The Colorado Department of Revenue will not extend two key Colorado Lottery contracts, choosing instead to seek new bids for advertising and public relations services.
The move comes in the midst of a criminal probe into the timing of gifts given to top Lottery officials by vendors doing business with the agency and as Department of Revenue Executive Director M. Michael Cooke reviews all of the Lottery's contracts to make sure they were crafted fairly.
"It's a perfect time for us to look at these contracts," Cooke said. "In light of everything going on, why wouldn't we?"
Cooke noted that there was no specific concern that singled out the advertising and public relations contracts, adding that extensions "are not entitlements. They are options to extend at our discretion, and we're choosing not to."
Cooke said she will issue a single contract to cover advertising and public relations with an eye to cut costs. As it stands now, Karsh & Hagan supplies the Lottery's advertising services, taking in a potential $8.5 million a year. Peter Webb Public Relations has a contract worth, potentially, $400,000 annually.Both could have been renewed for another year starting July 1. cq Cooke said she hopes a new contract will be in place by then, with the companies holding the current contracts welcome to apply.
Both companies emphatically denied doing anything unethical to win Lottery contracts.
"It had totally nothing to do with gifts," said Karsh & Hagan president Pasquale "Pocky" Marranzino. "It had totally to do with the fact that we have done a great job for the Colorado Lottery. We won it fair and square because we do great work and we were the low bidder."
Pete Webb said in a statement that his company is a "victim" of the Revenue Department's reorganization.
"We have always acted ethically with the Lottery, and have observed and respected the Lottery's strict rules of integrity," he said.
All the companies doing business with the Lottery have been under scrutiny since the sudden resignation in November of Mark Zamarripa, who had run the Lottery for nearly a decade.
That scrutiny has been taxing on Webb's company.
"In the past six weeks, we've had to undergo intrusive audits, a CBI (Colorado Bureau of Investigation) investigation, leaks to reporters and innuendo that portrays some Lottery vendors as unethical," Webb said in the statement.
Zamarripa quit just before he was to meet with Cooke to talk about expenses he incurred on a trip to New Orleans. In Cooke's view, it was impossible to tell what the state was to pay Zamarripa for and what was provided by the national lottery organization sponsoring his trip. He has declined to comment.
Records show that Zamarripa and other top Lottery officials frequently accepted dinners, golf games and tickets to sports dvents from vendors doing business with the Lottery.
For example, in April 2002, Zamarripa played golf at the expense of executives from Karsh & Hagan. Less than a month later, Zamarripa approved a contract extension for the company, records show.
On a state-mandated disclosure form declaring his acceptance of the golf game, Zamarripa noted it was a "thank you for company business" from Karsh & Hagan advertising.
Webb's company has also provided gifts to Lottery officials that are under the microscope.
In March 2000, cq Peter Webb Public Relations gave Irish whiskey as a "thank you gift" to a top Lottery employee. It gave bottles of wine to Lottery employees in the months after its most recent contract was signed in February 2002. The reason one of those bottles was given is referenced as "Renewal of PR contract."
Urged by Cooke, the Colorado Lottery Commission last month instituted one of the toughest conflicts-of-interest policies in the nation. Lottery employees are now barred from accepting even a cup of coffee from vendors.