Casino Control Authority Inquiry

Mr CARR (Maroubra - Leader of the Opposition) [4.12]: I move:

That this House notes as a matter of public importance the selection of the preferred applicant by the Casino Control Authority.

Yesterday's submission to the Casino Control Authority by counsel assisting Mr Allaway is extraordinary. Mr Allaway argued that Leighton Holdings Limited failed the probity test. He said that the company should not be involved in the management of the casino, yet he also argued that it should be free to maintain its shareholding in this multimillion dollar project. Section 12(2)(h) of the Casino Control Act states that a licence must not be granted to those who fail the probity test and are connected with the ownership of the preferred applicant.

The community has a right to know how Leighton can maintain its shareholding in the consortium after it has failed the very probity test set for it by this Parliament. The community has a right to know how Showboat, as the partner of Leighton, can continue to operate while its partner has failed to demonstrate probity. There will be a public scandal if this partnership goes ahead after the submission. It will be a reward for deception. I am sure that not one honourable member sat in this House and thought that if one party failed the probity test the casino licence would still be issued to that consortium. The reward for failing the probity test is, in Mr Allaway's submission, a lucrative building contract. According to his analysis, Showboat and Leighton were not close associates. The people of New South Wales are left with a multimillion dollar casino, 100 per cent controlled by United States interests.

According to Mr Allaway, the Casino Control Authority attempted to make contact with the Federal Bureau of Investigation, but that contact was never made because the Casino Control Authority did not go through the correct protocol. This is now a matter of grave concern. This matter of public importance is about the rights and responsibilities of this Parliament. When this Parliament established the Casino Control Authority under the Casino Control Act it did not give either the Government or the authority a blank cheque in regard to the casino licence. In the past seven months there has been an orchestrated attempt to prevent this Parliament from exercising its responsibilities. There has been a deliberate campaign of intimidation. At the heart of this campaign, led by the Premier and the Chief Secretary, has been the attempt to mislead the public about the status of the preferred applicant - the Leighton-Showboat consortium.

To that end, the Premier, the Chief Secretary, the financial backers of the consortium and, I have to say, the consortium itself, embarked upon a campaign of misrepresentation without precedent. On 6 May 1994 the New South Wales Casino Control Authority
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and the Chief Secretary announced the Leighton-Showboat consortium as the preferred applicant for the Sydney casino licence. The press release heading said it all: "Sydney Casino Winner Announced". There was no mention of ongoing inquiries of any outstanding concerns, yet, as the Opposition has shown, serious concerns about probity remain. These concerns are: the involvement of Leighton in payment and acceptance of losers' fees; the links between Star Casino's owner, Louis Roussel III and organised crime; and probity concerns over the Showboat Australian directors, John D. Gaughan and J. Kell Housells Jnr.

I turn, first, to Leighton, the subject of yesterday's unfavourable submission. On 16 May the Chief Executive of the Casino Control Authority, Lindsay Le Compte, said that the two casino consortia had undergone probity investigations and the authority was happy with both. On 17 May the Sydney Morning Herald identified Leighton as one of several building contractors nominated by the New South Wales Royal Commission into Productivity in the Building Industry as having received and given over $4 million in losers' fees on six different building projects. On 18 May the authority said it was aware of the circumstances surrounding the naming of Leighton contractors in the building industry royal commission. The press release stated:

. . . the Authority had been given access to an opinion by a Queens Counsel who concluded that the practice of the payment of "losers fees" to unsuccessful tenderers did not contravene the Trade Practices Act or the general law.

When the Minister was interviewed on the 7.30 Report she clung to this opinion. She said, "Oh, there is a Queen's Counsel's opinion on this. Everything is all right". She quoted it as it if were a Queen's Counsel's opinion that she had commissioned. This legal advice was meaningless. The Queen's Counsel's opinion was provided to the authority by Leighton and commissioned by the Master Builders Association - a party subsequently discredited by the royal commission. The Chief Secretary, and Minister for Administrative Services said, "Oh, we have a Queen's Counsel's opinion on this", implying that it was as fresh as paint, but that opinion was provided before the royal commission had heard any evidence about unsuccessful tenderers. No independent or alternative advice was sought by the authority.

