Archive for MD Lottery

More Maryland Lottery Politics

Maryland LotteryI previously wrote about the Maryland Lottery and complaints and intimidation from IGT, a spurned bidder for state contracts. After that, I decided to pay more attention to news revolving around the lottery and bidding processes.

Part of the complaints from GTECH were designed to intimidate Gordon Medenica, who had been appointed but not yet confirmed, as director of the Maryland Lottery. Last week, the Executive Nominations Committee held confirmation hearings for several officials, including Mr. Medenica.

After questioning, Senator Joan Carter Conway asked that Medenica’s nomination be held for further investigation. Bryan Sears wrote about the hearing in The Daily Record.

The senator asked Medenica questions about lottery income sources before moving on to questions about the recent contract recommendation made in favor of SGI and the appeals by IGT and Gaming Innovation. As you may recall, IGT filed a protest that they eventually backed down from. Gaming Innovations moved forward with a protest that they eventually dropped.

Specifically, Conway drills down into questions about minority business enterprise (MBE) goals from all three bidders. Medenica points out that the goals are pass/fail and that all three bids met the goal of 20% participation. He also tells Conwa y that a bid with a local joint venture partner does not get any more consideration.

This question related to Gaming Innovation’s bid and their use of a “local” partner, businessman Emmanuel Bailey. In Gaming Innovation’s protest letter, they complained that their team included two members who were “running” the D.C. Lottery.

One of these partners is Emmanuel Bailey. He’s deemed a local partner for the Maryland bid and he also was for a successful bid, along with Intralot, to run the DC Lottery.

Mr. Bailey has been ensnared in investigations of the procurement process related to the DC Lottery.  He was apparently running his operations, as a local partner for Intralot, from the basement of his mother’s home in the District. He apparently lived in Maryland at the time. That is not allowed under D.C. law. You must live in D.C. to be certified as a local partner. Maryland does not have that requirement for local partners.

This puts Bailey in a bit of a quandary as it relates to the Gaming Innovation bid for the Maryland Lottery business. As far as DC is concerned, he is “local.”  If so, that means he is lying if he claims to be in Maryland as part of the Gaming Innovation bid.

To sum things up, IGT originally made an implied threat against the confirmation of Gordon Medenica as director of the Maryland Lottery before withdrawing their protest. Gaming Innovation continued their protest based on specious logic and found a sympathetic ear in Joan Carter Conway who is now holding up the confirmation.

I will continue to follow this story as it develops further.

IGT and more lottery intimidation

igt-logoI noted previously that IGT (formerly known as GTECH) has engaged in an intimidation campaign against Maryland Lottery officials in recent weeks since they lost out on a contract to another company.

Two letters of protest were filed, including one specifically targeting lottery director Gordon Medenica, who previously worked for IGT. The targeting of the director flies in the face of 2009 statements about the company changing its way.

As recently as a month ago (on September 29), the Securities and Exchange Commission – for the first time in its history – issued a standalone fine on whistleblower retaliation and announced that IGT “agreed to pay a half-million dollar penalty for firing an employee with several years of positive performance reviews because he reported to senior management and the SEC that the company’s financial statements might be distorted.”

Additionally, I have confirmed that lobbyists from Alexander & Cleaver P.A., including Hannah Powers Garagiola, representing IGT in the state have been lobbying members of the General Assembly and the media over the past few weeks.

As I noted previously, the U.S. Attorney for Maryland conducted a year-long investigation of the company – then known as GTECH – in the 90s after they hired associates of the governor to take the lottery contract from the incumbent provider in a questionably conducted procurement. A lobbyist for the company was convicted of unrelated mail fraud charges because of that investigation.

I also discussed intimidation and influence-purchasing by IGT in Texas, Arizona, and Rhode Island. Since then, I’ve read more on the company’s history in Maryland.

In 2009, GTECH applied for a contract running the computer system for the state’s nascent slot machine system. Slots were just approved the year before in a statewide referendum.

The state of Maryland’s 2009 background investigation of the company revealed legal problems in other states and countries as well.

The company admitted there were investigations into “possible contract and regulatory issues” and, according to The Baltimore Sun, the “company or its employees have faced allegations of bribery and taking kickbacks” going back to the 90s.

News reports from 2009 in Maryland discuss the fact that the national sales director of the company went to prison after a conviction in New Jersey on charges related to a kickback scheme. Also, mentioned in the 2009 story: a lawsuit in Brazil by the government against GTECH over contract money received by the company that was allegedly illegal because of bribery of government officials.

In the 2009 investigation and application for contracts, it was noted that the company “steadfastly maintains that it has embarked on a course of conduct that is entirely different than its past one, and that it is now in strict compliance with all regulatory requirements.”

More on IGT

In 2006, the Texas Department of Safety investigated of GTECH for a Texas Lottery Commission meeting. GTECH officials claimed back in 2006 that the company had changed its way of doing business as well.

