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Big lottery vendor dogged by controversy

GTECH CorporationGTECH Corporation: Big lottery vendor dogged by controversy

GTECH expected to bid for online games in Tennessee

Scandal and suspicion have marked GTECH's 22 years in the lottery business. But so has spectacular success.

The company, which is expected to bid on the Tennessee lottery's online games contract, helps run lotteries in 26 states and 42 other countries. Its revenues exceed $1 billion a year, spokesman Bob Vincent said.

But GTECH, which is based in West Greenwich, R.I., also has run into trouble, especially in the 1990s. In Georgia, where Tennessee lottery director Rebecca Paul led the lottery from its beginnings in 1993 until last month, the company won the initial online contract despite a bid that was 33% higher than rival Automated Wagering International's offer.

A hearing officer and a Superior Court judge ultimately ruled the contract was appropriate.

The company has found notoriety in other ways, however:

" Guy Snowden, its co-founder, was convicted of libel in England in 1998 for denying that he had tried to bribe Sir Richard Branson, chairman of the Virgin Group, so Branson would drop out of the competition for that country's lottery.

" GTECH's former national sales manager, J. David Smith, was convicted in New Jersey in 1996 of receiving kickbacks from a consulting firm in exchange for lobbying contracts. Smith, who had socialized with Paul and negotiated the initial contract in Georgia, was sentenced to five years and three months in prison in 1998.

" Kentucky's state auditor said a former state lottery president, James Hosker, gave GTECH an overly generous contract months before he left Kentucky in 1992 to work as GTECH's top official in Texas. The state's attorney general decided not to prosecute.

" Other companies offered lower bids in Illinois, New York and Michigan, but GTECH won contracts in each of those states, The Atlanta Journal-Constitution reported in 1994, when the Georgia lottery was in its first year.

Critics believe GTECH tends to win so many deals through its extensive political connections in states where it hopes to do business.

"We'd go to dinner with the lottery director and find out GTECH had hired a yacht and taken out the whole (expletive deleted) legislature," the former president of AWI, W. Hubert Plummer, told Fortune magazine, which conducted a four-month investigation of GTECH in 1996. "It was like shooting your popgun, and they were firing a howitzer."

GTECH has 12 registered lobbyists in Tennessee: six from its staff and six from two Nashville firms. Four of the local lobbyists are from the Miller & Martin law firm and two from the consulting firm Public Strategies, Vincent said.

The company no longer employs Dick Lodge of the Bass Berry & Sims law firm. Lodge is married to Gina Lodge, the state commissioner of human services, and quit representing GTECH after the General Assembly approved lottery legislation last spring that prohibited spouses of the governor's Cabinet members from working for lottery vendors, Vincent said.

State Sen. Steve Cohen, D-Memphis, the biggest advocate of a Tennessee lottery since the 1980s, said each of the major lottery vendors had a "significant" presence at the Capitol. He said he expected either GTECH or Scientific Games, which recently acquired AWI's parent company, to win the online contract because of their experience in the field.

GTECH contends it does so well because it offers superior services. "We really have been the pioneer in bringing most of the innovation to the online lottery business since its beginning," Vincent said.

Since 2000, when new management took over, GTECH has won 56 contract awards or extensions worth 90% of the revenues up for bid during that time, Vincent said. "In each and every one of those cases, we went through an extensive review of the products and the services we offer, and the manner in which we conduct our business, and the people who conduct it for us."


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