A Rhode Island company that practically built the nation's state lottery business just added the Florida Lottery as the missing gem to its crown jewels.
GTech Corp. last week became the successful bidder to run the Florida Lottery system. With Florida in hand, the company will run all five of the country's biggest state lottery systems - New York, Texas, Georgia, California and Florida. Altogether, GTech will operate 26 of the 36 state lottery systems, plus the Washington, D.C., system.
"We generally have 70 percent of the worldwide lottery markets," GTech spokesman Bob Vincent says.
Talk about the Big Kahuna of the computerized lottery industry. To win Florida, GTech outbid two competitors: 15-year Florida Lottery operator Automated Wagering International, now part of Nevada slot machine giant International Game Technology; and Georgia's Scientific Games International.
GTech's 10-year contract starts in February 2005, when the state's contract with Automated Wagering expires.
It's a very, very good time to be running state lottery businesses. Many state budgets that were awash in excess revenues only a few years ago are now deep in the red. Those deficits are pushing some states already dependent on lottery cash to consider additional gambling games to increase revenues. And some of those few states still resisting lotteries are preparing to ignore their residents' moral complaints against gambling and the lottery's regressive taxation and embrace their own lottery systems.
Tennessee is gearing up its first state lottery. Alabama and North Carolina are debating the idea. South Carolina recently adopted it.
It does not hurt that the rising popularity of Las Vegas is fast legitimizing gambling to a once-wary public.
No wonder the stock of GTech, a public company whose shares trade on the New York Stock Exchange, hit an all-time high last week. Its stock closed Friday at $42.77, up 21 cents. Its market cap, a clear sign of clout, hovers near $2.5-billion.
If GTech's corporate numbers shine, its past is tarnished with years of bad publicity.
GTech was born in 1981 when founders Guy Snowden, Victor Markowicz and Robert Stern, backed by the Texas Bass brothers and their money guru Richard Rainwater, began chasing lottery contracts.
As GTech's CEO, Snowden used his aggressive style to help his company dominate the young lottery industry. But his tenure was awash in tales of scandal. In Texas in the early 1990s, GTech paid a former Texas lieutenant governor $3.2-million for a single year of lobbying work. In New Jersey in 1996, a former GTech national sales manager was convicted of crafting a kickback scheme using inflated payments to state-level political consultants.
In 1998, Snowden lost a libel battle over bribery allegations by British billionaire Richard Branson. Snowden's GTech and a Branson-led consortium were fighting to win England's national lottery business, the world's largest. GTech won the bid. But after a London jury awarded Branson about $180,000 plus $1-million in legal costs, Snowden agreed to resign.
GTech's Florida Lottery contract is its first in this state. But it was not for lack of trying.
"I've lobbied for 30 years, and I've never seen anything dirtier than lottery stuff," GTech lobbyist Barry Horenbein told the St. Petersburg Times in 1995.
GTech was a bidder against Automated Wagering in 1996 for Florida's lottery business, a 10-year, $500-million contract that then was the largest nonconstruction pact in state history. When GTech lost, it sued, claiming the state's selection process was flawed. An appeals court later ruled for GTech but Automated Wagering was allowed, with restrictions, to complete its contract. When the state sought new bids this spring for the next 10-year contract, GTech won.
During those years, GTech was an active player in Florida politics. In 1998, when Jeb Bush defeated Buddy MacKay to become Florida's governor, the Republicans received $30,000 from GTech. Bush insider Paul Bradshaw, who helped shape the candidate's image and later married Bush's campaign manager, was a lobbyist whose clients included GTech.
No question, GTech has taken steps to try to clean up its rougher image. When CEO Snowden resigned, his successor named a former FBI official as vice president for compliance.
In 1999, GTech picked Tampa native Bruce Turner, an industry analyst and a former research director with Salomon Smith Barney, for its board of directors. Earlier, Turner had worked at Raymond James, the St. Petersburg securities firm, and at Tampa Electric as a customer relations supervisor. He graduated from West Point and earned an MBA at the University of Tampa.
When GTech's top executives resigned in 2000, Turner joined the management team. At 44, he is now GTech's president and CEO.
Colorful past aside, GTech's lottery reputation is one of extreme efficiency. Florida has picked a company well known for extracting the maximum amount of money from the public for its clients.
Nobody has commented on this story yet.