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Investor relations have turned sour at Entain following accusations that the company failed to disclose knowledge of bribery and corruption at its former subsidiary, Headlong Limited. A group claim is set to be filed against the gambling giant concerning the final Deferred Prosecution Agreement (DPA) that Entain made with the Crown Prosecution Service (CPS) in December 2023 concerning the historical offences committed in Turkey.
We contacted the industry experts at NoDepositCasino.guide, who expressed their thoughts on the matter:
‘This is precisely why there are stringent AML and Compliance rules put in place within the industry, because they ensure cases like these don’t happen, or at the very least are mitigated. Even as an affiliate company, we have to pass through a series of regulatory audits to prove there’s no shady activity going on. Not only that, we need to make sure any brand we work with and promote is equally compliant because it can tarnish our reputation!’
Fox Williams contends that investors suffered substantial financial losses due to the probe and the ensuing penalties. This legal move underscores the severe implications of corporate governance failures and the importance of transparency with investors. As the case unfolds, it could set a precedent for how companies manage and disclose historical offenses, particularly in high-stakes industries like gambling.
Exposing The Truth
The issue emerged after a thorough investigation by HM Revenue & Customs (HMRC) began in November 2019, when Entain Holdings UK Limited received a request for information about its former Turkish-facing online gaming business, Headlong Ltd. Headlong Ltd had been under Entain’s ownership from 2011 until it was sold in 2017. Entain profusely denied allegations that it continued to benefit from Headlong Ltd after the sale.
In July 2020, Entain (then known as GVC) confirmed that HMRC was broadening its investigation after initially targeting suppliers in 2019 to include potential corporate offending under section 7 of the Bribery Act 2010. It wasn’t until May 2023 that Entain announced it was working to resolve the probe, which revealed that the company allegedly lacked adequate procedures to prevent bribery within its Turkish operations.
This resulted in Entain agreeing to pay £585 million in penalties and disgorgement of profits. Additionally, it was ordered to make a £20 million charitable donation and contribute £10 million to CPS and HMRC costs.
Group Claim
However, the law firm Fox Williams, representing some of the investors involved in the case, alleges that the business also breached Sections 90 and 90A of the Financial Services & Markets Act 2000, seeking to recover more than £100 million in compensation.
Fox Williams claims that Entain failed to inform investors about the investigation. The claim period spans from 1 July 2011 to 31 December 2023. The firm stated that they believe senior executives of Entain knew that its Turkish subsidiary was involved in bribery and did not disclose this to its shareholders, thereby breaching its disclosure obligations and standards of good governance.
Andrew Hill, partner, and head of the securities litigation team at Fox Williams, emphasized that the claim aims not only to provide shareholders with the financial compensation they are owed but also to serve as a cautionary tale for other public companies, compelling them to take their disclosure obligations more seriously.
The Future of Entain
Entain is already facing consequences from the case, with anticipated declines in shares similar to those seen in May of last year, when they nearly halved following the announcement of a significant penalty settlement with HMRC.
Moreover, Entain reported a substantial loss in 2023, with the £936.5 million figure in full-year results overshadowing an 11.0% rise in revenue to £4.77 billion, driven by the acquisition of new brands. However, this M&A activity incurred additional costs for Entain. One notable deal in 2023 was the acquisition of Polish-facing STS, which incidentally sparked a shareholder revolt led by Eminence Capital. As a result, it remains to be seen how the gambling giant will navigate this controversy and its ongoing impact on its business.
