or Gomez’s position with the company.

Macau, a special administrative region, is the only Chinese city where casinos are legal. Elsewhere in the nation, it’s illegal to organize people to gamble, operate a casino or make a living from such activities. The punishment is no more than three years in jail.

The arrests send a pointed message to the casino industry, said  Richard Huang, a gaming analyst for Nomura International.

“The key message from the Chinese government is that it will take the policy on the gaming industry more seriously,” said Huang. “The law has always been there to forbid gambling marketing. Now the government is vigorously enforcing the regulation.”

The arrests haven’t affected business for casino operators in Macau, the world’s biggest gambling hub, so far, said Huang. Most casino operators rely on gaming promoters to bring in high-stakes players, and the industry in Macau has begun to shift away from those VIP players to attracting tourists and casual gamblers.

Of the 18 Crown employees detained in mid-October, one – a Chinese national who Crown said was a junior employee – was released on bail earlier this month. All the detained employees who have not been released have been formally arrested, said Zhai, who declined to specify how many of those arrested his firm represents.

Crown’s shares plunged the most on record Oct. 17 on the news that its staff, including three Australians and a Malaysian, were detained in China. Among them was Crown’s head of international high-roller operations Jason O’Connor.

The shares have since recouped those losses, and rose 3.1 percent to AUD11.49, the highest level in more than a month, by the close of trading yesterday.

Australia is continuing to seek official confirmation of the status of the Crown employees within the Chinese legal system, Foreign Minister Julie Bishop said in e-mailed statement Monday, while Australian Trade Minister Steven Ciobo said in a Bloomberg TV interview the country continues to offer consular support to the Crown detainees.

Chinese authorities had warned Crown last year to halt its efforts to attract high rollers from the mainland to gamble overseas, a person familiar with the government’s decision to detain the Australian company’s employees said last month.

Australian Financial Review reported Monday that three Australian employees of Crown Resorts, along with 13 other China-based employees of the company have been formally arrested. A fourth Australian, who is believed to work for a junket operator, was also arrested, the paper reported. Bloomberg