A year ago, Ohio Lottery Director Michael A. Dolan persuaded skeptical lawmakers to buy $11.6 million worth of equipment to launch the state's new Keno game on a promise that the setup would still work after a year — a premise that Dolan later admitted was false.
Now, as Dolan prepares to ask the same legislative panel to approve a $41 million contract with a company to run Keno and other lottery games for the next two years, the director's own dubious promises could return to haunt him.
On May 5, 2008, Dolan persuaded the state Controlling Board, a bipartisan panel of lawmakers that signs off on major contracts, to buy monitors, satellite dishes and computer terminals for Keno from GTECH Inc., which was the Lottery's prime vendor at the time.
On the instructions of Gov. Ted Strickland's top attorney, Dolan neglected to tell the lawmakers that he was in the process of dumping GTECH in favor of another company, and that the new company might not be able to use the equipment the state was about to buy.
At the time, the Strickland administration was pushing Dolan to launch Keno as quickly as possible to raise a projected $73 million to stave off cuts to public schools.
The ruse may have gone unnoticed but for a lawsuit that GTECH filed challenging the selection of the new vendor, Intralot SA. During that case, Dolan admitted during hours of testimony that there had been doubts as early as April 2008 about whether Intralot could simply tweak the GTECH machines and keep them going.
"There was an interest in maximizing the efficiencies in operations of the Lottery and to the extent that we could reuse the equipment, we wanted to," Dolan said in an Oct. 15 sworn deposition. "But there was no certainty as to whether or not that was possible."
Five months earlier, however, Dolan sounded much more confident in his unsworn comments to the Controlling Board.
"And all of the equipment we are asking to purchase today can be used by any of the other vendors in the marketplace," he told lawmakers, who agreed to the purchase in a 5-2 vote.
The Lottery now is stuck with 2,000 Keno terminals — including 772 that sit in warehouses, never opened — that Dolan said he hopes to sell to other states.
Dolan still insists that the machines are reusable and that the Lottery even now could, in theory, require Intralot to convert GTECH's machines. But, that might have led to glitches in the fast-playing numbers game, Dolan said, "like putting a Ford engine in a Chevy car."
He admitted in testimony, however, that he had known in April 2008 that the companies' satellite systems were incompatible and probably couldn't be reconciled. Dolan also conceded that the Lottery had stricken contract language that would have required Intralot to reuse the machines.
Dolan said the Lottery took up Intralot on its offer to provide 3,200 Keno terminals — plus service and related equipment valued at a total of $12.1 million — at no cost to the state.
"All in all, we're going to come out ahead a few to several million dollars," Dolan said in an interview.
Intralot said its seemingly too-good-to-be-true offer comes with no strings attached. The company's vice president, Byron Boothe, said it could have gotten the GTECH machines to work — although at a "ridiculous" price — but ultimately decided to replace the terminals and satellite equipment with its own.
"To be real frank with you, it would have been much better for us to be able to take the GTECH equipment," Boothe said. "You're talking 2,000 machines and at $2,000 per machine, that's $4 million we could have saved. We looked at it pretty hard. It was much better for everybody all around for us to go with the system we had already bid and say to the lottery, 'Here's your asset.' "
The "free" equipment may come at a cost, though.
The Controlling Board is scheduled to vote Monday on a $40.8 million contract with Intralot to run all of its online games, including Keno, for the next two years. In addition to that base rate, the contract includes several add-ons, including lottery machines that play Keno and other games, that could drive the price higher. If the lottery purchases those additional machines, Intralot would receive a cut of the profit from each, increasing its take.
Some lawmakers on the Controlling Board say that given Dolan's record, they will approach the latest contract with skepticism.
Rep. Jay Hottinger, R-Newark, who voted against the Keno purchase last year, said Dolan basically tricked the Controlling Board into signing off on the deal.
"Had there been any hesitation or any doubt, there was no way we would have moved forward with Keno at that time," Hottinger said. "Essentially, he blew $11 and-a-half million on this. His lack of forthrightness and candor is disturbing."
State Sen. John Carey, R-Wellston, who voted in favor of buying the Keno equipment, said he doesn't know whether he would have voted differently if he had known the whole story last May.
"I think I would have presented additional questions that may have changed my vote," said Carey, chairman of the Senate Finance Committee. "At that point, I was willing to give Director Dolan the benefit of the doubt, but he has consistently had some credibility issues."
Dolan had been a lawyer and Cleveland councilman when Strickland named him to run the Ohio Lottery in March 2007. The state inspector general faulted Dolan two months ago for giving free lottery tickets to a state trooper who had declined to cite him after pulling him over. Strickland did not discipline him, and the governor's office also is backing Dolan on Keno.
Strickland's chief legal counsel, Kent Markus, advised Dolan against telling the Controlling Board last year that the lottery was about to switch vendors, which may have raised questions about the Keno equipment's compatibility.
"Were (lottery officials) directed or instructed not to talk about it? No," Markus said in an interview.
In his deposition, however, Dolan said the governor's office had instructed him not to disclose that information to lawmakers.
"Not a request, no," Dolan said in response to a lawyer's question.
"Was it an instruction?" the lawyer asked.
"Yes," Dolan replied.
In an interview, however, Dolan insisted that no one had tried to button his lips and that he had, in fact, told the Controlling Board everything its members needed to know.
"I answered every question as fully as I possibly could," he said. "I gave them every answer I was properly permitted to give."