Ladbrokes’ parent company, Entain, disclosed that it was expecting a massive fine from the UK tax authority following investigations into possible bribery offences by former Turkish subsidiary Sportingbet.
In a statement to its shareholders on Wednesday, Entain said that the UK’s public prosecutor, the Crown Prosecution Service, had been handed the HM Revenue and Customs-led investigation, which started in 2019. The company disclosed it was currently in agreement talks with the prosecutor and was working towards reaching a settlement.
“We are keen to achieve a resolution to what is a historical issue relating principally to a business that was sold by the group nearly six years ago,” Entain’s Chairman Barry Gibson said.
Entain stated that the investigation included an enquiry into Sportingbet and that historical misconduct involving the group’s ex-employees and third-party suppliers may have transpired.
“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,” Entain said in a separate statement.
The company promised to continue to cooperate with HMRC and the CPS. Entain also noted that the regulatory fine could be less than expected due to their full cooperation with the UK authorities.
The HMRC enquiry was based on “potential corporate offences” relating to Entain’s Turkish online gaming and betting business. Sportingbet was owned by Entain from 2011 to 2017 alongside brands like Foxy Bingo, PartyPoker, and Gala.
Entain, previously known as GVC Holdings, was required to produce the tax authority that held information about its Turkish subsidiary. The company previously assumed that the investigation was focused on its Turkish third-party suppliers, which carried out operations in Turkey despite internet betting and gaming being illegal in the country.
By June 2020, however, Entain stated that the HMRC enquiry had expanded to go over potential corporate offences carried out by offending entities within the group.
The betting giant disclosed that some of its offences uncovered by the investigation were mostly in violation of Section 7 of the Bribery Act. This relates to the company’s failure to prevent bribery in their places of business.
According to Morgan Stanley analysts, during Entain’s ownership period of the Turkish business, its cash flow was around £230 million.
The company sold the Turkish subsidiary to IT service provider Ropso Malta in December 2017 in a controversial deal and acquired Ladbrokes Coral shortly after for £3.6 billion.
Gibson said that since the investigation started, Entain had entirely overhauled its board members and leadership teams. The company also changed its business model, with regulated and non-regulated markets contributing to its total revenue.
“The board and leadership teams have been overhauled; 100 percent of our revenue is now from regulated or regulated markets; and our business model, strategy, and culture have been reviewed, analysed, and stress-tested,” Gibson said.
Due to the historic nature of the offences, they will likely not affect Entain’s gambling licence in the UK. The company and GVC have been issued a total of £22.9 million in fines from the UK Gambling Commision for anti-money laundering and consumer protection failures.