Finally, and most importantly, Mr Le Compte chose to hide the origins of the opinion to lend credibility to his defence of Leighton. That is unforgivable! Le Compte violated his duty to be impartial and independent - to be a public servant. He is meant to be the public watchdog, not a lap-dog in this affair. On 30 August the Trade Practices Commission commenced legal action against Leighton Holdings Limited as one of four companies charged with conspiracy to defraud the State Government of money relating to Commonwealth offices in the Haymarket. So much for the authority's clean bill of health! The Opposition has been vindicated by the decision of the Casino Control Authority to hold an inquiry into probity concerns.

This Minister and the Premier said on 6 May, "A winner has been announced. There are no further probity concerns". All this material has come out because we raised the issue of probity. We made it an issue. Statements made by members of the Casino Control Authority remain, however, a great cause for concern. Because of these statements the impartiality of this inquiry has always been in doubt. Comments made by members of the authority suggest that the inquiry was set up for one reason, and one reason only - to defend and justify the authority's decision to grant preferred applicant status. On 18 August this year Mr Lindsay Le Compte said in the Australian Financial Review that the inquiry would give the authority "a chance to justify its actions". Some independence! Some searching inquiry! The inquiry has been set up to justify the decision already made. Mr Le Compte went on to say:

It's important in confirming our credibility, which until now we did not think was in question, but Mr Carr obviously did.

Mr Le Compte has said that he is conducting the inquiry to protect the credibility of the casino authority, not to investigate matters of probity. The terms of reference of the inquiry are clear. Nowhere do they refer to confirming the credibility of the authority or justifying its actions. I remind the House that the inquiry is not about the integrity of the authority, Mr Tobias or Mr Le Compte. The inquiry is about the suitability of the Showboat group to run a casino in New South Wales under our legislation. If the inquiry is conducted properly, the people of New South Wales will make their own judgment on the credibility of the Casino Control Authority and its handling of probity checks. Evidence has emerged which raises concern about directors of Showboat Australia. The Opposition has obtained a 1988 report by the Division of Gambling Enforcement, New Jersey, raising the most serious questions about the probity of Mr Gaughan. The report stated:

John D. Gaughan is unable to establish by clear and convincing evidence his suitability for qualification as a director and shareholder of Showboat International.

It stated also that investigations by the division "reflect adversely on his good character". The report found that between 1936 and 1951 Gaughan ran illegal gambling operations in Nevada and was charged with such offences four times. In 1951, together with two others, both illegal bookmakers, Gaughan bought a 10 per cent interest in the Flamingo Casino in Las Vegas, whose principal owners were described as "persons with unsavoury reputations and questionable backgrounds". One of the owners of the Flamingo Casino was Chester Sims, a business associate of the notorious killer, mafia figure and financier, Meyer Lansky. [Time expired.]

Mrs COHEN (Badgerys Creek - Chief Secretary, and Minister for Administrative Services) [4.22]: In speaking to this matter of public importance it is vital that I examine the motivation that lies behind the debate. Honourable members should make no mistake: this is part of the continuing attempts of the Leader of the Opposition to deal
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himself a stake in the casino action. It is the work of a man with vested interests and questionable motives who simply cannot be trusted on casino matters. It is the work of someone who will try anything he perceives might somehow delay, thwart or prevent the awarding of the casino licence. It would be a naive person indeed who did not think that the Leader of the Opposition was playing an underhanded game on casino matters. I mean that he has been up to far more than his usual political mischief-making. How do I know that?

Events to date speak clearly for themselves. On 10 August the Leader of the Opposition was part of the gang of three attack on the casino project. The day before, the Prime Minister had apparently risen, like Lazarus, from his sick bed to criticise the location of the casino. The day before that, Frank Sartor, the Lord Mayor of Sydney, had announced a legal challenge against the development. Lo and behold, it was then the turn of the Leader of the Opposition. What did he do? The Leader of the Opposition announced that he had concerns about the preferred applicant, but he refused to detail those concerns. What reasons did he give for his actions at the time? He said that he raised the matter to prevent the Government from granting the casino licence, but needed parliamentary privilege before he could make his concerns known. I agree that he needs the protection of Parliament for his cowardly behaviour. Neither reason held up to scrutiny. For a start, the Casino Control Authority issues the licence, not the Government. Also, the licence was not due to be issued until November. If the Leader of the Opposition had given his information to the authority, he would have been covered by the secrecy provisions of the Casino Control Act. So why did he do it? I quote from the editorial of the Sydney Morning Herald of 12 August:

But Mr Carr's insistence that he has material which casts doubt on the probity of the preferred applicant for the casino, and his continued refusal to make that material available to the Casino Control Authority, is unquestionably an attempt to politically interfere with the awarding of the casino licence . . . We can only guess at the motives for Mr Carr's reckless behaviour.

