Camelot chiefs threaten to resign

Crisis meeting: Lottery officials in late-night talks as today's deadline approaches

Steve Boggan and Matthew Brace

Camelot was deep in talks with the Government last night amid strong indications that directors of the National Lottery operator were preparing to resign if they are ordered to repay their controversial bonuses. The resignation threats sounded increasingly realistic as it emerged that the departures might be announced today.

A Camelot spokeswoman said last night that resignation was "a very viable option" for directors who have been given a deadline of today by the Secretary of State for National Heritage, Chris Smith, to come up with proposals to appease public disquiet over rising salaries.

"It's one of the options and it's a very feasible option at the moment. Chris Smith has requested specific things - one of those is that bonuses be handed over to charity," she added.

"If the directors feel they can't do that, the only obvious option for them to do next to safeguard the long-term future of the lottery is for them to resign."

Shareholders and board members will hold a key meeting early this morning. "Nothing is decided and everything could change at that meeting, we don't know," the spokeswoman said, adding that the resignations would probably be from individual members rather than from the whole board.

Sources close to Mr Smith said he has been unmoved by reports that three of Camelot's top executives may quit today, and by the announcement that three of the company's five shareholders will pull out if the operation is made "not-for-profit".

"If you are asking whether he would buckle under threats or let them go on their way, then it would be the latter," one aide said.

"His main concern is that public confidence in the lottery should be restored so that it can continue to be a great success and raise more money for the good causes. He wants to draw a line under the whole episode as soon as possible."

Following his meeting with Camelot's chairman, Sir George Russell, at which he expressed anger at bonuses of up to 90 per cent of salary, Mr Smith is awaiting a response to three proposals aimed at restoring public faith in the lottery.

He asked Camelot to repay pounds 7m of interest from unclaimed prizes to the good causes fund and suggested the directors pay some or all of their bonuses to charity.

Camelot was also given six weeks to come up with proposals for operating as a not-for-profit organisation.

Over the past three days, however, a number of stories appeared in the press, apparently designed to put pressure on Mr Smith to reconsider a position that looked very radical in the light of independent research which has shown Camelot's is the most successful and efficient lottery in the world.

First, Sir Ernest Harrison, chairman of Racal, and Jeremy Marshall, chief executive of De La Rue, both of which own 22.5 per cent of Camelot, said they would not participate in a not-for-profit organisation. They were joined by GTech, the American shareholder responsible for the lottery technology, which said it would not provide goods and services without a profit element.

Second, it was reported that Tim Holley, Camelot's chief executive who earned pounds 590,000 last year, David Rigg, its pounds 333,000 a year communications director, and Peter Murphy, pounds 361,000 finance director, were considering resigning today in order "to avoid further damage to the national lottery".

Reports also suggested that Mr Holley, Mr Rigg and Mr Murphy were considering the move both to resist caving into political pressure and to end the long-running controversy once and for all.