A battle for reputation in US

IN AWARDING the contract to run the National Lottery to the Camelot consortium, the British regulatory authorities must either have deemed irrelevant or considered ill-founded the controversy relating to one of the consortium's members, G-Tech, the US lottery operator.

Rhode Island-based G-Tech has grown enormously in the US in the past five years, but in doing so it has become caught up in a number of mini-scandals from California to Georgia, which have aroused the attention of a number of American journalists and private investigators.

The company says it has been the victim of a series of half-truths spread by competitors in an industry where dirty tricks are commonplace, and that it has never been found guilty of wrong-doing.

G-Tech has effectively cornered the business in America, operating the lottery in more than half of America. However, its rapid profits growth of the past few years is unlikely to continue. Last week a company statement knocked the share price from dollars 34 to dollars 23 as the market digested the news that the company's earnings are likely to be static in the coming financial year. Analysts had previously forecast earnings growth of 25 to 30 per cent.

The company has a reputation for nurturing relationships with the public officials who run the lotteries, and it has shown a willingness to employ people with good political connections. Sometimes this strategy has sparked off complaints from its competitors, which have triggered official inquiries.

In Georgia the award to G-Tech of a dollars 150m lottery contract triggered a legal case after a complaint from a rival. The Georgia Lottery president, Rebecca Paul, was alleged to have had a business relationship with a G-Tech official, national sales officer, J David Smith. The accusation was made by Automated Wagering International, which accused Ms Paul of favouring G-Tech.

G-Tech was cleared of any wrong-doing and it says the matter has now been put to rest. The company also said that the relationship between Ms Paul and Mr Smith was 'entirely professional and appropriate'.

In Arizona the lottery director, Bruce Mayberry, was asked to leave the lottery and move to another state agency just three months after threatening to revoke the company's performance bond. G-Tech's critics and rivals accused the company of using its political muscle.

A full investigation by the attorney-general found that Mr Mayberry had been dismissed for a good reason and that G-Tech had no role in his dismissal.

G-Tech was criticised in a Kentucky state audit, released last year by Ben Chandler, which raised questions as to whether the company provided value for money. As a result of that audit, seven directors of the Kentucky lottery resigned.

The Kentucky attorney- general's office also investigated allegations that Jim Hosker, a former Kentucky lottery director and also a friend of J David Smith, was on the payroll of the lottery and G-Tech at the same time.

In 1991 Mr Hosker signed a contract with G-Tech. He later left the lottery to work for G- Tech in Texas, but G-Tech says that he never worked for both the lottery and the company simultaneously.

Mr Smith, interviewed by an American newspaper, the Atlanta Constitution, blamed competitors and the media for spreading rumours.

Mr Smith, who resigned from G-Tech earlier this year, pleaded guilty to gambling charges in 1981. At G-Tech he earned nearly dollars 1m a year, convincing public officials of the merits of the company.

The company was unperturbed by his earlier record and says that it disclosed his conviction wherever it was relevant around the world.

Craig Watson, vice-president of public affairs, says that Mr Smith did a good job for the company before he resigned last January.

Last year California's lottery director, Sharon Sharp, resigned amid allegations, denied both by her and the company, of showing favouritism in the awarding of lottery contracts to G-Tech.

G-Tech spends heavily and places great importance on political lobbying.

In the UK, Lord Moore, formerly one of Lady Thatcher's favourite ministers, is a board member. Camelot's public relations advisers are Brunswick, one of the top financial advisers in the City.

G-Tech's Mr Watson says rivals in the US have tried to spread rubbish to the media and law enforcement agencies and that allegations have led to investigations. 'In every single case G-Tech has been cleared,' he says.

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