Entain reaches in-principle agreement with CPS over Turkish case

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Preliminary judicial approval was secured today (24 November) at the Royal Courts of Justice sitting as the Crown Court at Southwark. Entain will seek final judicial approval in court on 5 December.

Terms of the DPA are in line with the provision announced on 10 August. Entain agreed to pay a financial penalty plus disgorgement of profits totalling £585.0m (€674.0m/$736.1m). It will also make a charitable donation of £20.0m and contribute £10.0m to CPS and HMRC costs.

These will be paid in instalments over the term of the DPA. This will run for a period of four years from the date of the final court approval.

At the time of writing, Entain’s share price was down 2.38% on market opening at £843.80 a share.

Entain hopes to draw a line under the case

The DPA relates to an HMRC investigation into the historical Turkish business. This stretches back to 2019 when it sought additional information from GVC Holdings – Entain’s previous name before rebranding – related to online betting and gaming operations. 

Entain added that the DPA is voluntary and would fully resolve investigations into matters in relation to its own business.

“This legacy matter concerns a business which was sold by a former management team six years ago,” Entain chair Barry Gibson said. “The group has changed immeasurably since these events took place, and the DPA process has provided a reminder of the stark differences between the GVC of yesterday and the Entain of today. 

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

Entain and HMRC: how did we get here?

GVC owned Turkish subsidiary Headlong Limited from 2011 to 2017. It sold the business to Ropso Malta Limited for a performance-related earn-out of up to €150m. The operator later waived the earn-out to smooth the approvals process for Ladbrokes Coral. 

However reports persisted it still benefitted from the Turkish operations, despite repeated denials. HRMC began looking into the case shortly after. 

HMRC widened the scope of its investigation to cover “potential corporate offending” in 2020. Entain previously said the inquiry targeted former third-party suppliers. However, it later dismissed a connection with its former payment subsidiary Kalixa – sold to Senjō Group in 2017 – collapsed German behemoth Wirecard and the Turkish operations.

Taking steps to reshape an uncertain business

This led to wholesale changes with Entain. Later in 2020, Kenny Alexander stepped down as CEO. Shay Segev, Alexander’s replacement, moved on to sports streamer DAZN, with Jette Nygaard-Andersen now holding the CEO title.

Furthermore, the corporate make-up of the business now looks very different to how it did back in 2020 following the Entain rebrand. At the time, Segev said this better reflected the group’s socially responsible ethos. 

Tying in with this, Entain in 2020 also shifted its place of management and control from the Isle of Man to the UK. This led to its tax residence moving as a result.

Where does this leave Entain’s former executives?

In reaching today’s agreement, Entain again stressed it related to its own business and the group. This may suggest that former executives involved with the business at the time may still face charges.

As stated when the DPA was struck in August, the settlement covers alleged offences under Section 7 of the 2010 Bribery Act. Section 7 says businesses must put in place proper procedures to prevent people associated with the company from making bribes for the organisation’s commercial benefit.

The operator admitted in May historical misconduct involving former third-party suppliers and employees of the group may have occurred.

As to where this leaves former employees, the case is not so clear. However, there is no doubt links to the HMRC investigation continue to impact those leading Entain at the time. 

Kenny’s conundrum

This is particularly true for Alexander, who, along with former chair Lee Feldman and former CFO Stephen Morana, failed in a bid to take charge of 888 Holdings earlier this year

FS Gaming, an investment vehicle backed by the trio, took a 6.57% stake in the operator in June. Soon after, a proposal was tabled for Alexander to become CEO, Feldman chair and Morana CFO.

However, this was halted almost immediately when the Gambling Commission intervened. It said that is has final sign-off for a change of corporate control and directly referenced the Turkey case as a reason for flagging concerns over the proposal.

With 888 facing the threat of a licence suspension in Britain if it did not ratify the change, this led to 888 ending talks. However, 888 may not yet be in the clear, with a licence review still looming over the operator.

Per Widerström was ultimately named CEO in July, replacing Itai Pazner.

Entain will make a further announcement on the case after the next court hearing on 5 December.

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