The British lottery regulator, Mr Peter Davis, resigned last night following a crisis meeting with the Culture Secretary, Mr Chris Smith, in London.
Mr Davis was summoned to explain his plan to restore public confidence in the lottery following the resignation of Mr Guy Snowden, a former director of the lottery operator, Camelot. Mr Snowden lost a libel action against the businessman, Mr Richard Branson, who had claimed Mr Snowden had tried to bribe him to withdraw a bid to run the lottery in 1993.
After four hours of discussion, Mr Smith emerged from the meeting to confirm that Mr Davis had resigned. Mr Smith said the decision was "mutual" and was made in the interests of maintaining public confidence in the lottery.
In a statement, Mr Smith said there was "no stain" whatsoever on Mr Davis's integrity.
Mr John Stoker, the deputy director general of Oflot, the lottery regulator, has been appointed to lead the organisation while a replacement is sought.
After his victory in court on Monday, Mr Branson called for the appointment of a new director general of Oflot, saying that Mr Davis harboured "serious reservations" about awarding the lottery licence to Camelot in 1994. Speaking on BBC Radio 4, Mr Branson said that GTech, the company which Mr Snowden created in 1980 and which has a 22.5 per cent share in Camelot, had also been "found guilty" yet remained a key shareholder in the consortium.
Raising the stakes, Mr Branson said a new regulator must ask whether Camelot's licence should be terminated. Camelot holds the licence to run the lottery until 2001, but Mr Branson said the public wanted a "proper people's lottery where all the profits go to good causes".
Earlier, Mr Davis's position had been undermined by the intervention of several Labour MPs, one of whom tabled a Commons motion calling for his resignation. Mr Alan Williams MP demanded that Mr Davis should be brought before the Commons Public Accounts Committee.
In the Commons motion, signed by five other MPs, reference was made to the watchdog's use of a GTech company aircraft during a tour of the US.
The former heritage secretary, Mr David Mellor, said Mr Davis should not resign and he criticised the "monstrous" attacks upon him.
Aiming his criticism at Mr Snowden, Mr Mellor said it was "ridiculous" to suggest that the entire lottery project, and Mr Davis, should be damned because of "one lamentable incident". The court case had certainly brought shame upon Mr Snowden but "it does not say anything about the way Camelot has been run".
"As for Peter Davis, I think it is monstrous he's being attacked like this. He made a judgement which was then, before there was any trouble about it, specifically scrutinised by the National Audit Office. The NAO endorsed his choice of Camelot."