The company, based in the Philippines, used a British man to purchase up to 14,000 tickets in a rollover week on behalf of overseas gamblers.

It ended up winning £16,628,000, transferring one of the biggest jackpots in the lottery’s 10-year history offshore to a secret Liechtenstein bank account.

It is the first time that overseas gamblers are known to have won the top prize.

The disclosure is likely to embarrass Camelot, the lottery operator, which is supposed to run it for the benefit of British residents.

The rules restrict entry to British citizens and foreign tourists visiting the country. People living abroad can play, but only if they have a British address and bank account.

Police suspected an Asian syndicate may have been behind the operation but did not pursue their inquiries after Camelot told them there had been no breach of the rules. By using a UK-based agent, the company was able to buy as many tickets as it liked.

The company — Overseas Subscribers Agents (OSA) — is operated by a British businessman and his Indian and New Zealand partners from an office in Manila. It claims to have helped 100,000 overseas players to gamble on domestic lotteries.

Camelot admits it is concerned at the “commercial exploitation” of the British lottery by such companies, which charge users a fee of up to £4 a ticket for their services, but added it was not illegal.

OSA’s British-based agent is Ken Jackson, a former plastics technologist from Sheringham, Norfolk. He admitted he had been buying up to 14,000 tickets a week for the company since 1995, spending two hours processing them at his local Woolworths or his newsagent.
It is estimated that he has spent £3.5m on tickets in that time, winning small prizes every week and in November 2001, £127,000. Then came the jackpot in January 2002. “We shredded all the tickets. I didn’t want all that incriminating paperwork around,” he said.

It is not clear whether the tickets were bought on behalf of a single syndicate attempting to increase its chances of winning or individual overseas players. Nor is it known whether the company used other UK-based agents at the same time to shorten the odds further.

There are almost 14m different number combinations in the draw. By buying 14,000 tickets with different numbers, the chances of winning the jackpot are reduced from about 1 in 14m to 1 in 1,000. The company would, on average, expect to recoup 245 £10 prizes a week and between 13 and 14 £65 prizes a week. Therefore, on average, it could expect to make back up to £3,360 from the £14,000 every week.

The jackpot attracted significant press interest because Jackson waited eight days before claiming the prize.

He earned £48,000 interest while the prize money was held in a British bank before being transferred to Liechtenstein.

Detectives came across the money transfer as part of an investigation into a series of suspicious transactions overseas involving a solicitor linked to a number of unrelated frauds. The solicitor, who transferred the jackpot out of Britain, was later struck off for the frauds.

John Whittingdale, the shadow culture secretary, criticised the OSA scheme. “This scale of buying by overseas syndicates that have no connection with this country goes against a sense of British fair play,” he said.

“The idea of being a professional lottery player is against the spirit of the thing.”

A spokeswoman for Camelot confirmed that the operator had investigated the OSA’s British agent, but said no law had been broken.

“We regard the national lottery as a fun game for individuals or small syndicates of friends, family or work colleagues and therefore not appropriate for commercial exploitation,” she said.

Jackson was asked to become an agent for OSA by a German friend when he retired from his job in Hamburg in 1995. He said Camelot soon became aware of his activities and sent a member of its security team to interview him. “They came to see me in Sheringham. They said ‘what you’re doing is illegal but we’re not going to prosecute you’. They wanted to know what we were doing. I said, ‘I’m acting as an agent for a company.’ They said ‘fair enough’. It was lucrative for them,” said Jackson.

However, Camelot said it never told Jackson that what he was doing was illegal or that it would refrain from prosecuting him.

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