UK gambling giant GVC Holdings is facing renewed scrutiny from the UK taxman over the company’s former Turkey-facing online gambling operations.
On Tuesday, GVC announced that Her Majesty’s Revenue & Customs (HMRC) was “widening the scope of its investigation” into GVC’s former Turkish operations, which the company offloaded in 2017 in an apparent bid to smooth UK regulatory approval for its then-pending takeover of rival Ladbrokes Coral Group.
Last November, HMRC sought information from GVC regarding the Turkish business, a request that GVC says it understood as being “directed at a number of former third-party suppliers, relating to the processing of payments for online gambling in Turkey.”
GVC said Tuesday that HMRC had recently informed the company that it was now “examining ‘potential corporate offending’ by an entity (or entities) within the GVC group which HMRC has not yet identified.”
GVC claims to have been “surprised” by HMRC expanding its probe and “disappointed by the lack of clarity” provided by the taxman. GVC did say that HMRC made a reference to Section 7 of the Bribery Act 2010, which involves corporate liability for corrupt activity committed by employees or associated individuals for the purpose of creating a business advantage.
Shareholders reacted negatively to GVC’s announcement, pushing the shares down nearly 12% by the close of Tuesday’s trading. Part of that alarm stems from the fact that there is no limit for the financial penalties that can be imposed on companies found to have violated Section 7.
GVC’s announcement came just days after its longtime CEO Kenny Alexander surprised the markets with news that he was leaving after 13 years with the firm. Former COO Shay Segev was tapped to assume Alexander’s CEO duties.
GVC launched a US-facing online gambling/sports betting joint venture with MGM Resorts a couple years ago, which required GVC to undergo scrutiny by local gaming regulators. The former Turkish operations produced tough questions from Nevada regulators, scrutiny that Alexander reportedly didn’t handle all that well, leading to his subsequent apologies for the testy response.
If the HMRC probe uncovers anything untoward, GVC could face additional barriers to regulatory approval in other US states. The Roar Digital partners recently announced a significant boost in their financial commitment to the joint venture, reflecting their desire to carve out a significant slice of the US market.
GVC’s former operations in Turkey continue to plague the company long after their disposal, including questions over GVC’s decision to effectively give the business to an individual with whom Alexander had a history. GVC was forced to issue a statement last July denying that it was still somehow benefiting from its former Turkish business.
Turkey takes a particularly harsh view of internationally licensed online gambling operators serving local customers, which makes any company with a significant Turkish market presence at pains to justify the legality of this offering.