US investors take GTech to court

Camelot's National Lottery partner faces allegations of covering up technical problems

GTech, the lottery systems group which cost Camelot its UK licence, is being taken to court in the US for allegedly misleading investors.

GTech, the lottery systems group which cost Camelot its UK licence, is being taken to court in the US for allegedly misleading investors.

A class-action suit was last week filed in New York claiming that the company covered up a series of international sales disasters, the exposure of which has caused a collapse in its share price. The allegations feature William O'Connor, its former chief executive, who is accused of making inaccurate statements about the company's global expansion plans.

It was GTech's decision to cover up software glitches in its UK terminals that caused Camelot, the consortium that has run the domestic game since its inception in 1994, to be declared unfit to bid for the next contract. Camelot has since decided to buy out GTech's UK operations, and last week won leave to seek a judicial review of the National Lottery Commission's decision. However, the next licence is still likely to be awarded to the commission's preferred bidder, Sir Richard Branson's People's Lottery.

GTech, based in the Rhode Island town of Providence, is under fire for claiming it had won lucrative contracts around the world and boasting of booming revenues. In April, reports began suggesting its global expansion was not proceeding as planned. By July, it became clear that revenue forecasts would not be met. Now, Milberg Weiss is bringing the lawsuit on behalf of other shareholders who bought stock between April and July.

GTech is no stranger to controversy. Co-founder Guy Snowden resigned in 1998 after losing a libel case he brought against Sir Richard. The case was filed after the Virgin founder alleged that Mr Snowden had tried to bribe him to withdraw his bid for the original lottery licence.

When Mr Snowden, who left with a £9.3m settlement, was replaced by Mr O'Connor, the new man was intended to be a break from the past. However, Mr O'Connor himself left in July along with Steve Norwick, his chief operating officer, blamed for attempts to hide GTech's mounting global difficulties. Mr O'Connor's own departure was sweetened by an £8m pay-off.

Camelot members responded to the bad publicity generated by Mr Snowden's libel defeat by buying GTech out of their consortium. However, Camelot retained the US group as a supplier, a decision that proved costly when it emerged this year that software glitches had caused thousands of UK winners to be either underpaid or overpaid. The National Lottery Commission blamed last month's dismissal of Camelot's bid on GTech's failings.

A High Court judge will next week hear Camelot's challenge to that decision. Meanwhile, the People's Lottery is tweaking its bid to satisfy the commission's outstanding objections, which could herald the award of a licence to run the game for seven years. Sir Richard has said running the lottery is his greatest ambition.