Flutter agrees $4m US settlement over historic Russian lobbying efforts

Flutter Entertainment has agreed to pay $4m to the Securities and Exchange Commission (SEC) in the US over historic alleged violations of international bribery laws in Russia relating to The Stars Group (TSG).

Details of the settlement, released by the SEC on Monday 6 March, is connected to alleged violations of the Foreign Corrupt Practices Act (1977) by TSG between May 26, 2015 and May 15, 2020.

TSG became part of Dublin-headquartered Flutter on May 5, 2020 when the £10bn merger of both companies completed.

The settlement relates to pursuit of legalisation of online poker in the Russian Federation, and lobbying activities undertaken by external consultants working on behalf of TSG.

During this period, Toronto-based TSG paid three consultants $8.9m to lobby Russian government officials.

The individuals, who were named by the SEC as consultants A, B, and C include a lobbyist working to establish TSG’s business in Russia, and an attorney providing legal advice to the firm on Russian gaming law.

Consultant C was the head of a “business interest group” and a well-known Moscow-based businessman on contract with the company in a lobbying and business support capacity tasked with dealing with the Russian government.

Between 2015 and 2018, consultant C was paid $461,000 in unevidenced expenses, with TSG failing to accurately record these payments.

At that time, Russia operated and still operates as a ‘grey market’ in respect of online poker and while not expressly prohibited, is not actively permitted by Russian authorities.

The SEC highlighted failures by the poker operator to “devise and maintain” a sufficient system of internal accounting controls relating to these consultants. Further, the agency found that adequate due diligence or written contracts, as well as adequate proof of services, were also absent.

“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 SEC said in a statement detailing its investigation.

In addition to the three consultants highlighted by the SEC, a separate consulting company was also named by the SEC, which TSG paid $2m in the form of multiple payments in 2015, primarily to liaise with the firm on legislative issues and engage with Russian government officials.

TSG recorded these payments as “lobbying fees” but at no point provided with documentary justification to support this accounting. In addition, TSG allegedly conducted no due diligence on this company, ignored “red flags” and failed to investigate its principals or beneficial owners.

The SEC highlighted the cooperation of Flutter throughout its investigation, as well as remedial actions taken by the firm to rectify these issues following its merger with TSG.

Remedial measures included enhancements to its internal accounting controls and policies and practices relating to due diligence, use of third parties and record keeping.

Flutter also terminated relationships with consultants A and C in March 2021 and is winding down its relationship with consultant B, who is currently assisting the firm with its exit from Russia, first announced in 2022 following Russia’s invasion of Ukraine.

In a statement, a Flutter spokesperson said the infractions occurred prior to Flutter’s ownership of TSG. “This is a legacy issue, related to a period prior to Flutter’s ownership of TSG,” Flutter said.

“As highlighted by the SEC, following our acquisition of TSG we made significant changes to implement a framework of controls in line with Flutter’s existing standards. We are pleased that this matter has now been concluded,” the firm added.