Inside a corporate doppelganger: how bet365 bets on apathy

by | Jan 19, 2019 | Business

They were tripping over it, diving through it, springing in the air above it to make spectacular catches; the bet365 ad that is, the ad which doubled as a boundary rope at the Test Cricket this year.

No, that’s not an ad, they say. It’s a boundary rope.

While Tennis Australia has done the right thing and kept gambling ads out of the Australian Open Tennis, Cricket Australia and the Seven Network were merrily promoting online betting all day on TV, showcasing their predatory wares to millions of Australian children.

What you will never see in bet356 advertising is the Australian corporate entity behind the secretive British betting shop. They call it Hillside (Australia New Media) Pty Ltd. It is less recognisable that way.

So, borrowing from the words of Samuel L. Jackson in the bet365 TV ad, let’s make it a little more recognisable:

“Hello, I’d like to tell you about the world’s biggest online sports betting company. The reason why they are the world’s number one is . . . .[dodging tax and failing to obey the law helps] and guess what is now based in Australia.”

A gambling colossus that loses money in Australia (yeah right)

They might be based in Australia but bet365 is not paying income tax in Australia. According to Hillside’s 2018 accounts, it has carried forward tax losses of over $100 million.

These tax losses belie the growth in bet365’s gambling turnover. It is a booming business. Gambling revenue has doubled from $58 million for 2015 to $115 million for 2018.

Let’s face it; a gambling company that claims it makes tax losses taking bets off Aussie mug punters is either incompetent or lying.

Looking more closely at Hillside’s latest annual report, the odds are 15/7 incompetent and 6/13 lying.

Directors’ change their mind after eight pages

It all begins on page 1. To quote from Hillside’s Directors’ Report: “This financial report has been prepared in accordance with Australian Accounting Standards – Reduced Disclosure Requirements”. The directors clearly imply that their company has prepared “general purpose” financial statements because that is what the “reduced disclosure requirements” commonly refer to.

Unfortunately, the directors’ commitment to general purpose financial statements lasts for only eight pages. On page 9, the directors have had a change of heart and say they have prepared “special purpose” financial statements. Basic financial statements that is.

Such basic, or short-form, financial statements not intended for anyone but the foreign master and they fail to carry the most important disclosures required by Australian accounting standards; for example, information about transactions with related parties.

Hillside’s parent company is incorporated in the United Kingdom and apparently there are all manner of related party dealings which have led to Hillside owing $135 million to its parent company at balance date.

Hillside has liabilities which exceeded assets by $88 million and it declares itself to be technically insolvent without ongoing financial support from overseas.

Where are the “true and fair” financial statements?

Hillside appears to fall into that category of companies which are supposed to lodge general purpose financial statements with the Australian Taxation Office. Bet 365 Group Limited is a global parent entity with income in excess of $1 billion.

So where are Hillside’s general purpose financial statements? Here are the odds:

  • 2/1 – not prepared because of administrative oversight;
  • 1/5 – not prepared because Hillside wants to keep the Tax Office in the dark;
  • 1/7  – lost at the Australian Securities and Investments Commission (ASIC).

And it is a no brainer for Hillside to prepare general purpose financial statements. They have millions of Australian customers. They take billions in bets. They hold millions on account for their customers, basically like a bank.

Surely, the highest standards of financial reporting and disclosure should apply to such a company?

Perhaps the auditors and chartered accountants at Pitcher Partners, perched up there on Level 22 of the MLC Centre in Martin Place, could explain how on earth Hillside’s special purpose financial reports are “true and fair” as they claim.

Cash or monopoly money?

Hillside’s cash flows between 2015 and 2018 also reveal something else that stretches the imagination; what used to be cash is now monopoly money.

The company’s 2015 accounts reported that it had cash receipts from customers of more than $2 billion. Remember Hillside holds the cash when customers deposit funds into their betting accounts or make winning bets.

Its 2018 accounts, however, report only $114 million of cash receipts from customers. How do billions in cash receipts turn into millions three years later? According to Hillside they have doubled their turnover from 2015 to 2018 but customers are only wagering about 5 per cent as much as they used to.

And where is the cash outflow to the ATO for GST paid? Maybe it is hiding in cash payments to suppliers.

Allocation of group costs

We ordinary taxpayers, we non-multinationals without government relations operatives, would love to fill in tax returns and claim a tax deduction under the label of “Whatever, it’s an Allocation”.

Hillside’s 2018 accounts include an expense of $11.7 million for “Allocation of group costs”. Back in 2014, the allocation was $5.7 million. What are these group costs for a company based in Australia? If there were general purpose financial statements we might be able to find out.

It seems like some kind of variable cost because it keeps going up. Maybe every time a customer in Australia clicks on the bet365 website someone in the UK has to write a report or call an accountant or lawyer in for more advice … in order to get the costs up in Australia, and transfer wealth offshore which would otherwise be subject to Australian tax.

Kowtowing to multinationals

Here is the rub. Opaque special purpose accounts prepared at the behest of billion dollar multinational companies are depriving us – the Australian public – of proper oversight of corporate financial affairs and the income tax base in our country.

Bet 365 founder Denise Coates paid herself $480 million for a year’s work in 2017, making her the best paid woman in the world. She has apparently upset the neighbours in the process of building her $160 million house in Cheshire.

Over here in Australia, Hillside’s special purpose filings are based on the proposition that there are no other users of the reports – other than Denise and her handsomely rewarded managerial colleagues in the United Kingdom.

Bet365 is by no means alone in this. Imagine them advertising loudly to their customers that they, the customers, indeed creditors, can deposit money with bet365, like a bank, but they still have no interest in Hillside’s financial statements. According to Hillside, their creditors have no business checking if the company is solvent, or how much money it might owe.

This is plainly nonsense. It is a nonsense perpetrated over the years, without explanation, by the Big Four accounting firms and the (Big Four controlled) professional accounting bodies CAANZ and CPA Australia.

It is a nonsense which is yet to be competently dealt with by the Treasury and its government agencies: the Financial Reporting Council, the Australian Accounting Standards Board, and ASIC.

All appear to kowtow meekly to the interests of multinational companies. Some do it for fees. Some because they know which side their bread is buttered. Some because they have been lobbied and have been made to feel important. And some simply because they don’t really understand accounting and would not know any better.

Such is the sophistry, the delusion, perpetrated by multinationals and their advisers.

White lines sniffed and crossed

Meanwhile, we see this recent headline: “A coke-snorting, high-rolling lawyer who bet up to $3 million a day on football games has been sentenced to up to six years behind bars.”

Personal responsibility and caveat emptor aside, the young lawyer, Brodie Clarke, clearly had a problem. But how could his betting shops not know that he had a problem when Clarke was risking up to $3 million in sports bets a day?

This reporter would bet that bet365 is one of these betting shops.

They all pay lip service via their little Gamble Responsibly disclaimers, but far deeper in the fine print are disclaimers that bet365 will soak up your personal data and even transfer it to Gibraltar and the UK.

So, they take your money on trust – and on bets – and take your data too, but claim that customers have no right to see statutory financial disclosures, despite what the accounting standards actually say.

Hillside’s adverts at the cricket, its carry forward tax losses and its special purpose accounts are an affront but equally galling is how little is being done by Australian authorities to haul this company and its advisors into line.

Taxman closes in as William Hill skips the country


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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