A class-action lawsuit has been filed by a group of investors in UK online gambling giant Entain (OTC: GMVHF), seeking compensation for the damage done to the company’s share price by a bribery probe into its former Turkish operations. Entain, previously known as GVC Holdings, has been accused by the UK tax agency HMRC of failing to implement effective protocols to prevent employees at its Turkish subsidiary, Headlong, from engaging in bribery and theft.
The complaint, lodged on Wednesday in London’s High Court by 20 institutional shareholders, demands $150 million in damages. It alleges that Entain did not adequately inform investors about HMRC’s investigation into corruption and bribery within Headlong. The probe ultimately led to one of the largest fines in UK corporate history, with Entain paying £600 million (US$760 million) to settle the case. Since May 2023, when the impending penalty was announced, shares in the company have almost halved.
Entain attempted to shed its problematic Turkish operations by offloading Headlong for free in December 2017 ahead of its proposed takeover of British legacy betting group Ladbrokes-Coral. Online gambling remains illegal in Turkey, and Entain aimed to avoid regulatory issues that could jeopardize the Ladbrokes deal. However, at its peak, Headlong contributed a third of Entain’s revenues. The subsidiary allegedly employed dubious cash-collection networks and payment processors to conceal transactions from Turkish financial institutions and reportedly bribed Turkish officials to overlook their operations.
HMRC’s accusation centered on Entain’s failure to prevent Headlong employees from engaging in bribery. The oversight of the unit was so lax that some employees were reportedly defrauding the parent company by siphoning off funds. Had the case proceeded differently, Entain could have faced prosecution under the UK Bribery Act, risking the loss of licenses worldwide and potentially affecting thousands of jobs. However, prosecutors ultimately opted against this outcome.
If the lawsuit goes to trial, a judge will need to assess the extent to which the Turkish investigation affected Entain’s stock market performance. Other factors, including several unsuccessful acquisitions, have also contributed to the company’s declining share price. Activist investors have recently become more vocal within the group, expressing concerns over its strategic direction. This turbulence may have contributed to the resignation of CEO Jeannette Nygaard-Anderson in December 2013 amid rumors of internal unrest.
Andrew Hills, a partner at Fox Williams, the law firm that filed the complaint, expressed hope that the lawsuit would not only allow institutional investors to recover substantial losses but also enhance transparency and governance within the UK’s gambling sector. He emphasized the necessity for public companies to take their disclosure obligations seriously.
