Entain Expects Fine Over Bribery Claims
International gambling operator Entain is expecting to receive a substantial fine from HMRC. An investigation carried out by the tax authority into possible bribery offences at one of the operator’s former Turkish subsidiaries has now been handed over to the Crown Prosecution service. It is not expected that the outcome of the investigation will affect Entain’s gambling license.
Most of the offences investigated by HMRC relate to instances in which the operator failed to prevent bribery. ©Monstera/Pexels
HMRC Investigation
Leading betting and gaming operator Entain has published an update on an investigation that HMRC has been working on since 2019. The investigation refers to historic corporate misconduct at the Entain’s former Turkish online betting business, Sportingbet. It is expected that the bribery case could result in a substantial fine for the operator.
The UK tax authority’s investigation has now been handed over to the Crown Prosecution Service, the public agency responsible for prosecuting criminal cases investigated by the police and other investigative authorities. The operator has revealed that it is negotiating a deferred prosecution agreement and is working on achieving a resolution to the ongoing investigation.
Entain first received a production order from HMRC on November 28th, 2019. It was required to provide information relating to the group’s former Turkish-facing online betting and gaming business. This subsidiary, which it had held since 2011, was sold in 2017. Initially the investigation was focused on a number of third-party suppliers that processed payments for its online services in Turkey.
The scope of the investigation widened on July 21st, 2020. HMRC then probed potential corporate offences by an entity, or entities, within the group. Entain has confirmed that amongst the offences under investigation is section 7 of the Bribery Act 2010.
In its statement, the operator acknowledged that historical misconduct involving third-party suppliers and employees may have occurred at the previously owned Turkish business. It added that it is continuing to cooperate fully with the tax authority’s investigation and the Crown Prosecution Service. The statement continued:
“While the Company cannot say at this stage what the consequences of the investigation will be, it is likely that they will include a substantial financial penalty which is yet to be determined. The Company cannot identify reliably at this stage the size of any financial penalty.”
Entain Shares Dip
According to Entain, the group has undertaken a comprehensive review of its anti-bribery policies and procedures. It has also taken action to reinforce its wider compliance program and related controls. The board has confirmed that it is content with how the investigation has progressed and is looking forward to resolving the matter.
While the scale of the fine is not yet known, analysts at US investment bank Morgan Stanley have speculated on the issue. They estimated that the cash flow from the Turkish business between 2011 and 2017 amounted to around £230 million. However, the penalty could be significantly lower than that sum.
The fine may not relate to all of the business’s historic activity in Turkey. In addition to this, the discount for full cooperation with UK authorities could cut the fine to one third of its potential value. Following Entain’s announcement, shares in the FTSE 100 company were down two percent to £13.45.
Due to the historic nature of the offences, it is not expected that the investigation will impact Entain’s UK gambling license. However, the operator has previously found itself in hot water with the Gambling Commission on a number of occasions. The collective sum of fines issued by the regulator to Entain and its former entity GVC Holdings amount to £22.9 million.
In August 2022 the operator was made to pay £17 million over social responsibility and anti-money laundering failures. At the time, it was the largest penalty ever to be issued by the regulator. That record has since been broken by William Hill, which was fined £19.2 million over similar failures in March of this year.
Criticism Over Subsidiary Sale
Entain owned subsidiary Sportingbet when it was operating as GVC Holdings. The operator rebranded itself as Entain in December 2020 in a bid to distance itself from the dodgy reputation that the operator had gained. GVC had become associated with offering gambling to unregulated markets and large buyouts.
The new name aimed to reflect the operator’s new direction, focusing on sustainability and conduct. At the time, the operator also committed to only operate in regulated markets by 2023. The rebrand coincided with the beginning of former CEO Shay Segev’s tenure, who took over from predecessor Kenny Alexander.
Alexander had led the betting and gaming group for thirteen years. Under his leadership, GVC Holdings expanded from a small gambling tech firm to a global business listed on the FTSE 100. The former CEO was responsible for orchestrating more than £5 billion in acquisitions, including the purchase of rival operators Bwin.party and Ladbrokes Coral.
Alexander’s tenure did not come without its fair share of controversies though. In 2019, the former CEO and former chairman Lee Feldman came under fire after they sold off almost £20 million worth of shares in just three days. GVC’s market value plummeted and Feldman was replaced in the role by Barry Gibson.
The former CEO was also criticized over the sale of Sportingbet’s Turkish division. The Turkish business was sold in 2017 ahead of the operator’s £3.2 billion acquisition of Ladbrokes Coral, which cemented the operator as the UK’s biggest high-street bookmaker.
Alexander sold Sportingbet to IT service provider Ropso Malta, which was owned in part by Ron Watts, a businessman who co-owned a stud farm with the former CEO in Scotland. It had initially been reported that the Turkish division would be sold for up to €150m paid over five years. However, it appears that Entain waived the fee to rid itself of the business as quickly as possible.
