Australian-listed casino operator Donaco has initiated a series of lawsuits against Thai businessman Somboon Sukcharoenkraisri, the man who it bought Cambodian casino StarVegas off, claiming that he has breached non-compete disclosure, ‘poached’ VIP junkets and staff and threatened its player base.
Donaco’s legal claim against the former Thai owners has been set down for arbitration in Singapore with a nine day hearing scheduled, commencing on July 29 2019.
In Donaco’s main litigation, the operator is demanding US$190m. It claims in court documents that competing casinos were being developed on land linked to Mr. Sukcharoenkraisri. It alleges that the new casinos ‘poached’ four key VIP junkets Star Vegas’s VIP junkets, along with many of Star Vegas’ staff and threatened players that they would not be safe unless they played at a rival casino.
The situation spiralled out of control after a Cambodian court issued an injunction to close down the two rival properties Star Paradise and Paramax.
Donaco claims that since this injunction, intruders came into StarVegas, shutting down all the slot machines before making an announcement over the Public Address system within the casino that Star Vegas was closing and all players would need to relocate to the Star Paradise, the new casino next door.
Donaco claims that people linked to Mr. Sukcharoenkraisri then stole computers and kitchen equipment and made 550 staff work at the new casino.
VIP junket operators, worth $30m to StarVegas, were told that lines of credit would not be extended and that their safety could not be guaranteed unless they played at Star Paradise instead. Donaco believes it has a ‘very strong case.’
Donaco, which also operates the Aristo International in Vietnam, has seen its market value fall from $290m to $51m in just over a year.
When the company bought StarVegas in 2015 it was generating revenues of $82m a year. Just three years later Star Vegas’ earnings were US$30.4m, a 54 per cent decline on the previous year’s figures. In 2018 gaming revenue fell 42 per cent primarily due to the ‘breach of non-compete clauses by the Thai vendor, which harmed the VIP business.’
Donaco said: “We were presented with some significant challenges at Star Vegas with the vendor illegally operating two competing casinos and poaching our Thai junkets, which had a significant impact on the full year result. The performance of our VIP business at Star Vegas was particularly impacted in the early part of the financial year, but we have worked hard to restore the junket business. Pleasingly, we have seen the second half producing a significant uplift in VIP turnover, which has continued to improve into the current financial year.
“Star Vegas did show a pick up in patronage on the main floor, however the subdued backdrop of the Thai economy continued to hold back the main floor revenues. We are seeing encouraging signs from the initiatives we have taken to drive main floor revenues, including new gaming machines, upgraded facilities, and a second main floor targeting non-Thai players.”
Donaco stated: “Most of the usual VIP players and junkets from Yunnan province were deterred from visiting the property in July and August, due to threats from the Chinese crime syndicate. The Vietnamese police now have all of the records of the Chinese crime syndicate members, and they will not be allowed into Vietnam.”
Ben Reichel, Donaco’s Executive Director, added: “We did a deal with the wrong person. We are focusing very intently on dealing with the issues ahead of us. Donaco has received expert legal and financial advice. Having considered that advice, Donaco has now increased the size of its damages claim from US$120m to US$190m.”
The company has successfully frozen over $10m worth of Donaco shares held by the Thai vendors of the Star Vegas casino business. The Supreme Court of New South Wales has now granted a further extension of the freezing order, by consent, until 4 October 2019, when the matter is listed for further directions.
In retaliation, Mr. Sukcharoenkraisri has tried to terminate Donaco’s lease on the Star Vegas land. He has threatened to build a wall around the casino and has cut off electricity to part of the venue by taking one of its transformers.
Donaco has been granted an injunction in its favour by the Banteay Meanchey Court of First Instance in Cambodia, to prevent the vendors of the Star Vegas business from threatening to terminate the lease of the land on which the Star Vegas sits. This injunction remains in force for an indefinite period of time, unless it can be overturned by another court or arbitration ruling. The vendors have committed a number of breaches of the lease agreement, specifically by encroaching on the land leased to Donaco.