Lottery Consultant's Dual Roles Raise Questions

Company had roles with state, vendor

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    NEWSLETTERS

    TK
    NBCDFW.com
    A consulting company that helped Texas write bidding rules for its upcoming lottery operator contract was simultaneously getting paid by GTECH Corp., the current vendor that intends to compete again for the state's lucrative lottery deal.

    A consulting company that helped Texas write bidding rules for its upcoming lottery operator contract was simultaneously getting paid by GTECH Corp., the current vendor that intends to compete again for the state's lucrative lottery deal.

    The dual role of consultant Gartner Inc. is raising questions about a potential conflict of interest and whether GTECH has a competitive advantage over other lottery companies bidding this year for Texas' contract, one of the nation's largest. The stakes are high: Winning the Texas Lottery contract can bring a company more than $100 million annually.

    GTECH and Gartner say there was no malfeasance and that the Gartner contract with GTECH was halted after the issue surfaced and Gartner informed the lottery commission Dec. 30. They insist the lottery bidding process should move forward. Texas Lottery Commission officials say they see no reason to scrap its request for bids, which went out Jan. 4.

    Lottery Consulant Had Roles With State, Vendor

    [DFW] Lottery Consulant Had Roles With State, Vendor
    Gartner Inc.'s dual consulting roles raises questions about a potential conflict of interest.

    "Based on what we currently know, we don't believe it affects the current procurement process," Texas Lottery spokesman Bobby Heith said Friday. "Both Gartner and GTECH are worldwide companies with thousands of employees, and certainly mistakes can happen. However, the matter is still under review."

    Gartner had a $2.1 million contract with the Texas Lottery Commission starting in July 2008 to help state lottery officials write bid parameters. That contract banned the company from working for GTECH. But in mid-November 2009, Gartner signed with GTECH for a six-week $150,000 consulting contract, according to company officials and state records.

    Texas abruptly ended its contract with Gartner this month, having paid $1.4 million of the total.

    Some lottery commissioners quizzed agency officials and a GTECH representative about the contracts during a commission meeting Jan. 6. After lengthy discussions and questions about any conflicts of interests, Commissioner J. Winston Krause said, "I'm just disgusted with Gartner. That's it."

    At least one company considering competing against GTECH is voicing concerns. Intralot Inc. of Greece, which recently landed the online games contract for Arkansas' lottery, says the outcome of the Texas commission's review may determine whether it bids in Texas.

    "We respectfully await the results of the investigation by the Texas Lottery Commission," as well as answers to Texas lottery commissioners' questions in the matter, said Wendell Moore, a consultant for Intralot.

    Gartner, a Stamford, Conn.-based firm, called its simultaneous contracts an oversight. Gartner spokesman Andrew Spender said the part of the company that contracted with GTECH in a "small engagement" didn't realize the terms of the much larger contract with the lottery commission. He said Gartner brought it to the Texas agency's attention as soon as it realized the problem.

    He said the lottery bidding process was not tainted by Gartner's work for both the lottery commission and GTECH.

    "Absolutely not -- impossible that it would be," he said.

    GTECH, a global company based in Providence, R.I., has the current 10-year lottery operator contract for Texas, where the games generate some $3.7 billion in sales per year. The company gets to keep a percentage. Last fiscal year it was paid $101 million by the state.

    GTECH gained no information from Gartner about its work on the lottery bidding rules, said GTECH spokesman Bob Vincent.

    "Our folks on the ground (in Texas) were unaware of the Gartner relationship," Vincent said. He called the two contracts purely coincidental, something that Gartner should have caught in doing "conflict checks." He said the Texas Lottery's current bidding process "is a fair one, a transparent one and this type of relationship with Gartner is not one that had any impact on it."

    Scientific Games and Camelot Group also are expressing interest in Texas' lottery business. The commission expects to receive bids this spring and announce the apparent successor company in August. There would be a one-year overlap period with GTECH before the successor embarks on a seven-year operator contract.

    Some companies may bid for the whole contract -- including online tickets and instant scratch-off sales -- while others may compete to run only part of the operation.

    Gartner's dual contracts in Texas are reminiscent of another case involving GTECH. New Jersey decided in 2006 to rebid its lottery contract because of concerns that lobbying firm MWW Group was doing public relations work for the lottery while working for GTECH as a lobbyist. The state said it wanted to avoid an impression of a conflict of interest. Scientific Games contested the bid.

    Associated Press writer Jay Root contributed to this report.