When it won the UK’s largest contract in the public sector, the company that runs the UK’s national lottery borrowed millions from Kremlin owned banks.
VTB and Sberbank were two of Russia’s largest lenders. They formed a syndicate to lend €640m (£545m ) to Allwyn by 2020, just two years before Allwyn was selected as the “preferred” bidder for the £6.5bn lotto contract.
Allwyn paid back the part of the loan that was owed to two Russian banks as a response to the invasion in Ukraine. However, it appears that the funds helped the group to support itself during the expensive process of bidding on the lottery.
The UK placed sanctions on both Sberbank, owned by the Kremlin, and VTB. However, loans from these lenders, which were extended through European subsidiaries located in Germany and the Czech Republic, continued to be in place nearly a full month after the UK.
Allwyn paid back the debts at the end of March 2022 after the Gaming Commission selected the company as the operator for the lottery. This was in front of Camelot and Richard Desmond, the media mogul.
No evidence has been presented to suggest that Allwyn, which is ultimately owned by Karel Comarek, a Czech billionaire, violated sanctions, or that Russian influence was exerted on the bid. It is not clear that the Russian loans were directly used to fund the bid.
Allwyn stated that it informed the Gambling Commission of the loans it had taken out and its intention to pay them back on 28 February, just four days after VTB’s sanctions were imposed by the UK. It also said that it complied with Treasury sanctions guidelines.
The loans raises questions as to whether the MPs received the necessary information during the select committee meetings that examined Komarek’s Russian business connections.
Labour MP Clive Efford is a member of the Select Committee for Culture, Media and Sport. He said that he couldn’t understand why the Gambling Commission didn’t mention the loans in a June 2022 evidence session.
Efford said, “It’s unacceptable that the commission didn’t inform us when they chose Allwyn as their preferred bidder in the UK lottery that Allwyn had two loans from banks connected to the Russian State at the time they selected it.”
This evidence shows that the Gambling Commission did not give full and honest answers when asked what it knew about Allwyn’s connections to Putin’s Russia.
In April, the committee will likely question the Gambling Commission once more.
Iain Duncan Smith of the Conservative Party, vice-chairman of the All-Party Parliamentary Group on Gambling-Related Harm, also asked why the loans hadn’t been made public earlier.
He said: “This lending may not have been of any concern, but why weren’t MPs or the public informed about it?”
A contract in the public sector of such importance and value should be subjected to strict transparency requirements. The Gambling Commission should provide an explanation as soon as possible.
Analysis of publicly available corporate records in Czech Republic, where Komarek made his fortune during the post-Soviet period, revealed the previously unknown relationship between Allwyn Bank and Kremlin owned banks.
Allwyn, despite Komarek’s public criticism of Vladimir Putin’s ‘brutal’ invasion of Ukraine in the past, has found it difficult to dispel concerns among MPs regarding his Russsian connections.
The focus of the questions has been a gas storage plant in the Czech Republic that was owned jointly by Komarek’s holding company KKCG and Kremlin-owned Gazprom until February.
The Gambling Commission informed the Culture Committee in June 2022 that they were not concerned about the Gazprom connection.
Sberbank and VTB loans, agreed in December 2020, funded the Allwyn Group, which operates lotteries and gambling enterprises across Europe.
The group controls UK-based Allwyn Enertainment Ltd., which started operating the lottery in Feburary after a highly competitive bid war.
The Gambling Commission launched the competition officially in August 2020. This began a costly fight that saw Allwyn, and other bidders, spend millions of pounds on consultants, lawyers and boardroom veterans to support their bids.
Sazka Group Financing was the original lender, which became Allwyn International after a rebranding in May 2022. In the 2021 accounts of Sazka Group Financing, it is stated that the group had “responded” to sanctions imposed on Russia by member states of the European Union regarding the Russian Banking Sector.
The entire loan owed to VTB and Sberbank was repaid between 22 and 25 March, 2022.
On 24 February, the UK placed VTB on its list of sanctions. Sberbank joined that list on 1 Mar.
Four days after VTB’s sanctions were imposed, KKCG informed Gambling Commission about the loans it had made and its intention to terminate the contract.
The loans were not repaid by the time it was chosen as the preferred bidder of the Gambling Commission on 15 March.
The accounts for the Sazka Group as a whole refer to a loan repayment that was made early in March 2022 and is estimated at €60m.
This figure is about 14% the €450m borrowed by Sazka Group Financing from the syndicate before 2020.
Allwyn announced that it had agreed to a £380m separate credit facility for its lottery bid in October 2021. The bidding process was open for over a year at this point, and the facility hadn’t been drawn yet by the end 2021.
Allwyn stated that it “never borrowed money from any bank in violation of the sanctions restrictions”.
“As soon the Russians invaded Ukraine and before the Gambling Commission named Allwyn as its preferred applicant […],, Allwyn and their legal advisors began the process of repaying borrowings from the European branches of VTB […]and Sberbank […] in 2020 as part of an extensive syndicated banking financing.
“Allwyn informed the Gambling Commission promptly, and the process was carried out in accordance with wind-down guidelines published by HM Treasury.
Allwyn repaid VTB and Sberbank all their debts by 25 March 2022. This was only one month following the invasion of Ukraine. Allwyn has expressed its dismay at Russia’s invasion.
The Gambling Commission stated that it “required applicants to declare all funding sources they intend to use for their application as well as for the operation of the national lotteries.”
“We were and are still satisfied that Allwyn is not funded by sanctioned entities.”