JAMES PACKER'S Macau joint venture Melco Crown Entertainment is under investigation by Taiwanese authorities over the alleged channelling of $US180 million ($170.4 million) in illicit gambling funds from Taiwan to Melco's casinos in Macau.
According to reports, Taiwanese authorities are investigating fund transfers over three years by a Melco Crown subsidiary, MCE International, on behalf of 100 Taiwanese gamblers suspected of breaching the country's banking laws. Taiwanese prosecutors are reportedly applying to freeze about $US100 million in company funds in local bank accounts.
The chief executive of Crown, Rowen Craigie, is listed as a non-executive director of the Hong Kong-based company.
Only registered banks are allowed to engage in international currency exchange and transfer services in Taiwan, with penalties reported to include prison sentences of up to 10 years.
Two employees of MCE International's Taiwan office have been questioned by authorities.
"None of Melco Crown Entertainment's corporate entities has been charged at the current time and we believe our corporate activities are consistent with general market practice," said a Melco Crown spokeswoman, Maggie Ma.
"The company will fully co-operate with the Taiwan authority on any present and future investigations that they may conduct."
Regional analysts contacted by BusinessDay said it was hard to say if there were any probity concerns for Crown and its Macau joint venture but one local consultant said the implications were serious. Macau has been a notorious hot spot for money laundering from mainland China.
"If a casino's subsidiary was to be found guilty of money laundering, that creates a big black mark in terms of their credibility and their probity in terms of holding any casino licence."
Macau's importance to Crown is growing because the casino enclave is providing a rising share of the company's earnings.
According to research from Citi, Melco Crown is expected to account for 39 per cent of Crown's earnings this year, up from 6 per cent in the 2011 financial year.
"Despite the 25 per cent share price rally since October 2012, we continue to view significant share price upside given the earnings momentum at [Melco Crown]," said a Citi analyst, Michael Goltsman.
He has a $13 price target on Crown shares, which closed at $11.68 on Wednesday.
Crown is undergoing a probity check by the NSW Independent Liquor and Gaming Authority in order to increase its stake in a rival casino operator, Echo Entertainment.
Mr Packer is also wooing the state government to build a second casino operation at the Barangaroo harbour development.