CHICAGO - The Illinois Lottery and its chief Michael Jones have been in the news lately, with allegations that Director Jones may have pushed the owners of Northstar Gaming - the company that's managing Illinois' privatized lottery - to contract with a private company - Independent Lottery Research - to which Jones has been tied.
Recent stories by Fox Chicago and Better Government Association refer to emails they "obtained" showing Jones had approached Northstar's owner GTECH to demand Northstar include in their Illinois management deal the company Jones led before he became Illinois' lottery head.
Illinois Review was approached with the same story almost six months ago. Because the sources of the emails refused to go on record, we set the story aside.
Evidently the sources changed their minds and allowed BGA and Fox Chicago to use the emails. However, it is notable that neither BGA or Fox Chicago identified the source from which the emails came.
Does any of this matter to the ongoing controversy between GTECH/Northstar and Michael Jones?
It may matter as the Illinois House considers an investigation into whether Mr. Jones tried to extort Northstar - an idea one of Illinois' staunchest gambling advocates, State Rep. Bob Rita (D-Blue Island) suggested earlier this week.
Whether Northstar or GTECH has anything to do with Rita pushing for such an investigation of Jones and his emails is unclear. GTECH/Northstar have at least $20 million at stake.
Late last year and early this year, stories on Illinois Review criticized Jones for traveling throughout the U.S., using tax dollars to undermine Illinois' privatized lottery. As a result, Jones contacted Illinois Review and asked that his side of the story be told. In the interest of fairness, we interviewed him and shared his response.
When the previously mentioned unnamed source approached us with evidence in March that Jones was trying to push his way into a contract that would have benefitted Jones by up to $6 million, we asked Jones about it. He said that he withdrew Independent Lottery Research from the state's bidding process early on because the state contract demanded the implementing company put up too much money at the threshold of the partnership. The only companies with enough capital to meet the requirements that made it to the final cut included GTECH/Northstar, which eventually was awarded the state's contract.
Jones said some of Illinois' privatization requirements were faulty because they disqualified all except for the biggest managerial companies.
First, the managerial company would need to put up $20 million in cash or credit line, preventing smaller companies from competing for the project.
Second, Illinois is required to pay for the private company's operating costs, causing the state to risk its own capital.
Third, the length of the state lottery contract is 15 years, setting up a potential adversarial relationship if the managerial company underperforms, Jones said. He said the state should be allowed to fire an underperforming company.
And that, perhaps, is the underlying issue propelling discussion about an Illinois House investigation into Jones' and Northstar's relationship.
Northstar's calculations show they've increased Illinois lottery sales since assuming the job of implementing the state's lottery, but Jones and the state contend Northstar failed to meet its goal. In July, the Lottery reported GTECH/Northstar promised $947 million in net income during fiscal 2013. Lottery officials said the lottery generated $793.5 million in profits during the year.
GTECH/Northstar say it's not their work that is shoddy, it's the way the state does their bookkeeping that makes the lottery sales numbers appear to be less than what they should be. Thus, State Rep. Bob Rita is calling for an inquiry into the contract and raising questions about financial management and bookkeeping at the lottery.
The Blue Island Democrat has asked for an investigation by the Legislative Audit Commission because he was troubled not only by the relationship between Jones and Independent Lottery Research/Independent Gaming Research but by the answers Jones gave to the news media about the contract, the Peoria Journal Star reports.
Of note - since 1994, GTECH has written 41 political contribution checks equaling about $138,000 dollars, none of the checks were written to Rep. Rita, and those checks written were equally divided between Republican and Democratic state candidates. Rita is, however, considered one of the two "go-to" guys in the Illinois House when it comes to gambling expansion.
GTECH's concerns about their reputation and lottery management affect their company's bottom line and will be watched by other states interested in privatizing their lottery systems.
Other Illinois Review stories on Jones and GTECH/Northstar