Since 2018, Entain has been the owner of Ladbrokes. At the time, Entain went by the name of GVC Holdings, and it completed the acquisition of Ladbrokes Coral in March of that year. Two years later, GVC rebranded to its current name. Yet it remains as the owner of the Ladbrokes brand to this day.
While this has seen the company achieve certain levels of success, it hasn’t always been the case for Entain. For example, midway through 2022, it was hit with a huge £17 million fine from the UK Gambling Commission. The company was also threatened with having its official licence revoked.
Now it seems as though there could be another penalty on the horizon for one of the biggest gambling companies in the world. Again, this is linked to its Ladbrokes business. Recently, Entain revealed that is expects to be hit with a huge fine from the UK tax authority. This, it said, is due to certain corporate misconduct occurring in years past, taking place at its former Turkish online betting business. HMRC has been working on an investigation into this since 2019. Crown Prosecution Services received the details of this on Wednesday, May 31, 2023.
Entain has taken the decision to negotiate on a deferred prosecution agreement with the authorities in the UK. This, the company said, is what would likely result in it receiving a “substantial” penalty to pay.
What Is the Issue with the Turkish Business Side of Things?
The Entain brand owned a Turkish business between 2011 and 2017. That was when it operated under the GVC Holdings name. It sold this business prior to its takeover of the Ladbrokes brand, which cost £4 billion. This resulted in the creation of the UK’s biggest high street bookmaker.
The analysts at Morgan Stanley estimated the cash flow from that Turkish business amounted to about £230 million. The company did not that the fine could be lower, as it may not have any relative nature to all historic activity within Turkey. If Entain co-operates in full with the UK authorities, then there could be a discount of up to ⅓ applied to the final penalty.
HMRC’s probe surrounds what is defined as “potential corporate offending”. This, it suggests, may have taken place at Entain’s former subsidiary Sportingbet, which operated in Turkey. Most of the offences noted come under Section 7 of the Bribery Act. This section highlights instances where a company has failed to prevent an individual bribing another person or entity.
The investigation did not start off focusing on this, though. Instead, HMRC looked into wrongdoing by third-party suppliers to the subsidiary regarding payment processing. Yet the search later expanded to include entities and former employees operating for Sportingbet.
Speaking on the situation, Entain’s chairman, Barry Gibson said there is a desire to “achieve a resolution” over something that exists as a historical problem. To do so, he said that Entain has taken its own “decisive action” over the proceeding years, so as to improve its corporate governance.
“The board and leadership teams have been overhauled”, Gibson commented. He also spoke of 100% of the revenue now coming from regulated or regulating markets. Not only that, but Entain’s business model, strategy and culture have all gone through the review process. The announcement of the potential fine for Entain saw its shares fall by 2% to £13.45 during early morning trading.
Further Details Surrounding the Turkish Business and Entain’s Issues
Even though Entain sold the Turkish subsidiary back in 2017, it wasn’t without its problems. At the time, the sale raised a certain level of controversy. This was all due to then-CEO Kenny Alexander selling Sportingbet to IT service provider Ropso Malta. That company was part-owned by a businessman who also co-owned a stud farm with Alexander, based in Scotland.
Of course, because the issues surrounding the Turkish subsidiary are considered historic now, analysts don’t think the investigation will affect Entain’s UK licence. That could be a saving grace for the brand, considering in total (as both Entain and GVC) it has received penalties equating to £22.9 million. The majority of the failures necessitating these fines have surrounded consumer protection and anti-money laundering.
It was also confirmed by HMRC that a process was in place to negotiate a deferred prosecution agreement. No further comments were given on the case, though.
With regard to Entain, the company said it could not possibly comment on how the investigation would conclude. Prosecution of one or several entities within the business remains a possibility, it says. “Negotiations remain ongoing”, said a spokesperson for the brand. It also stated that any resolution would also be “subject to judicial approval”.
Any fine issued will be a blow to the Entain brand, which hasn’t been out of the spotlight for long where the Gambling Commission is concerned. Other than the £17 million fine issued last year, a £5.9 million fine came its way in 2021. That penalty related to failures of both Ladbrokes and Coral back in 2014, when the company had nothing to do with it. Time will tell how the investigation into its time as owner of Sportingbet will conclude.