Federal Court Finds Ex-Star CEO and GC Breached Duties Over 'Unethical' Culture

The Federal Court’s ruling against former Star Entertainment Group executives marks a watershed moment for corporate governance and regulatory enforcement in Australia’s gaming sector. Justice Michael Lee’s 501-page judgment details a systemic failure of leadership, where the pursuit of commercial advantage overrode ethical and legal obligations. At the heart of the case was the 'stepping stone' liability theory, where the Australian Securities and Investments Commission (ASIC) successfully argued that the executives' failure to manage underlying regulatory risks—specifically anti-money laundering (AML) and counter-terrorism financing (CTF) concerns—constituted a breach of their statutory duties to act with due care and diligence.

The evidence presented in court painted a vivid picture of a compliance environment in total collapse. Justice Lee highlighted instances where staff of the Chinese junket operator Suncity delivered cash to service desks in blue cooler bags and used blankets to hide their activities from CCTV cameras. Despite these 'flashing warning signals,' former CEO Matthias Bekier failed to advise the board to terminate the Suncity contract. This failure to escalate critical information is a stark reminder for C-suite executives that ignorance of operational misconduct is no defense when the red flags are sufficiently prominent. The court's finding that Bekier 'ought to have ensured' the board was apprised sets a high bar for executive accountability in high-risk industries.

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Despite these 'flashing warning signals,' former CEO Matthias Bekier failed to advise the board to terminate the Suncity contract.

Equally significant for the legal and RegTech community is the finding against former General Counsel and Company Secretary Paula Martin. The court found that Martin also breached her duties by failing to disclose the Suncity and China UnionPay risks to the board. This reinforces the evolving role of the General Counsel as a 'gatekeeper' of corporate integrity rather than merely a legal advisor. The ruling suggests that GCs who are aware of misleading information being provided to third parties—in this case, the National Australia Bank (NAB)—have a proactive duty to intervene and inform the board, regardless of the potential commercial fallout.