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Who Will Run Alabama's Lottery Should Voters Say "Yes"?
by Cathy Donaldson
With former campaign chiefs of the state's two head legal
officers leading the crusade for Alabama's proposed lottery,
it could have the feet of a bear.
Gtech, a scandal-ridden global gambling and financial
data-processing consortium, has an inside track to operate
the Alabama lottery, if voters change the constitution. The
world's biggest lottery operator, Gtech has in recent months
helped form the nation's biggest gambling conglomerate. It
also employs a successful corporate strategy of hiring
political insiders with lines to power brokers to break into
a state's lottery game.
Attorney General Bill Pryor's campaign manager Claire Austin
was the first Gtech lobbyist to register with the Alabama
Ethics Commission. "I'm working on the lottery," Ms. Austin
said. "The other people Gtech hired are Joe Fine and Bob
Geddie."
The influential Montgomery lobbying firm of Fine Geddie &
Associates is a big player, with eleven political action
committees (PACs) representing special interest groups that
poured nearly a half million dollars into 1998 State House
campaigns.
J. Carter Wells, who was Governor Don Siegelman's campaign
field director, runs the governor's Alabama Education
Lottery Foundation. That PAC was formed to raise money to
fund a planned televised pro-lottery campaign to air soft
ads focusing on Alabama's educational needs.
Education sells well in some lottery markets, according to
Gtech's annual report. Its strategy is to expand the lotto
player base by focusing on "good causes" such as the arts,
environment, charity, tax relief or scholarships.
Siegelman maintains his plan to change the state
constitution -- which prohibits gambling -- to allow a
lottery would raise $150 million a year for college
scholarships, school computers and pre-kindergarten
programs.
"Across the United States, as well as here in our own
community, there is an unprecedented focus on reforming
education," Gtech founder, chairman and CEO Guy B. Snowden
wrote last year. He resigned in February 1998 after a
British jury found he tried to bribe an English billionaire
regarding the lottery contract. A horn used to hook Great
Britain into its Heritage Lottery was tax revenue to restore
landmarks, churches and purchase old masters' paintings for
national museums.
With record $1 billion revenues last year, Gtech operates
lotteries in more than half the states, including
neighboring Georgia. However, a strong economy is slowing
lotto revenue rates, Gtech's financial reports show.
Another lottery company, Arizona-based PowerHouse
Technologies which operates lotteries in Florida and other
states also is vying for the Alabama contract, but so far
there is no plan to take bids.
PowerHouse lobbyist John D. Crawford said if Alabama is
going to have a lottery, he hoped it would be operated by
the best firm. "I personally believe PowerHouse Technology
is that firm," said Crawford, who confirmed he has not yet
been able to speak with the governor about PowerHouse's
proposal.
His competition is Gtech (pronounced gee tech) and its new
lobbyists. Crawford recently lost a leading client, the
giant Waste Management landfills, to the new firm
representing Gtech.
Ms. Austin, who also worked for former Attorney General Jeff
Sessions as public affairs and legislation director and was
his U.S. Senate campaign public relations director, was
Pryor's main campaign fund-raiser. She left Pryor's
employment after his November election to set up her own
business for lobbying, public relations and PAC development.
Lanny Young, her business partner in their new Montgomery
firm of Austin & Young Capital Resources, is a frequent
visitor to the governor's office. Young is trying to get a
state permit to open a Lowndes County landfill south of
Montgomery. Last year he sold the Three Corners Landfill in
Cherokee County to Waste Management -- now one of his lobby
clients.
Austin & Young intends to sell investment "memberships" with
no registration under federal or state securities laws,
according to its incorporation papers filed January 26.
Several other contract lobbyists are being paid by Gtech to
push the lottery in Alabama.
Last year, under new CEO William Y. O'Connor, Gtech said it
ended its practice of paying its lobbyists a percentage of
the lottery profits after its former national sales manager
was imprisoned on federal charges for kickbacks to lobbyists
who helped land the New Jersey lotto contract. That practice
is illegal in Alabama anyway. But the state's loose lobby
laws only require lobbyists to report spending over $250 a
day on a lawmaker, so there is no way to track gambling
lobby payments, gifts, or favors to legislators.
Few outsiders even knew which of several contract lobbyists
were working the Senate floor last month for Gtech when the
lotto measure passed. Late Friday afternoon before the
lottery bill was up before the Senate early the next week,
Claire Austin was the only Gtech lobbyist registered with
the Alabama Ethics Commission. Alabama lobbyists have ten
days between signing a contract with a customer and
registering with the Ethics Commission, according to
commission director James Sumner, who defended the practice.
