Camelot hit by CardCall crisis

LOTTERY DEALS: Fresh allegations raise questions about Camelot’s capacity for deal making

Camelot faces more embarrassment this week as Marketing Week reveals links between one of its licensees, phone card company CardCall and one of its principal shareholders Gtech. It comes just three days after Camelot was forced to launch an inquiry into the controversial licensing deal with CardCall because of allegations about the financial background of the latter’s founder, Michael Zwebner.

It is estimated that 4 million cards have been distributed on a free basis since they were launched in September. But the deal has caused Camelot some embarrassment after Marketing Week, and, last weekend, the Mail on Sunday revealed details of Zwebner’s company.

Camelot told Marketing Week that it was not aware of any allegations about Zwebner until last weekend. But Marketing Week had revealed some of the financial problems surrounding the company as early as last August and called on Camelot to investigate. But Camelot did not launch an inquiry.

According to sources close to Camelot, no investigation has been made by either Camelot or Oflot into the financial stability of the company. Although it is believed that Camelot did discuss CardCall’s financial position with Zwebner last October. Oflot says the deal was “ancillary” to Camelot’s activities and therefore did not require its scrutiny.

There is speculation about whether the decision to award the contract for the National Lottery phone card to CardCall was influenced by Camelot shareholder Gtech. Gtech, the biggest lottery concern in North America, owns a 22.5 per cent stake in the UK Lottery operator.

CardCall was introduced to Gtech by the former girlfriend of film producer and CardCall backer John Daly, Beata Bray. Daly, who has won two Oscars for Best Picture, ploughed $1m (600,000) into CardCall’s UK venture through Timber Participation which is incorporated in the British Virgin Islands.

Bray later became the girlfriend of Gtech founder and co-chairman Victor Markowicz and introduced him to CardCall. CardCall’s chief executive officer, Duncan Murray, says it has received a solicitor’s letter from Bray, demanding an fee for introducing CardCall to Camelot. “She made the claim for commission, we don’t think there’s any substance to the claim.”

A Camelot spokeswoman says Gtech had no involvement in the awarding of the contract. “Markowicz had no involvement in the decision to appoint CardCall. Very often deals are made on the basis of networking, this can sometimes be misconstrued.”

A CardCall insider says: “Zwebner often boasted of his links with Markowicz. He would say that if there were ever any problems with the Camelot deal, ‘Markowicz will sort it out’.” Zwebner denies he knows Markowicz well.

It is understood that Camelot allowed CardCall to take the unusual step of staggering payments of the 100,000 fee any user of the National Lottery logo must pay.

Zwebner tried to float the company in October but failed to gain enough subscribers. He then attempted to sell 51 per cent of CardCall to telecoms company MTT (MW December 20). There was a potential conflict of interest. Sir Kenneth Baker is a non-executive director of MTT. His wife, Mary is a non-executive director of Camelot.

An MTT spokesman says negotiations to buy CardCall were later scrapped.

Last August, Marketing Week revealed that Zwebner fled the country six years ago, leaving 1.5m in debts after a collapsed land deal (August 9 1996). His company, the Land Development Corporation, was bought by a firm called Eastcheap General Trading. Eastcheap took over the LDC’s Eurotech Centre near Oldham which was meant to create 2,000 jobs in the town.

Last weekend, the Mail on Sunday revealed that Zwebner, the sole director of CardCall’s US parent company, was also an undischarged bankrupt. Zwebner claims to have repaid his creditors and is applying to have the bankruptcy discharged. He told the Mail on Sunday he had told Camelot that he was an undischarged bankrupt.

The article also revealed that Zwebner had massive debts in the US, with AT&T, Sprint Communications, Allnet, a number of US printers and New York State taxes among the creditors.

Zwebner attributed those debts to a dispute with another company which he alleged had let him down.

Gtech has also caused embarrassment to Camelot. In the US, Gtech has been at the centre of fraud allegations and patronage of public officials to secure lottery contracts in different states. It has been accused of controversial dealings in its bids for US state lottery licences in at least eight states but as yet it has not been successfully prosecuted.

Camelot claims it is now investigating CardCall and that it was unaware of the company’s past until last Sunday. This begs the question of what investigations were carried out into CardCall before Camelot entered into the deal.

Some wonder whether National Lottery Enterprises was impatient to set up a deal after others had fallen through for one reason or another.

CardCall was in even greater need of the deal. In August, Marketing Week pointed to the CardCall brochure for its AIM flotation which said: “Recognising the need for corporate credibility and in order to get market recognition, the company has entered into an exclusive licensing agreement with National Lottery Enterprises.”

The article pointed out that Camelot was “lending its name to establish CardCall in the UK”. The plans appear to have backfired.

Marketing Week has published a series of articles raising doubts about the deal. In August 1996, a Camelot spokeswoman claimed that the previous business interests of Zwebner had no baring on the ANYphone card deal. It now seems to have changed its mind.

More questions are being asked of Camelot after Marketing Week revealed the daughters of a senior Camelot employee involved in recommending the CardCall licensing deal were later employed by the company. Camelot telecommunications manager Geoff Pollock was central to the success of the CardCall deal. He approved the technology, which was a sticking point, in the deal to produce National Lottery branded ANYphone cards. His two daughters Catherine and Angela were subsequently hired by CardCall. Camelot claims that the two were employed in vacation jobs and says their employment began after the contract was signed.

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