SYDNEY (REUTERS) - Australian billionaire James Packer on Wednesday (Oct 7) recalled asking the two top executives of Crown Resorts Ltd to study the risk of keeping staff in China soon before a mass arrest in 2016 upended his casino firm, saying they let "the side down".

Mr Packer's conduct at the time of the arrests is under scrutiny as the New South Wales state government holds an inquiry to decide if Crown should be allowed to run a 75-floor, A$2.2 billion (S$2.13 billion) casino tower in Sydney, just months before its scheduled opening.

During questioning, Mr Packer said he became concerned about staff safety in China after reports in 2015 that 16 South Korean casino workers had been detained on the mainland, where advertising gambling is illegal.

Mr Packer, who owned about half of Crown at the time and had resigned as executive chairman towards the end of 2015, said he asked Chief Executive Rowen Craigie and Chairman Robert Rankin to investigate.

The pair left Crown in 2017, while Mr Packer - who now owns 37 per cent - has since withdrawn from official Crown duties.

"I spoke to the two most senior executives in Crown about the matter of the Korean arrests, and that's how I turned my mind to it," Mr Packer said via video link from a location which local media reported was his yacht moored in the South Pacific.

In October 2016, 16 Crown staff were jailed in China for violating anti-gambling laws, prompting the company to withdraw from its many overseas interests.

"I believe Mr Rankin and Mr Craigie let the side down," Mr Packer said, noting he regarded Mr Rankin as "an expert on China and an expert on compliance".

Mr Craigie previously told the inquiry the arrests resulted from corporate governance failure. Reuters could not immediately reach Mr Rankin for comment.

Mr Packer was read an internal e-mail in which an employee described Crown's China staff "living in constant fear of being tapped on the shoulder" but denied seeing it before the arrests.

He said concerns should have been reported to Mr Craigie, who would have told the board.

Mr Packer was also read a February 2015 Reuters report about China's government announcing a crackdown on foreign casino firms trying to woo Chinese gamblers, but said he did not become aware of the issue until the South Korean arrests.

"I think it would be fair to say that in 2015 I thought China was a different place than it's turned out to be."