Gtech, as the nation's leading lottery contractor, is giving
new meaning to lottos. This is not your “mamma's lottery,
nor your father's grocery store,” as Gtech's annual report
puts it.
If the lottery proposal passes, the State of Alabama will
become one of 80 governments around the world relying on
Gtech's lottery systems for smooth operation of their game.
Gtech has a remarkably large, widespread and powerful
infrastructure that reaches thousands of retail locations
throughout the industrialized world -- a powerful asset in a
state that lacks sophisticated data networks.
Their operations ride on the backbone of the beast, as
pundits call the Internet. Gtech claims no other company in
the world has the kind of high-speed transaction-processing
network at retail outlets that it has. It plans to put video
lottery machines in malls and stores with checkout lanes,
like supermarkets.
Gtech isn't a household word in Alabama yet, but mark the
name. The corporation speaks several languages and has
powerful computers in several nations. It's a seven-headed
corporate entity with a lottery and electronic data network
linking five continents from Colorado to Brussels, England
to Europe and Asia, Georgia to Brazil.
In Brazil, Gtech has built its own new casino/lotto halls
and arranged with the country's biggest bank for customers
to pay utility bills at lottery retailers. Its financial
deal is with Caixa Economica Federal, which is fully owned
and controlled by the Brazilian government with 2,500
branches spread throughout the country of 160 million.
In Bolivia, the Gtech lottery, which fed on the needs of the
elderly for nationally insured health care, has been a bust.
The lottery has failed to provide the required sums, and the
waiting line of elderly requiring medical attention is
steadily increasing, according to officials of Caja Nacional
de Salud, the state body managing the service.
National Lottery president Juan Rivero has said that the
insurance for the elderly was nothing but a political move
on the part of the former Bolivian president to gain votes.
"It clearly was an electoral action that did not have any
sound feasibility study," Rivero said in Brazilian papers.
"They did not even contribute 10 percent of what they
promise. And if they declare bankruptcy, we will sue them
for breach of contract."
The corporation runs the lotteries in 38 countries including
New Zealand, Turkey, Singapore, Estonia and Lithuania, where
a new Gtech television-based lotto game is popular. Half the
world's lottery countries have on-line Internet lottos.
In Poland, Gtech is in a venture called DataTrans.
"Utilizing a common backbone with the lottery network, we
are providing the data network for the ATM commercial
banking transactions of EuroNet,” Don Stanford, Gtech’s
senior technology officer, wrote.
Lottery is lucrative. Gtech founders Guy Snowden and Victor
Markowicz were among the highest paid executives in Rhode
Island, where the holding company is based. Each had a $4.7
million pay package. Called a "brutish executive" in a 1996
Fortune magazine article, Snowden built Gtech into the
world's leading lottery vendor in fifteen years. According
to Fortune, Gtech never lost a contract it went after.
"Somebody was said to have the ear of a governor? He'd be
retained by Gtech, often on the eve of bidding. A political
contribution was needed to help a legislator see things from
Gtech's point of view? Never a problem. Was a little wining
and dining in order? Snowden would go all out," Fortune
wrote.
"We'd go to dinner with the lottery director and find out
that Gtech had hired a yacht and taken out the whole goddamn
legislature," said Hubert Plummer, the former president of
Automated Wagering, Gtech's archrival. "It was like shooting
your popgun, and they were firing a howitzer."
Automated Wagering, Inc., a part of PowerHouse which also is
seeking the Alabama lottery business, has a nine-year
Florida lottery contract worth an estimated $300 million,
despite two protests filed by competitor Gtech after AWI won
the contract with Florida -- its largest lottery customer.
However Gtech has the lottery contracts in most other sister
states. In Georgia in 1993 lottery director Rebecca Paul
allowed Gtech, which had bid $50 million higher than AWI, to
chop its price in a closed-door meeting. Gtech got the
business even though its bid was still $27 million more.
Post-bid enhancements also help Gtech. In Maryland in 1992
Gtech's $94 million lottery contract was supplemented by a
$49 million award to run a new statewide video lottery game
called keno. Georgia and several other states have added
keno machines to the traditional ticket lottery base.
Gtech's bet on the lottery opening in Alabama may pay off.
Paralleling Siegelman's election in Alabama, Kentucky got a
state lottery in 1989 after Wallace Wilkinson rode the issue
into the governor's mansion. His former campaign manager,
Danny Briscoe, was immediately hired as Gtech's lead
lobbyist. His contract paid him $372,000 over five years --
if Gtech got the lottery contract.
