Authorities investigating former Minnesota lottery director George Andersen suspected he was involved in bribery, conspiracy and conflicts of interest, court documents show.
Search warrants unsealed Friday lay out the still-open criminal investigation into Andersen's dealings with Media Rare, a public relations firm that had no-bid contracts with the lottery. The warrants are the first public indication that investigators thought Andersen's dealings might have amounted to more than mismanagement.
The criminal investigation centers on Andersen, Media Rare founder Michael Priesnitz, and Media Rare Chief Financial Officer Jeffrey Denney.
Only Denney is still alive. Andersen killed himself in January 2004, just days before a critical audit became public. Priesnitz killed himself last April on his second suicide attempt.
After Andersen's suicide, Legislative Auditor James Noble said that while he found much to question and criticize about lottery finances, he found no criminal wrongdoing.
In the warrants, drafted in June 2004, investigators wrote there was "probable cause" to believe that the three "engaged in a conspiracy to wrongfully and illegally obtain Minnesota State Lottery funds and resources for Media Rare."
A Ramsey County judge agreed and permitted searches of Media Rare's offices and records. It's unclear whether investigators discovered anything in the searches that supported their allegations.
No criminal charges have been filed, even though Ramsey County prosecutors have had the case since May.
"We are still actively reviewing the case. There are some complicated legal issues," said Jack Rhodes, spokesman for the county attorney's office.
In a 27-page affidavit, lead investigator Douglas Forsman outlined lottery contracts and dealings with Media Rare that he said didn't add up.
The lottery signed several no-bid contracts with Media Rare to produce TV and radio shows promoting the lottery for about $1 million annually. The legislative auditor questioned the increasing costs of those contracts compared with their overall promotional value to the lottery.
The lottery also was a major sponsor of Media Rare's Minnesota Pro/Am Bass Tour. According to the search warrant, the lottery kept increasing its sponsorship of the relatively obscure fishing tournament while canceling more lucrative sponsorships with the Minnesota Wild and Timberwolves, and University of Minnesota athletics, even though lottery staff members doubted the bass tour's promotional value.
At the same time, the warrants said, Andersen was underreporting how much the lottery was spending on the fishing tournaments. The lottery reported investing $110,000 in the Pro/Am Bass Tour in 2003 but actually spent an estimated $248,000.
Michael Lange, a lottery marketing manager, told investigators that he and other lottery employees were directly involved in soliciting lottery partners to sponsor the bass tour, including the Star Tribune of Minneapolis, Treasure Island Casino, Anheuser-Busch and four pro sports teams. He also said lottery workers helped stage the bass tour because its owners "did not have the expertise to run the event."
Andersen bypassed the lottery's normal approval process by directing $27,300 in "supplemental cash sponsorships" to the event in 2002 and again in 2003, Lange told investigators.
One warrant also alleges that documents found in Andersen's office suggest that in addition to Media Rare and the bass tour, he was personally involved in a series of other businesses controlled by Priesnitz and Denney.
Lottery promotions director John Mellein told investigators that Media Rare and the bass tour were considered "untouchable" interests of Andersen.
"Mellein stated there was no one in the lottery that felt they could challenge George Andersen," an affidavit said.
The Minnesota Legislature established the lottery in 1989. Andersen was its first director. Since the audit, the lottery has reduced staff and slashed its operating expenses from $32 million to $22 million. It canceled its contracts with Media Rare in March 2004, and both the company and the bass tour are defunct.
Andersen's widow and his attorney said Friday the allegations don't match the man they knew.
"I know he didn't do anything illegal," said his wife, Darlene Coates Andersen.
"I thought he was a very outstanding person to come into this job brand new and that he did a very fine job. He provided a real service for Minnesota," attorney Joseph O'Neill said.
Jeff Denney, the last owner of Media Rare, said Friday that the supplemental payments to the bass tour in 2002 and 2003 were for work ordered by the lottery.
Asked if he feared being charged with a crime, he said, "No, absolutely not."