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Lotto contractor to take in millions from new Keno game

February 28, 2002
By: Matt Williams
State Capital Bureau
Links: HB 1972

JEFFERSON CITY - Missouri's lottery game operator stands to take in millions annually from a new, fast-paced Keno game approved last month.

Rhode Island-based GTECH Corp. was automatically awarded the new game by the Missouri Lottery Commission, a move estimated to generate more than $2.7 million annually for the country's leading lottery contractor.

Modeled after similar games in at least nine other states, Missouri's Quick Draw Lotto is a computer-based numbers game to be played out every five minutes in restaurants and bars. Players pick 10 numbers from a group of 80 and win based on how many of their picks are selected. Results would be shown on a television screen in the bar.

Lottery officials project the game will net the state about $21 million a year in profit, money desperately needed in the state's coffers this year. The game is one of Gov. Bob Holden's new sources of revenue to fully fund public schools.

The day after Holden's State of the State address, the Lottery Commission approved the new game, giving the green light to GTECH to implement the system. As part of the company's contract with the state to maintain the state's regular lottery system, GTECH automatically is awarded work on any new online games.

Holden's push for the new game came six months after GTECH contributed $5,000 to help pay the debts of Holden's inaugural committee.

In 1990, the state hired GTECH to operate all of its online games, such as the multi-state Powerball and Pick 4 lotteries. GTECH runs the sales terminals and computer system in exchange for 3.52 percent of the games' total sales. Last year, that amounted to $7.4 million.

The company is the nation's leading lottery contractor, running games in 23 states, but its history has been marred by charges of corruption. In 1998, the company's national sales manager was handed a 5-year prison sentence for a kickback and money-laundering scheme in New Jersey.

In 2000, the company nearly lost its contract with the British national lottery after an employee disclosed that executives covered up a software glitch that miscalculated more than 90,000 lottery prizes.

Most recently, a former GTECH employee in Kansas filed a complaint with the state's Human Rights Commission alleging superiors directed her to seduce a lottery official so the company could blackmail him.

GTECH officials defended the company's reputation, saying that dozens of states have chosen the company to run their lottery systems after performing thorough backround checks. Spokesman Robert Vincent said the company is also well regarded among investors on Wall Street.

"We're very comfortable with the company's sucess," he said.

Missouri Lottery spokesman Gary Gonder said there have been no problems with the company here.

"We have no concerns about the company," Gonder said. "They seem to be very reliable."

Critics in other GTECH states have questioned whether state lottery commissions are trapped by lottery operators who become so entrenched that they squeeze out competitors.

When Illinois recently rebid the contract for its lottery services, incumbent provider GTECH submitted the only bid. Competitors said there was no way that they could underbid a company that already ran the lottery.

Gonder denied that Missouri was trapped by GTECH, pointing out that there was a competing bid when the company's contract was renewed in 1995.

Vincent said his company works very hard to retain its customers, but said the lottery business is a very competitive one and that they have been underbid by other companies in other states.

Some lawmakers are seeking to slow the new game, saying the lottery commission went too far in approving the plan. Rep. Pat Kelley, R-Lee's Summit, introduced a bill that would require legislative approval before any new lottery games can be introduced.

"I just feel this is a major expansion of the lottery," Kelley said, suggesting that the state should find money by cutting programs instead of expanding state-sponsored gambling.

"If we have a fiscal challenge, then we ought to meet that challenge by making the cuts we need to make," he said.

Similar bills have been filed by top GOP leaders of Missouri's Senate.