Gtech's former national sales manager, J. David Smith, was
convicted for fraud and bribery involving lotto lobbyists in
New Jersey. In 1997 The Houston Chronicle reported that
Smith boasted about bribing at least ten state legislators
to ensure passage of the lottery bill in Texas and getting
the contract for Gtech. The paper said a former Kentucky
lottery official told investigators that in 1993 Smith named
eight or ten Texas lawmakers he said he paid up to $10,000
apiece for "favorable consideration" of a lottery bill.
The reported boast took place about six months after a major
lottery push in a special Texas legislative session. Texas
voters approved a state lottery in 1991, and Gtech began
running its on-line games in 1992. Nora Linares, Texas
Lottery Commission director, was fired in 1997 after
confirming that a close friend -- an indicted state official
who later went to prison -- worked as a Gtech consultant. In
California a Gtech lobbyist was captured on tape bragging
that California's lottery director was "our gal."
The Alabama legislature has passed a bill to put the lottery
up for a statewide vote, with no provisions regarding who
will oversee it other than political appointees. The House
voted down an amendment preventing felons from serving on a
proposed seven-member Lottery Commission to be appointed
solely by the governor.
Meanwhile Gtech has gotten new officers. Snowden resigned
following the U.K. lottery scandal, and Markowicz stepped
down effective March 1 last year after the shake-up at
Gtech. A jury in the United Kingdom found Snowden had
libeled Richard Branson, who had asserted Snowden tried to
bribe him to keep his Virgin companies from competing for
the U.K. lottery license.
Gtech is moving into wider global circles. In March Gtech
hired an executive out of the computer giant Unisys
Corporation as its facilities manager. David Calabro's
expertise indicates Gtech is eying more government lottery
and data management work. He is a former special advisor to
the Army Chief of Staff and was an assistant professor of
diplomacy and economic policy at the U.S. Military Academy
at West Point.
The mission of Gtech's Worldwide Lottery Group is to win
business, so in addition to its traditional lottery and new
television games, its GameScape subsidiary has developed a
colorful lotto game machine to appeal to a new generation of
gamblers in the South. Using tactical marketing polls and
cultural studies, Gtech has come up with HotTrax, a new
interactive 3-D game featuring racecars speeding around a
track. "Designed to appeal to consumers who don't ordinarily
play traditional lottery or casino-style games, HotTrax
stimulates a high level of player involvement and friendly
competition," says Gtech's annual report.
Gtech is on a roll. In recent weeks the lottery corporation
has formed partnerships with the biggest casino syndicates
on the globe. On April 5, Gtech's wholly-owned subsidiary
Dreamport announced a lottery video machine manufacturing
deal with the Bally Gaming unit of Alliance Gaming Corp.
Headquartered in Las Vegas, Alliance is the nation's largest
gambling machine operator and operates two casinos.
Last month Gtech joined a group including Harrah's
Entertainment -- part of Promos casinos -- to buy Turfway
horse track near Florence, KY. They plan to open a casino
there if it's legalized in Kentucky. Harrah's, the world's
largest gaming company and called the McDonald's of
gambling, operates two casinos in neighboring Mississippi
and is attempting again to open a New Orleans casino this
fall.
Several other groups have been seeking casinos in Alabama,
including the state's dog track owners, such as Milton
McGregor of Montgomery. Though the state's media have been
referring to attempts to have gaming at the race tracks as
video poker bills, the dog tracks have made no bones about
wanting to have casino-type gambling.
Milo Dakin, McGregor's lobbyist for his Shorter and
Birmingham tracks, said the video poker bills backed by the
state's dog tracks were unrelated to the lottery. "I
wouldn't touch the lottery with a 20-foot pole," Dakin said.
"We have kept our hands out of the lottery." In the past
eleven years fifteen lottery bills have been introduced in
the Alabama Legislature.
Dakin worked to kill them all in committee -- except this
year. He said the state's four dog tracks are being gutted
by the Mississippi casinos, whose owners "funneled money
into Alabama in suitcases" to help church coalitions fight
the video poker bill. "It's the same old story," Dakin said;
"it's the preachers and bootleggers getting together again."
Apparently the dog track gaming measures sound enough like
casino gambling to pull in lobbyists working for Mississippi
casinos to fight them in the Alabama legislature. While
Alabama gambling opponents got sidetracked from the lottery
and have been wearing themselves out fighting the nightmare
poker machines, Gtech has been designing a dream machine. If
Alabama's lotto amendment passes, Gtech's gaming machines
could be at all the racetracks, coin laundries and service
stations. The company's marketing strategy is to place the
machines everywhere there's a checkout counter, including
service stations, groceries and malls.
They want to make it simple to play the lotto on Gtech's new
EZ Express, a self-service kiosk designed to be "an easy,
fun way to play in busy retail settings," according to
Gtech. Slot machines are called the "crack cocaine" of
gaming, and Gtech could be inventing a new drug.
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