Long odds for Loto after Court verdict

Stripped of its local authority registration the NHS Loto has to change the way it operates if it is to continue. A ruling decided it is no longer a local operation but a national lottery. Tom O’Sullivan and David Benady investigate

In failing to secure registration with a London local authority, the NHS Loto not only lost a court decision, but also the only factor which made it unique. It has consistently argued that it is a collection of more than 100 local lotteries designed to fund local hospitals – the judgment says it is a single national lottery.

Justice Hidden’s judgment, supporting the Royal Borough of Kensington and Chelsea’s (RBK&C) view that the NHS Loto is one national lottery rather than 100 separate branches as its operator Pascal & Company claims, has effectively undermined its continuing operation. Without registration from a local authority or the Government’s gambling watchdog, the Gaming Board, a lottery cannot operate.

NHS Loto was able to continue its televised free prize draw last week because ticket sales had been suspended. But it is no longer registered to run paid-for lotteries.

The RBK&C withdrew NHS Loto’s registration in March, declaring it was a single lottery with an income in excess of 250,000 and should be registered with the Gaming Board which has greater powers to scrutinise a lottery’s activities.

But a temporary injunction, won by Cherie Booth QC acting for the NHS Loto solicitor Mishcon de Reya, gave Pascal & Company breathing space. The injunction ran out on August 1 and, when Marketing Week went to press, the NHS Loto had not applied to the Gaming Board for registration.

“There is in my view only one lottery organised entirely by the National Hospital Trust (NHT) and organised as one lottery,” Justice Hidden said in his summing-up of the case on July 23. “There is only one common entry form, only one draw and only one set of winning numbers for each of what are said to be 100 separate lotteries… The NHT by its publicity is seeking to sell a ticket in one lottery.”

He then went on to dismiss the arguments of Pascal & Company that there are 100 separate branches: “They are a paperwork facade, beyond which the court has to look in order to see the reality … And thus it is impossible for me to hold that the societies are validly registered.”

It leaves the controversial lottery, which is still negotiating financial support for a 20m marketing and advertising push with its Malaysian backers, having to change its structure. It has been talking to agencies since January but has yet to appoint one.

NHS Loto has been operating since 1988 but only became a serious player with an injection of 5m from American Allan Ginsberg and the advent of a 1m live television prize draw in June 1995.

A total of 100 branches from all over Britain are registered with the Council although the NHS Loto no longer even has an office in the borough. A Marketing Week investigation last year (MW December 1 1995) exclusively revealed a change in ownership – when a company called Stenworld effectively took over Pascal & Company – and highlighted the concerns of the Council.

With the creation of the National Lottery in 1994, the rules changed and any single lottery with an annual sales income over 250,000 had to be registered with the Gaming Board. NHT financial reports show that, through its 100 “branches”, it had a total income of 386,937 in the year to the end of July 1994. This was before the relaunch and television exposure in 1995 which would be expected to swell income.

Future expansion to make it the UK’s number two lottery is dependent on the fresh funding which had been expected earlier this year. But the funding is tied to the financial restructure of a Malaysian feed milling company, Sin Heng Chan.

A statement from the NHT claimed the judgment would make little practical difference to the operation of the Loto, saying it would “not be difficult to comply with all the points made by the judge”.

But the judge’s summing-up of why he considered Loto to be a lottery – including the fact that there was one administrative centre, bank account, application form and set of trustees – would seem to imply formidable obstacles. He did not outline to Pascal & Company how it should restructure the branches to be re-registered.

“The point is to clarify exactly what we have to do and then comply,” says NHT spokeswoman Georgina Catchpole. She says the practical details of restructuring the “branches” are being handled by Pascal & Company. But it refused to comment and referred all inquiries to the NHT. But the organisers seem intent on continuing with local “branches” rather than submit to Gaming Board scrutiny.

Prior to last week, NHS Loto players chose their five numbers by post to enter a 10,000 local prize draw. The winners were announced live on a Thursday night Channel 4 television “show” and invited onto the show, with the chance to select an envelope containing up to 1m in prize money. All the entrants, including those who did not win, automatically went forward to the jackpot free-prize draw.

But Catchpole admits the free prize draw is seen by the NHT as a promotional mechanism for the paid-for side of the Loto – the local draw. This is the actual lottery part of the business and takes place off camera.

However, no tickets were sold for last week’s draw. An NHS Loto operator told a Marketing Week reporter trying to buy a ticket last Thursday: “The draw has been suspended until August 15 while we update the licence and change the rules.”

The NHT statement issued last week says: “Other branches not affected by the RBK&C action will continue to raise money for their local hospitals with the only area not now benefiting being Kensington and Chelsea.”

But the RBK&C has always been led to believe that all 100 branches were registered with it. “We have never been made aware of any other branch registered with any other local authority,” says a council spokesman. “We asked if there were any other local authorities holding registrations and it said no.

“Our concern was that if a local authority registers a lottery it could imply to the punter approval of the body from top to bottom. We only see limited financial data and felt uneasy about the registration continuing.

“If it had registered with the Gaming Board, everybody, including the Charity Commission, the Council and the Gaming Board, would have been satisfied. But it seems reluctant to do that.”

Both the Gaming Board and the Charity Commission are continuing to investigate.

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Tom Fishburne is founder of Marketoon Studios. Follow his work at marketoonist.com or on Twitter @tomfishburne See more of the Marketoonist here

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