That same day, coming under heavy pressure from the Government and the news media to release the information, the Leader of the Opposition did a U-turn and released the material. I have no need to remind the House of the great lie of the Leader of the Opposition, that he got his report from publicly available resources. Today is 75 days since he uttered that lie. He has already proved his inability to defend himself on this grey issue. But did the dishonest behaviour of the Leader of the Opposition stop there? Of course not! Next he suggested that he held more material relating to Showboat, but again he refused to give it to the Casino Control Authority.

In keeping with its charter under the Casino Control Act, the authority - no doubt sick to death of the irresponsible actions of the Leader of the Opposition - announced an inquiry so that the Leader of the Opposition and anyone else who so desired could bring forward information, knowing that it would be fully aired in a public domain. Then came the next deception. The Leader of the Opposition told anyone who would listen - and he has done so again today - that the holding of the inquiry justified his actions. In fact, it was his continued decisions to withhold information which led to the inquiry - hardly something of which the Leader of the Opposition could be proud.

Next, the Leader of the Opposition finally agreed to provide his information to the inquiry, but steadfastly refused to appear before it. Coward Carr was at it again. I could go on for much longer about the deceitful actions of the Leader of the Opposition on casino matters, but I have stated my point. The Leader of the Opposition has vested interests in overturning the casino project, no doubt hoping to win government, nobble the Casino Control Authority, change the casino site and do a deal which would best advantage the Australian Labor Party. His dubious behaviour has been criticised and commented on by overseas investment houses, media commentators and even his own mates in the Labor Council, the same mates who are now trying to dig him out of his electoral funding hole. Peter Sams of the Labor Council is quoted in the Daily Telegraph Mirror of 15 August as saying:

I am worried, there are many hundreds of jobs being delayed by this political manoeuvring.

What has the Leader of the Opposition really done? He has released a highly confidential police report to the public, which the Casino Control Authority already had in its possession and which was the subject of further inquiries. What a hero! The Leader of the Opposition has continually lied to the public and has failed in his public duty to cooperate with the relevant institution established by this Parliament, namely, the Casino Control Authority. It was this Parliament in 1992 that decided that the process of selecting the casino operator would be controlled by an independent body, the Casino Control Authority. The concept was supported strongly by the Opposition when the Casino Control Act was passed. The Casino Control Act gives the authority clear objects and functions. The Act makes it clear that only the Casino Control Authority may determine applications for the casino licence and that the Minister must not direct the authority in this regard.

The Act imposes strict probity requirements on who may be granted a casino licence. The authority, not the Government, must consider whether an applicant and its associates are of good repute, having regard to character, honesty and integrity. The Casino Control Act clearly states that the authority must not grant an application for a casino licence unless satisfied that the applicant and each close associate of the applicant is a suitable person to be concerned or associated with the management and operation of the casino. That responsibility was not extinguished with the announcement of the preferred applicant. Since that time probity checks on the preferred applicant have been ongoing, as they will be on any future licensee.

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I am advised that the authority has considered the issues associated with the report of the royal commission and has conducted further inquiries in relation to the Trade Practices Commission action and other developments. Those matters were also considered during the public inquiry. The authority is obliged to obtain reports from the Commissioner of Police and the director of casino surveillance, and is at liberty to obtain information from law enforcement agencies and other sources. The Auditor-General provided a due diligence report to the authority when the preferred applicant was announced in May.

The process followed by the Casino Control Authority continues to be monitored by the Auditor-General and will be until it is completed. The inquiry will complete the process of assessing the suitability of the preferred applicant to be granted the casino licence. The Casino Control Authority is the sole body responsible for assessing applications for a casino licence and for determining who will be granted that licence. Only the authority is in possession of, and has access to, the relevant persons and information essential to enable a properly informed decision to be made as to whether a casino licence should be issued to the preferred applicant. The process set down by the Parliament is working. The inquiry will complete the process. The Casino Control Authority has stated publicly on numerous occasions that it will not award the licence until it is satisfied with the suitability of the applicant in accordance with the requirements of the Act.

