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UK Internet lottery making owners wealthy

Online GamblingOnline Gambling: UK Internet lottery making owners wealthy

New Internet-based lottery, which is supposed to donate its proceeds to charity, is instead enriching its owners

A charity lottery promoted as the fairer alternative to the National Lottery has awarded its directors shares and bonuses worth almost £10 million (US$18.7 million).

The lottery, called Monday, held its first draw this week and is being heavily advertised as a more altruistic way for people dissatisfied with the national lottery operator, Camelot, to have a weekly flutter.

But scrutiny of financial documents shows that, despite a high-profile publicity and advertising campaign stressing the lottery's benevolent nature, the people behind the scheme are enriching themselves by millions of pounds. Members of the board of Monday's operator Chariot have been granted shares worth £3.4m (US$6.4 million). Share options — which can be exercised immediately regardless of performance — are worth a further £5.2m (US$9.7 million). On top of the shares, share options and their annual salaries the eight executives also stand to pocket a further £1m (US$1.87 million) a year from a company bonus scheme and employee incentive plan.

Leading charities such as Shelter and The Samaritans which signed up to the lottery as partners were not aware of the payments. They were condemned as wrong by Unison, the biggest trade union in Britain, which represents charity workers. But charities said that they welcomed the extra money the scheme could bring in at no extra cost.

In its advertising, Monday promotes itself as a kind of people's lottery with more but smaller prizes than the National Lottery, giving players a 27 times greater chance of winning. Its literature stresses the involvement of high-profile charities such as Barnardo's and St John Ambulance and boasts that it gives more money to charity, 30 percent of total revenue, than Camelot's 28 percent which goes to "good causes".

"Finally, Britain's fairer lottery IS HERE," Monday's advertising trumpeted this week. A footnote to the literature states that the lottery is run by an external manager, Sisson Marketing International. But it makes no mention of the fact that the lottery is ultimately owned by Chariot PLC, a profit-making company floated on the Alternative Investment Market (AIM) in February with £14m (US$26.2 million) of City backing — a detail tucked away on a section of its website. Nor does its advertising reveal that Chariot's running costs and profits of the organization — at 15 percent of revenue — are 50 percent higher than those of Camelot's.

The 70 charities — who stand to receive up to £150m (US$280 million) a year if Monday is successful — will also have to pay back 5 percent of their funds toward running costs in the first year.

Scrutiny by The Independent of financial information provided to investors reveals that Chariot's directors have been handsomely rewarded for their involvement, even though only one of them, John Finan, put any money of their own, around £100,000 (US$187,000), into the venture.

The charity worker who devised the idea of the lottery, Suzanne Counsell, receives the greatest rewards — a 12.8 percent shareholding worth almost £2.5m (US$4.7 million). Tim Holley, the part-time, non-executive chairman, has a slice of the 4.4 million share options granted to the directors.

Mr Holley was chief executive of Camelot when he was criticized by the culture secretary at the time, Chris Smith, for receiving a six-figure bonus in one of the first political rows of the Blair government.

Last night Mr Holley, who works two days a week, defended the payments, saying City investors had wanted to ensure the management had a reason to make the venture a success.

"When investors invested £14m (US$26.2 million) in this organization they did it on the basis that it was going to be run as a commercial entity. Yes, it is raising money for charity but run on a business basis with proper and normal incentives for the directors," he said.

He added, "I don't think the level of business bonuses and shares is excessive We have not hidden the fact that it's got City investors. The charities know that."

While charities such as Shelter and The Samaritans welcomed Monday's potential funds, none was aware that its executives were poised to become millionaires.

When told of the payments, Rebecca Seedhouse, a fund-raiser with The Samaritans, remarked: "Wow!" adding, "Nice work if you can get it."

A spokeswoman for Unison, the public sector union, said: "I think most British people would be horrified if they found there was a small group of people making millions of pounds out of something to do with charitable giving and think that's wrong. If you are putting money into what you think is a charity it shouldn't be lining the pockets of the people running it."

