GTECH Corp., the operator of many government lotteries worldwide, was fined $1.4 million by the District of Columbia this month over charges that its subcontractors or a partner firm hacked into the district's lottery system and printed winning tickets for themselves two years ago.
The fine, which GTECH calls "a blatantly political move," comes as the firm is locked in a long battle to retain the New Jersey contract it has held for more than two decades.
GTECH and its Washington, D.C., partner, Lottery Technology Enterprises, are accused of supplying online lottery machines to the District of Columbia that were "vulnerable to fraud and abuse," according to a Sept. 17 notice of contracting officer Eric Payne's decision to fine the firms.
District investigators determined that individuals working for the firms tapped into the online systems over six months in 2005 and 2006 and printed themselves $86,166 worth of tickets free of charge. They collected a total of $72,000 in winnings from those tickets, the investigators found.
District officials fined GTECH and its D.C. partner the cost of the tickets and winnings, the costs of investigating the system breach and $979,557 for damages to the lottery's reputation.
"Lottery Technology Enterprises and GTECH supplied the government with an online lottery gaming system and communications system that were vulnerable to fraud and theft, hired subcon tractors who exploited that vulnerability and failed to heed warnings that the systems had been compro mised," Payne wrote in his seven-page decision last week.
GTECH challenged Payne's conclusions in a statement released yesterday.
"That is an unsubstantiated and unjustified calculation based more on politics than math," the firm's statement said. "The security breach was an unforeseen inci dent that was taken very seriously by LTE and GTECH. It was investigated immediately, and swift and appropriate actions were taken."
Bob Benson, a GTECH spokesman, said the firm will "definitely appeal" the fine.
"It's a highly charged political atmosphere," he said of Washington, D.C., where the mayor and council are at odds over whether to award a lucrative lottery operating contract to GTECH and its partners or to a competitor that includes rival lottery firm Intralot, an international firm with U.S. headquarters in Georgia.
The same two firms are facing off in New Jersey, where GTECH is seeking to retain a contract worth at least $15 million a year, which it has held since 1984. The competing bids, which were opened in January, are still under review, according to Tom Vincz, state Treasury Department spokesman.
Benson said GTECH no longer uses the radio system that was breached in Washington, and the D.C. breakdown has no bearing on other governments' lottery operations.
"This is not an issue going forward," he said.