I am satisfied that the authority is following the independent process laid down in the Act to determine this matter. This matter of public importance should be seen for what it is: a political stunt and a cover-up of the disgraceful performance and the lies of the Leader of the Opposition in relation to the casino. The Leader of the Opposition has failed to act in the public interest by his reckless behaviour in spreading rumours and innuendo. He has constantly implied that the Government issues the licence and plays a part in the process. The Opposition finds it incomprehensible that the Government would not manipulate the process. That is the way the Opposition does business. This Government has followed the process set down by this Parliament. The Leader of the Opposition should present his evidence to the Casino Control Authority. He has failed to do so, and he stands condemned for his actions.

Mr FACE (Charlestown) [4.31]: When the Casino Control Bill was passed I said history would repeat itself. This has occurred, because there has not been a full and open inquiry. Between 1960 and 1967 the Flamingo Casino was the site of a multimillion dollar skim of casino revenue. Mr Gaughan denied knowledge of the skim. However, one of those convicted of the skim was Steve Delmont, who, in 1986, was employed as the President of R. J. and S. Inc., a company owned by Gaughan. The report of the Division of Gaming Enforcement also states that in 1958 Gaughan tried to buy a Las Vegas racetrack with Sammuel Bratt, an operator of illegal gaming clubs, who was ruled by the Nevada Gaming Control Board to be unsuitable to run a racetrack.

The report further states that Gaughan is a friend and business partner of Lester Binion, who was described as "a person of disreputable character". In 1976 and 1978 Mr Binion lent Mr Gaughan $2.1 million. The report was forwarded to the New Jersey Casino Control Commission. The commission ultimately did not deny Showboat a licence to operate in New Jersey, believing Gaughan's claim that he had not been involved with the Flamingo Casino skim. A member of the commission, E. Kenneth Burdge, said Mr Gaughan should be awarded a licence because he had been told Gaughan had assisted an old man whose car had broken down.

When some of these allegations were put to the head of the Sydney consortium, Mr Gregg Nasky, by the Sydney Morning Herald, he said Mr Gaughan had never been convicted of a criminal offence and was well liked and respected. It seems the probity test applied by New Jersey and Mr Nasky is whether Mr Gaughan is liked or not. That is not good enough for the Opposition. The New South Wales Casino Control Authority and the Government should require a higher standard of probity. It cannot accept Mr Gaughan as a proper person to operate Sydney's casino on the basis that he helped an old man whose car had stalled. The Opposition's test is a higher test of probity.

The Casino Control Authority must satisfy the people of New South Wales that the standards set by the report of the New Jersey Division of Gaming Enforcement were too high. It must say that Gaughan was not, as the division reports, "unable to affirmatively establish by clear and convincing evidence his suitability for qualification as a director and shareholder of Showboat International". Showboat is in partnership with the Louisiana casino operator, Star Casino, owned by Louis Roussel III. An article in the Sydney Morning Herald of 12 August stated that Roussel is the subject of a United States grand jury investigation into the granting of US casino licences.

A 1993 Louisiana police report entitled "Background Report into Star Casino Inc." reveals Roussel owned the Merchants Trust and Savings Bank in Kenner, Louisiana. The report states that the president of the bank at that time, John Matassa, is the brother of Joseph Matassa, who managed the Pelican Tomato Company for Carlos Marcello. Both Marcello and Matassa have been identified as major mob figures. The report also stated that Joseph C. Marcello was on the board of directors of Roussel's Merchants Trust and Savings Bank. This fact was confirmed by Roussel's father in an interview with the New York Times in 1972. The article stated:

Mr Roussel acknowledged in the interview that Joseph C. Marcello, a brother of Carlos Marcello, was once a member of the advisory board . . . the Merchants Trust and Savings Bank.

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There is no doubt that Carlos Marcello, his family and their associates, including the Matassas, were deeply involved in organised crime. The New Orleans Time Picayune of 3 March 1993 stated that Carlos Marcello was the most senior mafia figure in Louisiana and Mississippi. Carlos Marcello and his family are the subject of a detailed biography by John H. Davis, entitled Mafia Kingfish. Davis says Marcello made his money through gambling, narcotics, prostitution, extortion, stolen goods, robberies, burglaries and theft. This was achieved through collusion of corrupt officials at every level. According to Davis, the Pelican Tomato Company provided Marcello with his alibi. He would claim that he was "a $1500 a month tomato salesman".

