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N.C. House Speaker under investigation in lottery probe

Dec 30, 2005, 11:50 pm

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North Carolina Lottery

House Speaker and Top Aide Under Investigation for Possible Corruption in Measure's Passage

When North Carolina's legislature relented from its decades-long opposition to a state lottery this summer, preachers and conservative lawmakers warned that wherever gambling goes, scandal follows.

Even they never predicted it would arrive so fast.

North Carolina, which until now was one of the few states without a lottery, will not begin its games until spring, but already state and federal criminal investigations are looking into whether the measure's passage was tainted by corruption.

State House Speaker Jim Black (D) is in the midst of a controversy over his role and that of a top aide who turned out to be working for a firm hoping to land the contract to run the lottery. Black has been compiling boxes of documents that have been subpoenaed by a federal grand jury examining how the lottery won approval.

Three of the nine lottery commissioners, meanwhile, resigned within a month of their appointments. One stepped down two days before testifying to the grand jury, and another bowed out after it was revealed that he received $24,500 from the same firm that hired the speaker's aide.

"We've never had, in anybody's memory, certainly not in the past 100 years, we've not had anything like this," said former House speaker Joe Mavretic (D).

The lottery imbroglio is emitting a strong odor of backroom, back-scratching politics over a state that traditionally has fancied itself enjoying a more honest, more modern government than the rest of the South.

"This is a stain," said Andrew Taylor, a political analyst at North Carolina State University. "We've not been a state run by a few strongarm leaders. It's been more inclusive and transparent than in most other Southern states. That's been a sort of badge of honor."

This self-image is one reason that North Carolina — the last state on the East Coast without a lottery — resisted for years the easy revenue that flows from public games. The anti-lottery coalition included conservatives, who decried the morality of making the state a numbers runner, and liberals, who bemoaned that lotteries earn much of their money by exploiting strike-it-rich fantasies of the poor.

In 2001, a recession arrived, and some of the resistance departed. Mike Easley (D), the new governor, was the first chief executive to endorse a lottery.

That same year, South Carolina created its game, luring players across the state line. Two years later it was Tennessee's turn. North Carolina, struggling to balance budgets, was surrounded by lotteries, and Easley's appeals were resonating more widely. North Carolinians, he said, were playing other states' lotteries and paying for their schools.

This year, Democrats, who control the General Assembly, shoehorned the lottery through the House but faced a one-vote deficit in the Senate. Democratic Senate leaders, who had declared their business done and sent members home, abruptly called them back a week later during the absence of two Republicans. The game passed.

"I felt unclean," said Sen. Fletcher Hartsell, a moderate Republican from the NASCAR hub of Concord, who voted against the lottery.

The sleight of hand used to pass the lottery foreshadowed the mess that followed, he said. "It literally did fulfill the worst-case scenario."

The unraveling began with the disclosure that Meredith Norris — who stepped down as top political aide to Black after the controversy broke — had been working as a consultant for Scientific Games Corp., one of the two major lottery companies in the country. Soon the North Carolina secretary of state, who regulates lobbyists, was investigating whether Norris was more than a consultant and had lobbied for Scientific Games without being properly registered. The company later filed reports showing Norris submitted expense reports to the company for thousands of dollars worth of meals with legislators. Then the FBI stepped in.

Black's office received subpoenas for hundreds of documents covering a range of people and subjects, including the lottery's passage, Norris, her clients, Scientific Games and one of its lobbyists. FBI agents also asked for records from a country club where Black held meetings.

Black curtly brushed off Republican calls for his resignation and emphasized that the grand jury has not charged anyone. "Why should I step down?" he asked in an interview. "I've not been accused of anything. I'm still doing a good job. . . . Everywhere I go, I'm facing larger crowds than I ever have and they're as supportive as ever."

Longtime Democratic political researcher Joe Sinsheimer is not among them. Sinsheimer, who said he was outraged by the revelations about Black, has started a Web site, http://www.jimblackmustgo.com , and has been digging up and promoting unflattering nuggets about Black.

Others are also weighing in. Secretary of State Elaine F. Marshall, a tough pol who trounced racing legend Richard Petty in her 1996 campaign, concluded that Norris, Scientific Games and its lobbyist had broken the law. Marshall handed the case over to the state attorney general for possible prosecution.

Scientific Games revealed the $24,500 it paid to one of the nine new lottery commissioners for lobbying.

"What do you expect the private sector to do when the competition is for a billion-dollar instant business that's a monopoly, that's guaranteed by contract with the full faith and credit of the 10th-largest state in the country?" asked Mavretic, the former House speaker. "What do you think private industry would do to get such a deal? They'd shoot their mothers."

Kevin Geddings, the commissioner who resigned, had omitted the Scientific Games payments from his signed disclosure form and denied any financial ties when asked by the commission chairman and the governor's staff. Geddings was one of two commissioners appointed by Black.

Another commissioner already had resigned because of the workload, and a third — also appointed by Black — stepped down after receiving a subpoena from the grand jury. He testified two days later.

The lottery commission has targeted an April 5 start for North Carolina's game, four months after the executive director began work. Only Tennessee has started its lottery so quickly, but Easley said the disruption over the lottery commissioners is over. Once the game is underway, he said, it will soon be generating money earmarked for teachers, schools and scholarships.

"The big deal is what it pays for, what it provides, the opportunity it provides," Easley said, "and that is the only reason why I have ever had any interest in supporting it. It's just a means, it's a process."

The Tar Heel state is predictably suffering through exactly what other states endured when they stepped into the gambling world, said Daniel T. Blue Jr., a Democrat and former state House speaker. It is the price for raising an estimated $425 million a year in education money.

"It's the age-old smell test: Even if you don't see it, if it smells bad, you tend to be repulsed by it. You keep suspecting there's something that's bound to create the stink," Blue said. "Is the money worth all the stain against the state's reputation?"

The answer may be yes. Recent North Carolina polls continue to show overwhelming public support for the lottery.

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