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House of Lords

Thursday, 6th June 1996.

The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Bristol.

Arthur Andersen: US Court Action

Lord Peyton of Yeovil asked Her Majesty's Government:

    Whether, following the judgment in the United States courts in the action brought by the Northern Ireland Office against Arthur Andersen, it is their intention to pursue the case further, and what have been the costs of the action to date.

The Parliamentary Under-Secretary of State, Northern Ireland Office (Baroness Denton of Wakefield): My Lords, in the recent judgment in the United States courts in the matter of Her Majesty's Government v. Arthur Andersen, the judge ruled that the Government's claims against Arthur Andersen in respect of negligence, breach of contract, fraud and aiding and abetting fraud should be allowed to proceed. Preparations are being made for the trial. The amount of costs in the case are a matter between government and their lawyers and disclosure while the action continues would not be in the public interest.

Lord Peyton of Yeovil: My Lords, would my noble friend be good enough to confirm that the events with which this action is concerned took place 16 years ago and that the case has been hanging around in the neighbourhood of the American courts for at least 10 years? If the Government will not tell me--I am sure they will not want to--what the costs have been, may I please guess that so far £15 million would just about cover it and that if they persist in the case, which they are likely to lose, the figure will be more like £40 million? It seems to me to be one of the most expensive pieces of face saving and cosmetics in history.

Baroness Denton of Wakefield: My Lords, I am pleased to confirm to my noble friend that there is no question of face saving whatever. There is competent legal advice that there is the opportunity to recover taxpayers' funds and in that matter I think the timescale is irrelevant.

Lord Williams of Mostyn: My Lords, when one deals with the question of taxpayers' funds, is it not the position that if the Government are successful a sum in excess of 300 million dollars is likely to be recovered, bearing in mind pre-judgment interest? Does the Minister agree that if there is a prima facie case supported by a judge in a competent jurisdiction in respect of allegations of negligence, common law fraud,

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security law violations and breach of contract, the British Government have a public duty to pursue those allegations?

Baroness Denton of Wakefield: My Lords, I am not a lawyer. To have the advice and comments of such a distinguished lawyer is exceedingly helpful.

Lord Howe of Aberavon: My Lords, perhaps I may divert my noble friend with a slightly different flavour of loyal advice. Has she had the opportunity of studying the 50-page report of the Public Accounts Committee produced some 12 years ago which said that this enterprise was impracticable from the start and should never have been assisted and made not one reference to Arthur Andersen, the defendants in this case? Does she not agree that the judgment of the American courts to which she referred dismissed at least half the alleged grounds of Her Majesty's Government's claim, including all of those which would give rise to so-called RICO triple damages? Is it not time for a fresh mind to be brought to bear on the wisdom of this litigious excursion?

Baroness Denton of Wakefield: My Lords, I am pleased to reassure my noble and learned friend that I have examined this matter with fresh expert advice. I believe that the matter of the Public Accounts Committee is outside the range of this Question and I believe the advice to continue to be very sound.

Lord Blease: My Lords, the noble Baroness will probably know that I was part of the body involved in the early negotiations concerning this case. We were quick to acknowledge that many mistakes were made. There is a past still to be pursued in collecting what was due because of corruption and other matters. The trade union movement and employers in Northern Ireland fully backed any methods used to redress the situation. The matter had a dampening effect on many aspects of life in Northern Ireland at that time. However, I am glad to say that many lessons have been learnt. Today, there is much American investment which is wholeheartedly supported and welcomed.

Baroness Denton of Wakefield: My Lords, I am grateful to the noble Lord for his comments. It is important that we learn from issues in the past. We continue to attract inward investment to Northern Ireland, because the best cement for peace is jobs.

Lord Peyton of Yeovil: My Lords, I would quite understand if, in present circumstances in Northern Ireland, Ministers there had not been following this matter with the closest concentration. They have other matters on their hands. I hope very much they will now take a serious look at what has been happening.

Baroness Denton of Wakefield: My Lords, I must question my noble friend's assumption that a Question of his would not be taken seriously or considered in depth. I assure him that I am not only representing Northern Ireland. I cast a Yorkshire eye over the issue.

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National Lottery: Profits

3.14 p.m.

Lord Donoughue asked Her Majesty's Government:

    Whether they consider that the profits achieved by Camelot through its monopoly contract to run the National Lottery have been appropriate.

The Parliamentary Under-Secretary of State, Department of National Heritage (Lord Inglewood): Yes, my Lords.

Lord Donoughue: My Lords, we on this side of the House fully supported the lottery legislation and welcomed the efficient launch and the benefits to good causes. But is the Minister aware that the pre-tax profits in only 18 months are heading for £100 million, which is more than the total capital invested in this operation and represents a return on capital far higher than in most of British industry, which operates in a competitive climate and does not run a monopoly licence to print money? Is he further aware that only three weeks ago the National Heritage Select Committee concluded that, in the light of the additional and unanticipated profits, Camelot should hand over a proportion to charity? Does the Minister agree with that? Would it not at least be elegant if it handed over £50 million to good causes?

Lord Inglewood: My Lords, Camelot has been an extremely efficient organisation. The main beneficiaries of that efficiency have been the Exchequer and the British people. We believe that charitable giving is an entirely desirable activity. We also believe that it should be for the individual who has the money to decide what to do with it.

Lord Wyatt of Weeford: My Lords, is the Minister aware that it is a very easy and simple thing to run a lottery? By this time, should we not have reverted to the original concept of two or more lotteries throughout the country so that there was real competition between them, more efficiency and greater amounts for good causes? Is the Minister aware that that is exactly what happened in the United States, where the state lotteries in various parts of the country rival each other? Does he not agree that that is the surest way of getting good competition, greater efficiency and more money for good causes?

Lord Inglewood: My Lords, it is glib to say that running a lottery is easy. Recently in the state of Arizona the newly-appointed lottery organisation had its licence withdrawn after six months because the operation was a shambles and the participants in Camelot, who made such a great success of the lottery in this country, have been called in to deal with the mess.

Lord Boardman: My Lords, can my noble friend confirm that the contract was awarded to Camelot in competition with many other firms and by an independent source? Can he also confirm that the risk-reward ratio at the time the contract was awarded was very much less favourable than it is in the light of the experience we have had to date?

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Lord Inglewood: My Lords, my noble friend is right. The decision to award the lottery to Camelot was strongly underscored by the National Audit Office.

Lord Jenkins of Putney: My Lords, if the Minister believes, as he says, that the scale of profit is appropriate, does he agree that the word "appropriate" acquires a new meaning; namely, "grossly excessive"?

Lord Inglewood: No, my Lords, I do not accept that.

The Viscount of Falkland: My Lords, does the Minister agree that one should be wary of too much outrage over profit in this area because there is no doubt that the lottery has been run efficiently so far, no matter what one's moral position may be? Does he further agree that you run the risk, if only the profit of this operation is considered and if you say that someone else should run it, that the new organisation may not run it so efficiently, may not make such profits and may be unable to give bonuses to its directors, but it may nevertheless take more out of the lottery than the 1 per cent. taken by Camelot to achieve all those profits and bonuses?

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