CorporateWatch, a group which monitors the behavior of companies, said: "It sounds like a pretty cynical operation."

Where does the money go?

What is Monday?

Monday is the new "charity lottery", which holds its prize draw on the Internet every Monday. It is billing itself as a fairer alternative to the National Lottery, with more prizes and more money going to charity.

So is it a good thing?

The charities think so. Some 70 charities have signed up to the scheme, from big ones such as Marie Curie Cancer Care to smaller ones like the Multiple Sclerosis Resource Center. Monday aims to raise £150m (US$280 million) a year for them. But there are questions about how much money from the public is being diverted into the pockets of City investors and executives.

Where does the money go?

For every £1 (US$1.87), Monday says 30p (56¢) will go directly to the player's chosen charity, 55p ($1.03) to prize money and 15p (28¢) to running costs. By contrast, for every £1 on the National Lottery, 50p (94¢) goes on prizes, 28p (52¢) on good causes (including charities), 12p (22¢) in tax and 10p (19¢) in operating costs.

So you stand a greater chance of winning with Monday?

Yes. Because the prize per draw is £200,000 (US$374,000) and there are many more smaller prizes — rather than Camelot's massive multimillion-pound jackpots — there is a much greater chance. Chariot says players' chances of winning are 27 times greater, although there is only 10 percent more prize money than the National Lottery.

And the charities?

They get 2 percent more than from the National Lottery's "good causes". However, in the first year, 5 percent of the charity money will be returned to Chariot, meaning that their share of the prize money will be 28.5 percent — just half a percentage point more than Camelot.

And the Government?

Gets nothing for public spending, on schools and hospitals and so on, because Monday is treated under legislation pre-dating the National Lottery as a "society lottery".

What about the business side?

Monday is run by a company floated on the London Stock Exchange's AIM index. City investors have plowed £14m (US$26.2 million) into it. Its investors include Bank of New York and Barclays Capital. In a note to stockbrokers in February, before Chariot floated, the investment analyst Edison said the company could make pre-tax profits of £40m (US$74.8 million) in the next financial year.

How much does the management get?

A lot. Arguably too much. The shares and share options for the directors are worth almost £9m (US$16.8 million) at last night's prices. Unlike many share-option schemes, Chariot's could make its directors millions of pounds straight away — without having to wait for a rise in the share price. One of the directors, Suzanne Counsell, was handed £150,000 (US$281,000) and shares worth more than £2m (US$3.74 million) for transferring her intellectual property to the company — essentially for coming up with the idea of the lottery. A bonus scheme could give each director up to £150,000 (US$281,000) a year depending on sales.

Independent

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3 comments. Last comment 11 years ago by savagegoose.
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mylollipop's avatar - Trek STLOGO6.png

United States
Member #24380
October 21, 2005
623 Posts
Offline
Posted: May 12, 2006, 1:38 am - IP Logged

Hmmm.  I still stay that a charitable lottery would be a ggod thing.  Just gotta get the right people to organize and run it, that's all.  There will be a National Charitable Lottery in the USA---soon.

    LOTTOMIKE's avatar - Lottery-063.jpg
    Tennessee
    United States
    Member #7853
    October 15, 2004
    11338 Posts
    Offline
    Posted: May 12, 2006, 2:51 am - IP Logged

    internet lottery is here to stay!!

      savagegoose's avatar - ProfilePho
      adelaide sa
      Australia
      Member #37136
      April 11, 2006
      3316 Posts
      Offline
      Posted: May 13, 2006, 5:41 am - IP Logged

      lol its more generous to chaRITIES, IT PAYS %2 MORE THAN THE STATE LOTTO to charities.

      whoopty do, this place deserved to crash and burn. only buy not buying tickets or anything will the mngmnts hsares be worth nothing.

      its a listed company fro what i could tell., shareholders, and ROI for investors being main concern., the charities are just sdtooges with their hands out.

       

      if u want to help a charity out, dot buy a lotto ticket donate to the charity directly,. you may even get a tax deduction on the donation.