On March 6, 2023, the Securities and Exchange Commission announced that it reached a settlement with Ireland-based gaming and sports betting company Flutter Entertainment plc to resolve allegations that the company violated the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”).
According to the SEC’s order, Flutter is the “successor in interest to The Stars Group” due to Flutter’s acquisition of The Stars Group in May 2020. Prior to its acquisition by Flutter, The Stars Group was publicly traded on NASDAQ. In August 2014, The Stars Group had acquired an online poker website, PokerStars, as part of an acquisition of Oldford Group Ltd. Oldford Group had engaged Russia-based consultants, and The Stars Group inherited those engagements along with Oldford Group’s operations in Russia.
Between 2015 and 2020, The Stars Group allegedly paid approximately $8.9 million to these Russian consultants to support its operations in Russia and efforts to have poker legalized in that country. The SEC stated that The Stars Group failed to maintain sufficient internal controls over the consultants, including failing to (1) perform adequate due diligence, (2) maintain written contracts at all times with the consultants, (3) monitor the consultants’ adherence to the terms of any contracts ultimately executed, and (4) review invoices submitted by the consultants. The SEC also stated that the Company improperly booked the expenses of one consultant as marketing or lobbying expenses when the engagement agreement stated that the consultant provided legal services. Another consulting company’s expenses were booked as “lobbying fees” despite the fact that “at no point” did The Stars Group receive “documentary justification to support this accounting.” The SEC noted that contemporaneous emails suggested that some of the payments made to consultants were for “New Year’s gifts to individuals, including Russian government officials,” and for payments to a state agency, although no records existed showing payments were made to that agency and the payments were booked as “Lobbying Fees / Rent – Offices.”
Without admitting or denying the SEC’s findings, Flutter agreed to cease and desist from future FCPA violations and pay a $4 million penalty to resolve these claims. In agreeing to this penalty, the SEC noted Flutter’s cooperation, which included sharing facts Flutter learned through an internal investigation and forensic accounting reviews, providing translations of documents and witness statements, and encouraging parties outside of the SEC’s subpoena power to provide information. The SEC also credited Flutter’s remedial efforts, which included enhancing internal accounting controls and the company’s policies and procedures around due diligence, the use of third parties, and record keeping. Lastly, the SEC noted that Flutter had withdrawn from the Russian market following Russia’s invasion of Ukraine in early 2022.