Zona de Azar Ireland – Flutter Paying to Settle PokerStars’ Alleged Bribes to Russian Consultants
Ireland.- 8th March 2023 www.zonadeazar.com Flutter Entertainment’s deal struck in 2019 and finalized in 2020 to acquire The Stars Group, the parent company of international iPoker powerhouse PokerStars and lesser mobile sportsbook FOX Bet, came with some delayed costs.
The Dublin-based gambling company settled the commonwealth of Kentucky’s suit against PokerStars for $300 million in September 2021. On Monday, Flutter agreed to a $4 million settlement with the U.S. Securities and Exchange Commission over The Stars Group allegedly violating foreign bribery law with payments to Russia-based consultants from 2015-2020.
All of these costly actions by PokerStars and The Stars Group predated Flutter’s purchase of the company.
Violations of the Foreign Corrupt Practices Act
The SEC issued a cease-and-desist order Monday against Flutter and wrote in its summary of findings in which “the Company” refers to The Stars Group:
This matter concerns violations of the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act of 1977 (“FCPA”) by the Company. Between May 26, 2015 and May 15, 2020 while the Company’s shares were registered with the Commission (the “Relevant Period”), the Company paid approximately $8.9 million to consultants in Russia in support of the Company’s operations and its efforts to have poker legalized in that country. The Company 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 Company also failed to consistently make and keep accurate books and records regarding consultant payments in Russia, including by inaccurately recording certain payments as lobbying fees.
The order further explains, “During the Relevant Period, revenues originating from users in Russia were a significant source of revenue for the Company. Russia was a so-called ‘gray market’ where poker was neither affirmatively permitted nor explicitly prohibited. The Company employed various consultants to lobby Russian government officials as part of its efforts to promote the legalization of poker in Russia and expand the Company’s operations in the Russian market. Despite the Company’s efforts, poker was never legalized in Russia. In March 2022, following Russia’s invasion of Ukraine, Respondent exited the Russian market.”
The SEC specified that some of the approximately $8.9 million the Toronto-based Stars Group allegedly paid Russia-based consultants went toward New Year’s gifts for Russian government officials.
‘A legacy issue’
Flutter, which also owns FanDuel, the leading U.S. online sports betting operator, neither admitted to nor denied the SEC’s findings.
“This is a legacy issue, related to a period prior to Flutter’s ownership of the Stars Group,” a Flutter spokesperson told The Wall Street Journal. “Following our acquisition of TSG, we made significant changes to implement a framework of controls in line with Flutter’s existing standards.”
The SEC noted that Flutter has cooperated with its investigation and has terminated or is in the process of terminating all business in Russia. Flutter has until April 5 to pay the $4 million.
PokerStars operates legally in just three states: New Jersey, Pennsylvania, and Michigan. Since Jan. 1, poker players in Michigan and New Jersey have been able to compete in a shared player pool. Pennsylvania PokerStars customers remain in a separate pool where they can compete only against fellow players in the Keystone State.
Edited by: @MaiaDigital www.zonadeazar.com
