A Topsy-turvy Lottery System

The lottery is essentially a reverse subsidy: The poor, who buy Mifal Hapayis' lottery tickets, subsidize the children of the rich, who attend extracurricular activities.

The edifice at 3 Haftman Street in Tel Aviv is packed with people on Thursdays. Mayors make the pilgrimage to the sixth floor of the Mifal Hapayis (national lottery) building, hoping that its chairman will deign to meet with them. Perhaps he will also agree to throw them a bone from his fat coffers. After all, he is the one with the money, and this year is an election year.

Being chairman of Mifal Hapayis is like being chairman of a mint. Mifal Hapayis has a monopoly on legal gambling, and Israelis are known gambling fans: Every year, the volume of gambling only increases. The chairman's office is hence the most sought-after post in the public sector. It is a guaranteed job for seven years, with a high salary, excellent benefits and enormous political power. Everyone flocks to the chairman's doorstep: not only mayors, but also service suppliers, advertising agencies, artists and writers - all hoping for a contract or funding.

Since political power is in essence the ability to hand out money, two people choose the Mifal Hapayis chair: the prime minister and the finance minister. They want someone who will carry out their political agenda. Once he had to be an activist in Mapai (the Labor Party's precursor), then a Likud member; now, he must belong to Kadima.

Mifal Hapayis is essentially a supplementary budget, on top of the official state budget. But its money is allocated at the discretion of its board of directors, which is mainly comprised of mayors, rather than according to the Knesset's directives.

This is an enormous gravy train from which politicians draw by the gallon. Mifal Hapayis has huge revenues, some NIS 3.8 billion a year. So it is no wonder that corruption scandals erupt there periodically. A decade ago, it was the fantastic pension awarded to then chairman Gideon Gadot; last week, it was allegations of bribery.

The figures involved in the current scandal are well known: Gamliel Hassin, "the worker with the Jaguar" from Ashdod Port, who ran Omri Sharon for Knesset as a representative of the South and was appointed to manage the "Port Museum" that never existed; and Yaakov Bardugo, who began his career in Likud as a member of David Levy's camp, and is currently a private businessman.

The two are suspected of having helped several people obtain regional marketing franchises for Mifal Hapayis in exchange for hefty payments - some of which went for bribes to Mifal Hapayis officials. Last Thursday, three of the franchise winners were released to house arrest: Alon Alroi, Haim Golan and Rafael Dayan. All had been arrested on suspicion of bribery.

The tender in question, to choose Mifal Hapayis' 10 regional franchisees, was issued in 2004. It was a very strange tender. It was not awarded based on the payment demanded by the would-be franchisee, but on his "character traits" - for instance, his ability to motivate people. When it comes to "character traits," the decision is necessarily subjective, so cronies can be given preference.

This was a particularly lucrative tender: The state was divided into 10 regions, and each regional franchisee would get 2.5 percent of his region's revenues - an enormous sum totaling some NIS 8 million to NIS 9 million a year. Thus it is no wonder that some of the bidders were approached by people who said they could "arrange" victory in the tender - in exchange for payment, of course.

The political appointments and the suspicions of corruption necessitate a fundamental change. The time has come to sever Mifal Hapayis from politics by privatizing it. The British realized this a decade ago, so they privatized their national lottery. They held a proper tender, which was won by the company Camelot.

Camelot pays the state huge royalties every year, and the British parliament decides what to do with the money - as is the norm in democratic countries. There are no political activists who poke their noses in and decide who should get the money, and no considerations that might not accord with the government's priorities. Contracts are not handed out to cronies; rather, the lottery enjoys transparent commercial management under rules set by parliament.

Another, more radical option would to be close Mifal Hapayis. After all, this is essentially antisocial activity: It sells illusions to society's weakest members, those who earn the minimum wage, that the lottery will rescue them from squalor. In practice, they lose what little money they have and end up even poorer and more desperate.

The lottery is essentially a reverse subsidy: The poor, who buy Mifal Hapayis' lottery tickets, subsidize the children of the rich, who attend extracurricular activities at the community centers built with this money. It's a topsy-turvy system that ought to be set right.