Louis Roussel III admitted that John Matassa was the President of the Merchants Trust and Savings Bank. John H. Davis states that John Matassa's brother, Joseph, bribed a juror in a criminal prosecution of Carlos Marcello. So Joseph Matassa - the brother of the chairman of Roussels bank - was one of Marcello's principal crime partners through the Pelican Tomato Company. Roussel is in partnership with Showboat, yet the authority says that Roussel passes the associates test. Further evidence has emerged to question the suitability of Louis Roussel III to operate a casino in New South Wales. On 19 August this year Mr Roussel was interviewed on the Today show. During that interview Roussel denied on three occasions that there was any connection between himself, his family and the mafia. The interview was as follows:

Steve Liebman: Do you know any members of the Marcello family which allegedly runs crime in New Orleans?

Roussel: I have probably met Mr Joe Segreto, I have, I know Mr Joe Segreto. Someone said he is familiar with the Marcellos . . .

Steve Liebman: And you have no links with the mafia . . .

Roussel: No . . .

The report of the Louisiana State Troopers quotes Mr Louis Roussel III as stating he owned a 10 per cent interest in Jazzville, a company vying for a casino licence in Louisiana. [Time expired.]

Mr CARR (Maroubra - Leader of the Opposition) [4.36], in reply: That is the little charmer - Louis Roussel - that she is happy to have in partnership with the people running the Sydney casino.

Mrs Cohen: On a point of order: I ask the Leader of the Opposition to have the courtesy not to refer to me as "she". I have an electorate, duly elected by the people.

Mr Beckroge: At the moment you have.

Mrs Cohen: And I will continue to have.

Mr SPEAKER: Order! The Leader of the Opposition should refer to the Minister by electorate or title.

Mr CARR: This is the person the Minister is delighted to have in partnership with the people running the Sydney casino. We heard nothing about Louis Roussel III in the lead-up to the exalted announcement on 6 May. "Winner declared", said the Minister - nothing about Louis Roussel. Why is the Minister so enthusiastic about putting the ownership of the Sydney casino in the hands of those in partnership with Roussel? What have they got, and how much? Who got it, and how much? Those questions have to be asked, given the behaviour of this Minister. The people of this State know that this Minister was part of a deal that puts Louis Roussel - with the record described in this House this afternoon -

Mrs Cohen: On a point of order: I object to the implication the Leader of the Opposition is making.

Mr SPEAKER: Order! There is no point of order.

Mr CARR: The Minister can object all she likes. She is stunned; tears are welling in her eyes. She can come here tomorrow wearing a different shade of lipstick. She is part of a thoroughly bad decision. She thought she got away with it for a few months, until the details started coming out - the details about the Louisiana link. Those details were never referred to the Casino Control Authority until the Opposition raised them. "Winner declared" was the title on the press release in the Minister's name. She can tap away nervously all she likes, but this hangs around her neck. She was part of this decision, and now the Casino Control Authority is raising all sorts of material that she was prepared to ignore. The other questions that must be asked are: how much does the Minister know, and when did she know it? What was the Minister told about the Roussel link? What had she been warned about the Leightons record?

The Minister was clutching an old, yellow opinion from a Queen's Counsel that had been passed on by the Master Builders Association. What a joke! The Minister's role in the affair was to cover up, and use an old QC's opinion that had been given to her by, of all organisations, the Master Builders Association, with its record as revealed by the royal commission. The evidence that was read into the record today by the Opposition came out only as a result of the work of the Opposition. The Government did nothing to enforce its statutory obligations under the Casino Control Act and to see that the probity test was applied. If the comments of Mr Allaway are any guide to the decision that will be handed down, will there be a probity test? Will probity be given any weight, given the extraordinary speech of Mr Allaway yesterday? Why did the Government write a probity test into the legislation if it will not give effect to the test?

It is a blot on the Government's record that it so ignored the requirement of its own legislation about nothing less than the establishment of the first legal casino in New South Wales that it was prepared to tolerate Louis Roussel in association with the people
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running the Sydney casino. All the details have been brought to the attention of the House today. It is all there in the record. The Government did nothing about its statutory responsibility to protect the probity of the deal, and it did nothing about researching the material, getting on top of it and seeing that the right safeguards were struck.

Motion agreed to.