Sports Betting Company Settles SEC Charges of FCPA Violations Involving Russian Third Parties

A global gaming and sports betting company settled SEC charges that it had violated the Foreign Corrupt Practices Act by failing to (i) establish and maintain a reasonable system of internal accounting controls and (ii) record and monitor payments to Russian third-party consultants.

In the Order, the SEC stated that the company, which operated one of the largest online poker websites in the world, paid approximately $8.9 million to consultants in Russia. The SEC alleged that the company worked with Russian consultants as part of its efforts to legalize poker in the country and expand operations in the Russian market.

Following an internal review by the company identifying improper payments made to government officials in other foreign jurisdictions, the company self-reported the findings to the SEC. Thereafter, the company established a policy that prohibited payments to third-party consultants before undertaking risk-based due diligence, written contracts and approval by its CEO or general counsel. The SEC found, however, that the company failed to adhere to these internal policies when conducting business with the Russian consultants by (i) submitting invoices without sufficient detail and (ii) misrepresenting the reason for some payments.

To settle the charges, the company agreed to (i) cease and desist from further violating Exchange Act Sections 13(b)(2)(A)-(B) ("Periodical and other reports") and (ii) pay a civil money penalty of $4,000,000. The SEC considered the company’s cooperation and remedial efforts when determining a penalty.