SBC News Entain warned of inbound litigation over DPA transparency failings

Entain warned of inbound litigation over DPA transparency failings

Entain Plc faces a pending lawsuit aimed at compensating institutional investors stung by the FTSE100 firm’s £585m penalty related to a bribery investigation of its former Turkish business by HMRC.

Andrew Hill and Matthew Reach, the litigation team of London law firm Fox Williams, are preparing the claim against Entain “on behalf of institutional investors, targeting autumn 2024.”

Fox Williams has launched a claim period, accusing Entain of failing in its regulatory duties to report bribery and corruption charges related to its Turkish subsidiary, Headlong Limited.

The litigation asserts that Entain shareholders are entitled to compensation for transparency failures, as Entain violated section 7 of the UK Bribery Act 2010. The section states that “a company can commit an offense under section 7 of failure to prevent bribery if an employee, subsidiary, agent or service provider (‘associated persons’) bribes another person anywhere in the world to obtain or retain business or a business advantage.”

Leading proceedings, Andrew Hill said: “This claim will allow institutional investors to recover substantial losses and, more importantly, improve transparency and governance in the UK’s gambling sector. Public companies need to take their disclosure obligations seriously. Hopefully, this will improve corporate behaviour, as shareholders won’t tolerate misconduct.”

The affairs of former GVC Holdings subsidiary Headlong have come back to haunt Entain. In December 2023, Entain agreed to a “definitive settlement” via a Deferred Prosecution Agreement (DPA) with the Crown Prosecution Service (CPS).

Entain will pay £600m as part of the settlement, including a £585m DPA financial penalty, disgorgement of profits, a £20m charitable donation, and a £10m contribution to HMRC and CPS costs.

The £600m settlement is due to be paid in installments by Entain over a four-year period from 2024 onwards. Yet booked on its 2023 accounts, the DPA settlement saw Entain declare corporate losses of +£900m.

Entain’s corporate governance stated that the bribery charges related solely to the former management team when the business operated under GVC Holdings.

Turkish subsidiary Headlong Limited was sold to Ropsol Malta in 2017, a deal required for GVC Holdings to proceed to acquire Ladbrokes-Coral for £4bn, later transforming its business to Entain Plc.

After a six-year legal challenge, Entain committed to generating “100% of revenues from regulated or regulating markets by 2023.” Yet ongoing repercussions of the bribery charges, have seen Entain’s LSE share price halved to 680 GPX on a year-to-date basis. 

Outgoing chairman Barry Gibson, who led the negotiations with the CPS, stated that the FTSE business had closed a chapter related to its former operations: “Entain has now fundamentally and profoundly changed. We can now concentrate on the future.”

Fox Williams has led several high-profile investor litigations against FTSE Plc firms, including Tesco, Glencore, and BooHoo, related to transparency and governance failures.

Entain cites that it cannot comment on a lawsuit that is yet to be filed against the company, and as such is unaware of any developments.

At present, Entain continues its search for a new Chief Executive to lead its financial recovery in which it recently concluded a strategic review by the Capital Allocation Committee (CAC).

The review has prioritised North American growth, driven by the ‘significant upside’ of its BetMGM joint venture. Further directives focus on executing ‘Project Romer’ as a key technical priority, which aims to achieve cost savings through the operational simplification of the FTSE global operating structure.

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