Gregory Palast

The Observer

Congratulations to George W Bush and to Camelot on their victories.

More than a year ago, we reported that the Government had decided to let Camelot retain control of the National Flutter in perpetuity. That was two weeks before the formal bidding process began. Despite our announcement, Richard Branson soldiered on, refusing, like the last dinosaur, to heed the voice whispering: 'Excuse me, but you're extinct.'

Yes, there was a moment in October when Oflot announced Branson as the putative winner. But I wasn't fooled. In 1968, a young George W. Bush, not the brightest campfire on the prairie, somehow got chosen to be a fighter pilot for the Texas Air Guard over hundreds of other young men eager to defend Dallas from bomber attack. The job, incidentally, carried an exemption from the Vietnam war draft.

Both Presidents Bush, past and future, deny that they used influence to get young George the Air Guard post.

Years passed. George fils became Governor of Texas. Gtech, already in control of the Texas lottery, was in hot water. An audit had questioned the company's proficiency as operator in Texas, its top sales representative was jailed in 1996 for bribery in New Jersey and, in 1997, the company was caught paying a consulting fee to the boyfriend of the Texas lottery director.

The remainder of the story may sound awfully familiar to Richard Branson.

The Texas lottery was opened up for bids, and a Gtech competitor was designated as having the best offer. Transfer from Gtech was subject only to review and negotiations. Then - surprise! - Bush's lottery commission dumped its new director, dropped the apparent winning bidder, and the head of the state Lottery Commission, Harriett Miers, announced it was best simply to stick with Gtech. Linda Cloud, executive director, said it offered the best deal.

Up until 1997, Gtech had a lobbyist, a politico named Ben Barnes, to whom Gtech paid more than million. Some malevolent soul had written to the US Justice Department earlier claiming that Barnes had fixed for Bush Jr to get the Guard slot - information which Barnes allegedly used to lock in Gtech's lucrative Texas contract for good.

But that letter, and the accusations in it, remained buried until a year ago when, confronted with it, Barnes stated in an affidavit that, indeed, it was he who called the Guard for young George.

Barnes denies he used this information for Gtech. Bush and Gtech also deny any link between Bush's military service and the Gtech contract.

In the middle of Gtech's US troubles, it flew the Tory government's lottery regulator into Texas. Oflot's Peter Davis endorsed the UK's emulating the 'Texas Model' of lottery licensing. This model is based on granting almost all aspects of a lottery to a single licence-holder. The problem, say experts, is that once the initial operator is chosen, it is in practice impossible for anyone to win the licence.

In Britain Camelot, using Gtech's technology and operations, won that initial contest based on its Texas and other 'experience' over your raw crew, Richard. This was after, you may recall, Gtech's chairman, who has since resigned, tried to bribe you out of the competition.

Tony Blair, then in opposition, promised reform. That should have been your first warning, Richard. Labour, once in power, rather than force Camelot to dump Gtech, permitted the consortium to shuffle the corporate ownership, and transform Gtech, from lucrative partner into lucrative prime contractor.

Labour's 1998 reform of the Lottery Act kept the single-licence Texas Model.

And, just in case you did not get the hint, the new law provided no end-of-licence transition period, making it impossible to transfer the system to a new operator.

The fact that Labour effectively saved Gtech's bacon in 1998 has absolutely nothing to do with an idea mentioned in 1997 by a would-be Gtech lobbyist.

The lobbyist, Derek Draper, told me (into my hidden tape recorder) that his friend Peter Mandelson needed someone to 'sell tickets for this ridiculous Dome thing. Gtech is offering to do that via the National Lottery [ticket]-selling equipment.' Draper added: 'Now it doesn't take a lot to work out that if the Government thinks Gtech can sell government tickets for the Dome, it's got to be a legitimate firm to sell tickets for the lottery.'

Gtech's one and only use of its machines for a purpose other than the lottery was to sell Dome tickets, at no charge to the Government.

Labour's 1998 reform virtually locked in the Camelot-GTech group.

Nevertheless, Gtech nearly blew it by concealing a computer cock-up that ate some wagerers' winnings. That required another corporate reshuffle, with Camelot promising to sever its links with Gtech.

'Severing' Gtech, the Observer's Jamie Doward disclosed on Christmas Eve, means Camelot will pay Gtech about