Flutter Entertainment Plc, the parent company of PokerStars, has negotiated a $4 million settlement to the United States' Securities and Exchange Commission (SEC). The settlement resolves a cease-and-desist order regarding years of vaguely described and misreported securities-related disclosures regarding payments made to several Russian consulting entities for lobbying purposes.
The cease-and-desist's related settlement centers largely on activity that occurred during the Amaya / The Stars Group ownership period, years before Flutter purchased Stars in 2020. A nine-page report released by the SEC on Monday details several years of payments made to three individuals and one company during the Amaya / TSG regime between 2015 and 2020.
The cease-and-desist order asserts that PokerStars failed to conduct due diligence regarding the lobbyists it selected to promote its efforts in Russia. The misreported lobbying efforts fell under SEC purview once Amaya offered a security that was traded on NASDAQ, first as AYA and later as TSG, beginning in June 2015.
According to the SEC, those lobbying efforts totaled $8.9 million between 2015 and 2020. Among other payments, Amaya/TSG funneled some money to Roskomnadzor (also known as “RSKM” or “Roskom”), the Russian state agency responsible for administering the country's various blacklists targeting online-gambling operators. A footnote in the SEC statement notes that Roskomnadzor blocked Stars' gaming servers on numerous occasions.
Also among the payments that were later disguised were reimbursements to a consultant "for New Year’s gifts to individuals including Russian government officials, which relevant Company policies prohibited."
Flutter has since ended its relationship with all but one of the Russian consultants. The remaining consultant continues to work on PokerStars' 2022 withdrawal from the Russian market. Flutter pulled PokerStars out of Russia following that country's invasion of Ukraine in early 2022.
Stars' Russia-facing lobbying efforts pre-dated Amaya years
Though the activity that drew the SEC's cease-and-desist order occurred under Amaya / TSG stewardship, PokerStars' lobbying efforts in Russia date back to the pre-Amaya days. Under its original Oldford Group entity, per the SEC, PokerStars retained three "legacy Oldford Group consultants" to assist in lobbying in Russia, which at the time had no formal online-gambling regulatory regime.
The SEC described the three Russian individuals as follows:
- Consultant A was a lobbyist initially retained to help establish the Company’s business in Russia.
- Consultant B was an attorney retained to provide legal advice regarding Russian gaming law.
- Consultant C was head of a business interest group and a well-known businessperson in Moscow whom the Company retained to support its business in Russia, which included interacting with and lobbying Russian Government officials.
The SEC's statement declared that no due diligence was performed at time the consultants were originally hired, nor was any due diligence performed once Amaya acquired PokerStars in 2014.
Later, Consultants B and C signed "perfunctory" consultancy contracts with Amaya. Those contracts, however, contained no anti-bribery or anti-corruption provisions.
Consulting firm raised multiple red flags
In January 2015, Amaya then contracted with another business, described by the SEC as "Consulting Company A", to offer aid "regarding Russian gaming legislation and [to] liaise with Russian government officials."
The unnamed company was referred to Amaya by Consultant A and quickly went to work despite, again, almost no due-diligence checks being performed. Amaya spent $2 million just with this company in 2015 alone:
"Without any indication that Consulting Company A provided any of its contracted-for services and despite numerous red flags around its retention, [Amaya] paid Consulting Company A a total of $2 million across multiple payments in 2015, half of which the Company paid after registering its securities with the Commission."
The company was described as being based in Belize and having its payment account in Latvia. One payment was described internally as a "success fee" regarding Russian online-gambling legislation but was later described as a retainer fee to employ lawyers and additional consultants.
SEC acknowledges Flutter's assistance in investigation
Flutter submitted the $4 million figure to the SEC as an offer of settlement, and the agency noted Flutter's help in aiding its investigation while agreeing to the offer.
The company has also instituted several remedial measures that include, according to the SEC, enhancements in internal accounting controls, global compliance organization, and policies and procedures regarding due diligence, use of third parties, and maintenance of adequate records.