The Texas report discussed the activities and lawsuit in Brazil at great length. A similar issue took place in Trinidad that was also looked into by the Texas DPS and an independent auditor. Other countries where concerns were raised included both Poland and the Czech Republic.

In these countries, the report noted that entities or people hired as consultants in each country appeared to be making a large amount of money while doing “relatively little work.”

As in Maryland this year. a lottery Director in Arizona awaiting confirmation was attacked in the media after IGT was not awarded a contract. That director resigned for having used a state car to drop off his children at school, after “an anonymous complaint letter — supposedly by a current Lottery employee …. was sent to the governor, attorney general, various state senators, and the Arizona Republic.”

If you look at the recent attempt to make trouble for Maryland Lottery director Medenica, whether it was the protest letter targeting him or the veiled threats about him still facing confirmation, then it doesn’t appear IGT has really changed its ways.

Political Intimidation and the Maryland Lottery

LotteryI noticed something very interesting while reading a recent article in The Washington Post about recent events at the Maryland Lottery and Gaming Agency.

IGT Global Solutions Corporation (formerly GTECH) lost out on a $263 million contract with the Maryland Lottery for its “central monitoring and control systems” according to the article. After losing the contract to Scientific Games International, IGT filed a letter of protest. They didn’t stop there.

IGT doubled down and filed a second letter of protest targeting Maryland Lottery director Gordon Medenica. He sent an email to lottery staff explaining the decision-making process. The director noted in that message that the technical requirements were more important than being the low bidder.

Medenica’s statement to the Associated Press about the protest:

The real story here is the attempt by the losing bidders to bring political pressure to an ongoing procurement process. Their manipulation of an independent, objective, competitive procurement is blatantly inappropriate.

Two recent posts at Red State by an out of state blogger seemingly discuss the matter from IGT’s viewpoint. The first, by Dan Spencer, notes that Medenica “has been appointed, but not yet confirmed by the state Senate.”

That sure sounds like IGT is sending a warning shot at Medenica, as well as a subtle attempt to encourage legislators to threaten his confirmation.

Another post at Red State cites “an industry insider” who claims that “bid protests” and “legislative scrutiny” could cause problems for Medenica because he was senior executive for Northstar New Jersey Lottery Group, a “business venture that was partially owned by Scientific Games.”

What this shadowy “insider” left out is that – in addition to Northstar being partly owned by SGI – it was primarily owned by IGT. In fact, IGT owned just over 82% of Northstar, and also provided part of Northstar’s staff.

More on IGT and Lottery Director Intimidation

This all seemed strange, so I started looking into previous lottery contracts around the country and found that IGT has tried similar intimidation tactics in a few other states.

In Texas in 1998, GTECH paid out a $725,000 settlement to former lottery director Nora Linares to settle a lawsuit. The Linares suit claimed GTECH “was to blame for interfering with her employment, emotional distress and making it difficult for her to get a new job.”

Linares claimed GTECH, which operated the Texas lottery, gave her boyfriend a $30,000 consulting contract she knew nothing about before it was made public in 1996. She also alleged that the GTECH engaged in a “systematic effort” to get her fired from her job in an attempt to cover up what they had done.

In Arizona in 1993, lottery director Bruce Mayberry was fired from his job, allegedly thanks to the insistence of a former staffer of Arizona Gov. Fife Symington who then worked for GTECH. Reportedly, Mayberry “tried to force the vendor to live up to its contract.”

As a result, the Arizona Attorney General announced an investigation of the firing.

One thing mentioned in coverage of that firing involved Maryland back then:

If [Attorney General] Woods looks for a pattern, he won’t have to look far, because GTECH has a habit of hiring political insiders to do its bidding. GTECH hired two associates of Maryland’s governor during a controversial bidding war for that state’s lottery contract. GTECH won the contract, but the U.S. attorney for Maryland has conducted a yearlong criminal probe into alleged bid-rigging.

Reporting from Arizona also mentions that the Kentucky lottery director and the entire lottery board resigned after a state audit showed  that “GTECH had benefited from contract loopholes and sloppy oversight.

In 2015, former Rhode Island Speaker of the House Gordon Fox went to federal prison after pleading guilty to accepting bribes. While GTECH wasn’t involved in this case, they were supporters of him. In fact, he paid a $10,000 fine in 2003 for a conflict of interest when he voted for legislation that would give GTECH $770 million and result in his law firm being hired by the company. Fox was regularly “schmoozing” with lobbyists from the company, including at Red Sox games in Fenway Park.

This is probably only the tip of the iceberg with lottery and gaming contracts across the country and around the world. While I do not really care who the Maryland Lottery agency selects to run the lottery,  this kind of political hardball by a government contractor in my own state does get my attention.

More to come.