Ohio Gov Kasich considers privatization of lottery by disgraced offshore multinational

GTECH, a gambling company that hopes to become the day-to-day manager of the Ohio Lottery submitted ready-made legislation last week to the Ohio Senate to privatize the operations of the $2.5 billion public agency.

The legislation, which could be included in the Senate’s budget bill, was delivered by GOP operative and lobbyist Mike Dawson on behalf of GTECH, a giant Italian company with a U.S. headquarters in Providence, R.I. and a history of run-ins with US law enforcement.

GTECH is an industry giant that held a lucrative contract from 1985 through June 2009 to run the Ohio Lottery’s back-office operations that support Pick 3, Mega Millions and other online games. The company is also represented by lobbyist Donald G. Thibaut, a close political adviser to Republican Gov. John Kasich.

Kasich for months has been discussing privatizing the lottery’s management operations, though he has not formally announced a plan to do so. A proposal to privatize the lottery’s management was submitted in March to the Legislative Service Commission, which researches Ohio’s budgets and laws.

GTECH has proposed a law which would give it control and effective ownership of the state’s multi-billion dollar lottery operations.  GTECH’s legislation spells out what qualifications a company must have to win the contract and gives the winning company broad powers to run the lottery, including the authority to design and conduct games that are not “subject to the state lottery commission’s rule-making authority.”

"I believe that the language provides the state of Ohio the best possible deal and gives anyone who wishes to bid a level playing field," Dawson wrote in a cover letter to Sen. Chris Widener of Springfield, chairman of the Senate finance committee, which reviews proposals for inclusion in the budget bill.

Widener, who can ignore such proposals, did not return a call to his office.

The Plain Dealer obtained a copy of the cover letter and proposed legislation — along with another legislative proposal to privatize the lottery that calls for the creation of an Ohio Lottery Optimization Authority. Under the second proposal, the authority — which would include the director of budget and management, Democratic leaders in the House and Senate, and the chair of the Ohio Casino Control Commission — would evaluate and recommend a company to run the lottery. It’s unclear who is behind that proposal.

GTECH’s legislation, drafted by the law firm Porter Wright, sets a deadline of Oct. 15 for companies interested in the contract to submit their qualifications. And it says the lottery must pick a company by June 1, 2012. The company would receive a 15-year deal and a yearly management fee of up to 5 percent of the lottery’s total revenue, according to the draft.

GTECH is part of a partnership that has a 10-year contract to run the day-to-day operations and marketing of the Illinois State Lottery, the first in the country to privatize. 

After GTECH lost Ohio’s back-room operations contract to Intralot, a Greek gambling company, it sued the commission, contending that the bidding process was flawed and the commission failed to investigate misrepresentations by Intralot. GTECH lost its case.

As Ohio auditor last year, Lt. Gov. Mary Taylor released a performance audit of the lottery that concluded it was well managed but could be improved if it became a quasi-corporate agency free of legislative oversight. She said that if the lottery could obtain a “modicum of exemption from the Ohio Administration Procedures Act,” it could better react to the market and implement its games, ultimately generating more revenue.

[Article summary with additions, original posted in Cleveland Plain Dealer]

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