An Ireland-based gaming and sports betting company will pay a $4 million fine to resolve charges payments made to Russian consultants by a company it acquired violated the Foreign Corrupt Practices Act (FCPA).
Flutter Entertainment agreed to cease and desist from future violations as part of the settlement it reached with the Securities and Exchange Commission (SEC). The company neither admitted nor denied the agency’s findings.
Flutter acquired The Stars Group (TSG), a Canadian-based gaming and sports betting company, in May 2020. TSG purchased PokerStars and several other online gaming brands from Oldford Group in 2014. As part of TSG’s acquisition of Oldford, it inherited Oldford’s Russian operations as well as certain Russian-based consultants, the SEC said in its order filed Monday. PokerStars operates in a “gray market” in Russia, the SEC said, where poker is neither legal nor expressly prohibited.
The details: From 2015-20, TSG paid three Russian consultants a total of approximately $8.9 million as part of its lobbying efforts to legalize poker in Russia. TSG failed to “devise and maintain a sufficient system of internal accounting controls over its operations in Russia during the relevant period with respect to third-party consultants, certain of which the company retained without adequate due diligence or written contracts and paid without adequate proof of services,” the SEC said in its order.
The company also failed to make and keep accurate books and records regarding consultant payments in Russia, “including by inaccurately recording certain payments as lobbying fees,” according to the agency.
In 2016, TSG conducted an internal review concerning whether it made improper payments to government officials in certain foreign jurisdictions. After completing the review, the company notified the SEC and Canadian regulators it might have committed violations, according to the order. The company instituted a policy regarding risk-based due diligence, written contracts, and approval by its chief executive officer or general counsel for all payments to third parties.
However, TSG continued to make payments to the Russian consultants in violation of the new policy, the SEC said, by failing to obtain and review invoices and properly supervise the consultants.
Compliance ramifications: Flutter cooperated with the SEC’s investigation and undertook remedial efforts to address the misconduct, the agency said. The company enhanced its internal accounting controls; global compliance organization; and policies and procedures regarding due diligence, use of third parties, and maintenance of adequate records.
In March 2022, following Russia’s invasion of Ukraine, Flutter withdrew from the Russian gaming market. In March 2021, Flutter terminated its relationship with two of the three Russian consultants, the SEC said, and is “winding down its relationship” with the third consultant, “who remains engaged for the limited purpose of assisting with the closure of the Russia business.”
Flutter response: In an emailed statement, Flutter said the company is “pleased that this matter has now been concluded” and noted it has “made significant changes to implement a framework of controls in line with Flutter’s existing standards.”