Dec 11, 2006, 11:25 am
As part of a major deal with 24 states, including California, an Italian company has purchased the United States firm that runs lotto and other online games for those states. The merger, where Lottomatica acquired GTECH, was finalized in August and expected to be completed by year's end.
The agreement surprised and stunned state lawmakers. Not even the attorney general's office, which is supposed to defend the state lotto, was aware of it. The deal was orchestrated by the state lottery's acting director, Joan Borucki, a gubernatorial appointee who stands firm in defending the $4.7 billion merger with little, if any, public scrutiny.
Legislators and watchdog groups are concerned after seeing internal documents about the company's business practices, 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.
According to records obtained by MediaNews Group through a California Public Records Act request, the Italian government levied a $7.5 million fine against Lottomatica for colluding with a competitor and a similar penalty for a one-day outage of the country's games.
"This decision brings into question the lottery's integrity," said Fred Jones, an attorney for the California Coalition Against Gambling Expansion. We couldn't agree more.
Yet state lottery spokesman Rob McAndrews said that it will be business as usual and there was no reason to have the purchase by Lottomatica formally acted on by the policy-setting Lottery Commission. Does this look like a back-door deal to you?
Even if this company proves to be viable, we are concerned that our state lottery has been allowed to operate pretty much independently without any oversight into such a significant deal for our state. What if this deal goes bad? What if it endangers the millions of dollars people put in the state lottery every week? As Jones asked, "Who will the people and schools of California hold accountable?"
This deal corroborates that the lottery system should have more oversight by the state, where it was partially established in the first place to aid one of California's biggest agencies — education. Before California was included in this merger, overview and scrutiny should've taken place. Even if Lottery Commission members were briefed, as McAndrews claimed, a full-blown review was needed. The Legislature or another part of the executive branch of state government should've explored this. As a matter of fact, in light of how this agreement played out, it's seems clear that our lottery system needs more monitoring.
Between the state attorney general's office and lawmakers, people could then feel a little more comfortable about future decisions involving California lotto. Our state lottery system shouldn't be allowed to run willy-nilly, as it did in the case of this merger.
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