Entain to Pay $739M Fine to UK Regulators Over Bribery Charges

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Entain, the giant European gambling conglomerate and 50% stakeholder in U.S. online casino and sportsbook BetMGM, this week agreed to pay a £585 million ($739 million) fine to the UK tax authorities.

The hefty settlement follows a comprehensive bribery investigation centered on its former operations in Turkey, which ended in 2017. This agreement was brokered with the UK’s Crown Prosecution Service (CPS) and financial authority His Majesty’s Revenue and Customs (HMRC).

Aside from this large fine, Entain’s investments this year have also troubled its financial backers. At a time when the U.S. gambling market is booming, company investors accused Entain of not prioritizing correctly after June saw it pay out $957 million to buy Polish online gambling operator STS. Instead, they said, it should focus on its hugely successful 50% stake in BetMGM.

BetMGM owner MGM Resorts International, the largest U.S. gambling operator, has consistently flirted with buying Entain in recent years. However, an agreeable figure between the two parties has not been reached.

“This legacy matter concerns a business which was sold by a former management team six years ago,” said Entain chairman Barry Gibson, hoping to put a line under the matter.

“We are committed to continuing our journey towards operating only in regulated markets, and are now widely recognized as a best-in-class, responsible operator, with the highest levels of corporate governance across all aspects of our business.”

Legacy Business

The roots of the scandal that led to this hefty fine lead back to the era when Entain was known as GVC Holdings. GVC was founded by four American businessmen in Luxembourg in the early 2000s.

It soon expanded across various European markets, with a host of mergers and acquisitions. From 2011 to 2017, GVC’s operations included the Sportingbet brand in Turkey.

The UK’s HM Revenue & Customs (HMRC) later unearthed evidence of bribery and other misconduct that had enabled GVC to maintain its Turkish operations. These revelations sparked a broader inquiry into the actions of Entain’s suppliers and former employees, focusing on the company’s failure to implement sufficient anti-bribery measures.

In 2017, Entain, then operating as GVC, exited its Turkish ventures by selling its operations under the Headlong Limited brand to Ropso Malta Limited.

The company, looking to expedite its withdrawal from grey area markets, as it was buying British operator Ladbrokes Coral, waived the fee in order to pass the transaction quickly.

This waiver, however, subsequently attracted scrutiny, and sparked rumors of ongoing financial connections between Entain’s senior figures and Ropso, leading to a deeper investigation by HMRC.

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The Price of Resolution

The HMRC investigation, which commenced in 2019, found evidence of possible involvement by Entain personnel and associated companies in bribery schemes.

Although the company has admitted no wrongdoing officially, the UK’s CPS said it was willing to take the company to court, possibly on criminal charges, if they did not agree to a settlement fine.

Apart from the principal fine, Entain is also expected to contribute £20 million (US$25.21 million) to charity and an additional £10 million (US$12.6 million) to cover the investigation costs incurred by HMRC and CPS. The total financial burden to the operator, including lost acquisition proceeds and fines, is estimated to exceed $1 billion.

That sum is a significant loss, especially when considering Entain’s Turkish operations’ potential profitability over a comparable period would have been nowhere near that.

The settlement, awaiting final judicial approval on December 5, is set to be paid in four installments.

The news has caused further stock price falls for Entain over the weekend. Trading on the London Stock Exchange, the company is at £918 ($1,157) this week. That’s down 8% on September’s figure, and some 30% down on the $1380 ($1,739) it was trading at in June before the reaction to its acquisition of STS Bet.

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