Illinois Lottery superintendent Michael Jones and the Northstar Lottery Group are at odds. Northstar is the private management consortium named in the fall of 2010 to run the Illinois Lottery.
The source of the disagreement is a preliminary draft of a ruling this week from a mediator assigned to determine whether Northstar should have to pay a penalty for failing to meet stipulated profit goals in its private management agreement with the state.
By its own accounting Northstar, comprised of lottery industry vendors Gtech and Scientific Games, fell about $50 million short of the $825 million lottery profit it was supposed to generate for the state in its first year managing the Illinois Lottery.
Under terms of the management agreement, Northstar was supposed to pay the cash-strapped state a penalty of half the profit shortfall, or about $25 million. Northstar, however, argued it should not have to pay the penalty.
But a mediator in the preliminary draft of his ruling this week agreed that Northstar should not have to pay the penalty because of certain actions taken by the state of Illinois that negatively impacted assumptions in Northstar's business plan.
Asked what kind of actions the mediator was referring to, a spokesman for Gtech and Gtech parent Lottomatica referenced such matters as Northstar's taking over management of the Lottery later than originally expected. The spokesman also suggested there were complications involving state employees connected to Northstar's taking over management of the Illinois Lottery.
The mediator's findings did not sit well with Jones, who immediately indicated the state would vigorously dispute the preliminary draft ruling and present additional materials and arguments as to why Northstar should be required to pay a penalty. A final determination is expected in about two weeks.
Jones was appointed Lottery superintendent in the fall of 2011, his second time around in the job. He held the same position in the early 1980's, when the Illinois Lottery was relatively new.
This time around Jones returned to head up the Illinois Lottery about a year after Illinois Gov. Pat Quinn tapped Northstar as the Lottery's first ever private manager. Northstar also became the first ever private manager of any state lottery in the United States.
Jones was among those highly critical of the quick and secretive selection process the state used to pick Northstar in 2010. At the time, Jones was one of numerous observers of —and participants in — the private management selection process who suggested it may have been rigged to ensure Northstar emerged the winner.
A subsequent report released by the Illinois Auditor General in the summer of 2011, also raised serious questions about the way the Illinois Lottery private manager selection process was handled
In recent weeks, Jones has been equally critical of a similar lottery private manager selection process now underway in Indiana, where Gtech, part of the Northstar consortium, also is in contention for that contract.