UK online betting giant Entain is up against a class-action lawsuit from investors that could result in it owing £100 million (US$118 million).
The London law firm Fox Williams states that it is getting ready to submit the lawsuit. It claims that Entain did not inform investors about an investigation by HMRC, the UK's tax authority, into bribery and corruption involving its previous Turkish division.
In November 2023, Entain consented to pay £600 million (US$760 million) to settle the case, marking one of the largest corporate fines ever recorded in the UK.
The company's shares have almost decreased by half since May 2023 when it alerted shareholders about an anticipated “substantial financial penalty.”
Fox Williams stated this week that Entain had not “reported truthfully (or at all) to investors about its awareness of (among other misconduct) bribery and corruption” involving its Turkish subsidiary, Headlong, from 2011 until December 2017.
Hands Oiled
Headlong previously represented a third of Entain's income. Online gambling is prohibited in Turkey, which led the subsidiary to employ dubious cash-collection systems and payment processors to conceal transactions from Turkish financial entities. It was reportedly bribing Turkish officials to ignore the operation.
Entain, previously called GVC, disposed of Headlong at no cost in December 2017 to facilitate its acquisition of Ladbrokes-Coral, finalized in March 2018. It was evident that its Turkish operations would not align favorably with UK regulators examining the Ladbrokes agreement, nor with possible investors.
In July 2020, HMRC revealed that it was investigating "possible corporate misconduct" by the Turkish division, causing Entain's shares to plummet by 12%.
Ultimately, HMRC accused Entain of not having the appropriate protocols to prevent Headlong employees from participating in bribery. In reality, the unit was managed so poorly that several of its employees were embezzling funds.
Corporate Wrongdoing
Entain might have faced prosecution under the UK Bribery Act; however, there were worries this could lead to the loss of its global licenses, threatening thousands of jobs.
"This claim will offer institutional investors the opportunity to recover substantial losses but more importantly serve to improve transparency and governance within the UK’s gambling sector, reminding public companies that they need to take their disclosure obligations seriously,” Andrew Hill, a partner at Fox Williams said.
“Hopefully this will therefore have the knock-on effect of improving corporate behavior, because public companies should know that their shareholders won’t let them get away with misconduct,” he added.
Entain stated it was not aware of any legal proceedings but expressed that it would contest any such claims "vigorously."