• Tue. Sep 20th, 2022

Legal row could take £1billion out of lottery funds

ByChad J. Johnson

May 7, 2022

The former Camelot chief executive has warned that an impending legal dispute over the loss of his National Lottery license could drain up to £1billion otherwise intended for good causes.

In a letter to the Gambling Commission seen by The Mail on Sunday, Dame Dianne Thompson urged the regulator to delay triggering a switch to a new operator, which she said could avert a funding disaster.

The legal bomb would more than halve the annual £1.9billion the lottery distributes to a wide range of causes from local community projects to supporting Olympic and Paralympic candidates.

Sign of things to come: In a letter to the Gambling Commission seen, Dame Dianne Thompson urged the regulator to delay triggering a switch to a new operator

In March, the Gambling Commission named European lottery operator Allwyn – backed by Czech billionaire Karel Komarek – as the preferred candidate for the fourth national lottery license, beating Camelot.

The commission aims to anoint Allwyn with an enabling deal “as soon as possible,” the letter said. A month ago Camelot, which has run the National Lottery since its inception 28 years ago, declared its intention to take the commission’s decision to the High Court.

Camelot chief executive Nigel Railton said last month he was “shocked” by the turn of events which would see the license snatched away. He said the watchdog “made that decision very badly”.

Railton added: ‘Despite lengthy correspondence, the commission has not provided a satisfactory response. So we have no choice but to ask the court to establish what happened. Thompson, chief executive from 2000 to 2014, said in the letter that the potential damages could amount to up to a decade of Camelot’s profits.

She said delaying the transfer of the license for ten years was a “relatively simple solution” which would “avoid any unseemly and unnecessary haste in legal proceedings and remove the risk for good causes”.

Thompson said in 2000, when a similar legal dispute arose over the license – this time involving Richard Branson’s popular lottery – that ‘the legal proceedings were allowed to come to an appropriate end, the transition to the new license has been successful and good causes have not failed in any way’. She said: “The Gambling Commission may grant a provisional license to Camelot for a further six months.

“The transition timetable would remain unchanged, the court case could be properly heard and – above all – any risk of a massive bill for good causes would be removed at a stroke.

“I fully understand the Commission’s enthusiasm to ensure that its preferred candidate has as much time as possible to make the transition successful.

“The transition is a complex and risky process – as I know all too well – that clearly will not benefit from a truncated timeline.” She added: “I’m also sure no one – let alone the Gambling Commission – would want to risk taking up to £1 billion for good causes, especially during a cost of living crisis.”

The Gambling Commission said: “In order to protect the integrity of the process, we will not be able to discuss specifics until litigation is complete.”

But he added: “We are confident that we have organized a fair and robust competition.” A delay in the implementation of the [next] licensing poses a significant risk that could decrease funding for these causes.

Allwyn is expected to take over management of the National Lottery in early 2024. Camelot would be unhappy that the commission’s analysis applied the same level of risk to passing the license to Allwyn as to staying with Camelot.

There will be a preliminary legal hearing this week which will decide the likely course of the main court case, which is expected to take place in October.

The initial hearing will decide whether or not damages will be appropriate compensation if Camelot loses the main lawsuit. Camelot hopes the lawsuit will pave the way for it to keep the license.

Last month it emerged that Komarek is set to receive a $750m (£572m) windfall when he lists his gaming company on the New York Stock Exchange.

It is expected to take Allwyn public through a deal with a special purpose acquisition company. The 53-year-old has amassed a fortune of £6billion and lives a jet-setting life. Komarek, his wife Stepanka and their four children move between homes in the Czech Republic, Palm Beach in Florida and the ski resort of Verbier in the Swiss Alps.

Canadian-owned Camelot claims to have returned £45billion to 660,000 causes in the UK during its nearly three-decade tenure.

It has come under pressure in recent years after profits grew faster than returns to good causes. This led to a reprimand from the National Audit Office in 2017.

But the company points out that profits – around £95million in each of the last two years – represent 1% of ticket sales.

Funds for good causes fell to less than £1.5billion in the year of the NAO reprimand. But the sum rose to £1.88billion last year thanks to record ticket sales of £8billion.

It is understood Allwyn has pledged to donate more than £30billion during his license – which could only be the first term if he is successful with a renewal.

It wants to offer more super-national lotteries, similar to EuroMillions where bigger jackpots attract more players. On top of that, he promised new technology that he hopes will appeal to younger players who favor online betting.

Camelot declined to comment.

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