SYDNEY -- Australia's Crown Resorts will retain control of its flagship Melbourne casino despite an official state inquiry finding the company "unsuitable" as a licensed operator.
The inquiry, led by former judge Ray Finkelstein, concluded that Crown's conduct had been "illegal, dishonest, unethical and exploitative" and said the scale of the wrongdoing was so widespread and egregious that "no other finding was open."
In spite of unearthing repeated breaches of law, the inquiry concluded it would not be appropriate to immediately cancel the company's exclusive gaming license for the state of Victoria, given the potential risk to the state economy from disrupting the operations of the Crown Melbourne, the country's largest casino, and the company's expressed willingness to reform itself.
Instead, the inquiry report recommended that Crown be permitted to continue operating for two years under the oversight of a special manager appointed by the state government while the company undertakes comprehensive reform to make itself "suitable" again.
The inquiry's finding comes after months of hearings that confirmed a pattern of illegal and unethical behavior by Australia's largest casino operator, massive underpayment of taxes and attempts to conceal activities from the state's gambling regulator.
The investigation in Victoria was launched after an inquiry in neighboring New South Wales in February found Crown not fit to open a casino in the company's new AU$2.2 billion ($1.64 billion) hotel in Sydney, because of its failures to prevent money laundering at existing properties in Melbourne and Perth as well as poor corporate governance.
Billionaire James Packer, Crown's biggest shareholder, is set to appear this week at a separate public inquiry in Western Australia that is looking into the running of Crown Perth casino. Final recommendations from that review are due next March.
The scandal-hit company's regulatory struggles have led to wholesale board and management changes. Ten of its 11 board directors, including its chair, have departed over the last year and the company has replaced its chief executive and many senior executives.
Uncertainty has already wiped nearly AU$1.5 billion off Crown's market value. But the shares climbed 8% in early trading Tuesday to AU$10.47 on relief the company would retain control of Crown. They had most recently peaked at AU$13.32 in May.
The troubles have also dashed hopes for a merger between Crown and domestic rival Star Entertainment Group, which abandoned a AU$9 billion bid for Crown in July.
Crown's board earlier rebuffed a conditional AU$8.4 billion approach from U.S. private equity group Blackstone as well as Oaktree Capital's offer to finance the company's buyout of Packer's shareholdings.