TV chief in new row over lottery links

SIR George Russell, chairman of both Camelot and the Independent Television Commission, threw out Virgin's bid to run Channel 5 just two days after Camelot discovered that Richard Branson was to slate the National Lottery operator in a controversial BBC Panorama interview.

The news will bring further pressure to bear on Sir George, who has already been widely criticised over potential conflicts of interest caused by his two jobs.

Last week Guy Snowden, chairman of Camelot's US shareholder GTECH, finally issued a libel writ against Mr Branson over the programme in December, in which the Virgin boss alleged Mr Snowden had offered him a bribe to drop Virgin's own lottery bid in 1993. Mr Branson is already suing for defamation.

This Wednesday Virgin also takes the ITC to court in a judicial review of the ITV regulator's decision last year to award the fifth terrestrial TV station to the rival Channel 5 Broadcasting, led by Greg Dyke of media group Pearson. Mr Branson, however, will be heading 30,000 feet above the ground at the time, starting a race to circumnavigate the world by hot-air balloon.

David Rigg, Camelot's communications director, learned of the Branson interview when giving his own interview to Panorama on 17 October last year. "No one had heard of it before. We were flabbergasted," he said.

Two days later the ITC threw out Virgin's C5 bid, which at pounds 22m was identical in value to the Pearson-led C5B offer, on the grounds of quality.

Industry sources say it will emerge in court next week, however, that ITC officials originally passed Virgin on the quality threshold. They were overruled by members of the ITC board, headed by Sir George, at a crucial meeting on 19 October, a week before the final franchise decision was announced.

Sir George could not be contacted yesterday, but the ITC insisted that the timing of the Camelot interview was purely coincidental. "It would have had no bearing on the decision. The decision on the award of C5 was a collective and unanimous decision on behalf of the whole board," a spokesman said.

Virgin won leave to appeal against the ITC's decision in the High Court at the end of November. The judge called the ITC's quality decision "irrational".

This Wednesday, Virgin will also allege that the ITC improperly allowed C5B to improve its bid by giving it two chances to improve its funding arrangements. Industry sources say Hill Samuel, ITC's merchant bank adviser, had told the regulator that C5B's bid was unsound on financial grounds.

The ITC spokesman declined to comment on details of the case, but said it was confident of victory. Virgin also declined to reveal documentary evidence, as did other losing bidders UKTV and New Century, which will be represented in court on Wednesday.

Virgin was, however, prepared to defend itself against accusations of whingeing. "If you lose fair and square, fine," said a spokesman. "But if you don't, this is the right thing to do. People too readily accept unfair decisions from quangos like this."