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Backlash in Calif. over sale of lottery operator GTECH

Dec 6, 2006, 9:57 am

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As the new 2007-08 Legislature convened Monday, the backlash over an Italian firm's quiet takeover of California's lotto contractor grew when a second legislative committee said it would investigate.

Assemblyman Alberto Torrico, a Newark Democrat who chairs the government organization committee in the lower house, said his panel is probing the matter and may convene hearings.

"I'm taking a look at the situation. I've read the press report. I've been briefed by my staff," said Torrico, whose committee oversees the California State Lottery. "We're going to do everything in our power to investigate. We'll take a look at what's happening with this contract, what the company has become.

"If a hearing or hearings are warranted, we're going to hold those hearings," he continued. "If any administrative rules or any existing law has been violated — which I'm not saying there has been — that should be a concern to all of us."

Officials at the lottery and at GTECH, the online gaming contractor that has been purchased by Lottomatica — an Italian firm with a spotted history — said they stand ready to answer lawmakers' questions and assert that it's business as usual at the lottery.

In the upper house on Monday, Senate leader Don Perata, D-Oakland, reasserted plans to probe the issue.

Over the weekend, Sen. Dean Florez, a Fresno-area Democrat who is chairman of Senate government organization committee — responding to documents obtained by MediaNews from the government — announced his committee would hold a hearing on the issue this month.

Torrico said Monday that he may approach Florez, who expressed surprise upon learning about the deal over the weekend, to discuss the committees' meeting together.

Republican legislators questioned the deal as well.

Legislators and government watchdog groups are concerned about whether the lottery, in the wake of GTECH's acquisition by Lottomatica in a $4.7 billion deal, will remain fair to players, prize winners and schools, which get a third of the revenue.

GTECH runs the lotto and other online games in California and 24 other states.

The governor-appointed Lottery Commission normally weighs major new contracts or contract renewals under the 1984 voter-approved Lottery Act. But the authors didn't address mergers involving major contractors.

The lottery's acting director is standing by her decision to approve California's part in the merger, based on the agency's own investigations, legal counsel and briefings of commissioners.

The agency tasked with defending them in court, the Attorney General's Office, was not consulted.

After being shown internal investigative documents obtained from the government on the merger, lawmakers and others questioned the buyer's antitrust conviction, lotto terminal shutdowns, lack of audits, absence of vendor and employee background checks and whether the U.S. accounting and legal probes of the deal were adequate.

GTECH President Bruce Turner said the company would, among other things, promptly notify California in case of "any change of control" of its buyer, that Lottomatica "will address personal disclosure requirements" for key employees and others, and implement "anti-corruption and anti-bribery programs."

Lottery spokesman Rob McAndrews said that despite new ownership, operations and senior management of GTECH will remain essentially unchanged.

The merger, finalized in August, is expected to be operationally complete by year's end.

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