MAYBERRY, R.I.P.EX-LOTTERY DIRECTOR MADE THE MISTAKE OF CROSSING GTECH, A POWERFUL CONTRACTOR THAT IS USED TO GETTING WHAT IT WANTS
It's tough to fight people with friends in high places. Just ask former Arizona State Lottery director J. Bruce Mayberry, who played hardball with GTECH, the biggest lottery computer vendor in the nation, and with Evans Group, which holds the state's largest advertising contract.
Governor J. Fife Symington III fired the highly regarded Mayberry after Mayberry started seeking concessions from GTECH and Evans Group. Both companies had hired Symington's former chief of staff and top fund raiser, George Leckie. Many observers believe it was Leckie--GTECH's hired lobbyist and Evans' hired consultant--who called the shots leading to Mayberry's dismissal.
Leckie resigned as Symington's chief of staff in 1992, because of his mismanagement of the Governor's Office budget. In one instance, after a trade mission to Japan, Leckie charged the state thousands of dollars for a weekend stay in Hawaii for him and his girlfriend. Leckie also turned out to have been behind the wheel in a hit-and-run, DUI case.
Despite these missteps, Leckie still has Symington's ear, and he still has value to those who want to get Symington's ear.
Leckie denies that he lobbied Symington, a Republican, on behalf of GTECH or Evans Group to get rid of Mayberry. The Governor's Office, in response to a New Times public-records request, says no records exist that show Leckie discussed lottery issues with Symington or with anyone on the governor's staff.
The denials don't impress state Senator Peter Rios, a Democrat and former Senate president. "Why was Leckie on GTECH's payroll as a lobbyist if he never lobbied anyone? That just doesn't make sense to me," Rios says.
Rios asked Attorney General Grant Woods to investigate Mayberry's firing, and Woods--a Republican who reportedly is considering a run against Symington in next year's gubernatorial primary--announced last week that his office would conduct a probe.
If Woods looks for a pattern, he won't have to look far, because GTECH has a habit of hiring political insiders to do its bidding. GTECH hired two associates of Maryland's governor during a controversial bidding war for that state's lottery contract. GTECH won the contract, but the U.S. attorney for Maryland has conducted a yearlong criminal probe into alleged bid-rigging.
Problems surfaced more recently in Kentucky, where the lottery director and its entire board resigned last month in the wake of a state audit alleging, among other things, that GTECH had benefited from contract loopholes and sloppy oversight. Although the audit does not allege criminal wrongdoing by GTECH, the Kentucky attorney general is investigating lottery operations.
The 31-year-old Mayberry--a former Xerox marketing executive--hooked up with Symington during Symington's 1990 campaign. Symington appointed Mayberry to run the state lottery in February 1991. By all accounts, including Symington's, Mayberry performed well, leading the lottery to record revenues in 1992.
"I thought he did a great job. There was plenty of opportunity for him to be successful in the future, and I was disappointed to see him go," says Richard Strohm, a lottery commissioner and Scottsdale attorney.
Mayberry declined to comment.
Mayberry got on GTECH's bad side when he tried to force the vendor to live up to its contract, which called for it to upgrade its on-line lottery system in Arizona.
The Rhode Island-based GTECH is a $500 million per year corporation that has mastered the art of securing and holding fat state contracts. GTECH supplies on-line computer systems for 25 of the 38 states with lotteries, including four of the eight highest-volume states--New York, New Jersey, California and Ohio. The company also provides lottery systems to 21 foreign countries.
Mayberry only had to look to Maryland to get a glimpse of how GTECH would play the game.
Last fall, the Maryland legislature erupted after it learned that GTECH had been awarded a $49 million, no-bid contract to add a keno-style game to that state's mix of lottery games. In December, the U.S. attorney for Maryland announced he would take the matter before a federal grand jury for review. The investigation is continuing.
In Maryland, GTECH hired former governor Marvin Mandell--the political mentor of current Governor William Donald Schaefer--as a consultant. Also on GTECH's payroll was Bruce C. Bereano, a loyal Schaefer supporter and key fund raiser.
With the help of Mandell and Bereano, GTECH won a nasty battle for the Maryland lottery contract in 1991 by underbidding the former vendor, Control Data, by $17 million. Questions immediately arose about whether GTECH had inside information that allowed it to low-ball the bid going in and make up for it later with the no-bid contract for the keno game.
After GTECH won the contract, Bereano was asked whether GTECH had insider information. The Baltimore Evening Sun reported that Bereano responded: "I have to take something to the grave." Bereano later said he was joking, and that he was referring to attorney-client confidentiality.
Mayberry's unseating began to take form early this year, after he expressed weariness about GTECH's delay in upgrading the lottery computer system. An improved system would allow winners to collect at any ticket retailer, rather than solely the outlet that sold the winning ticket.
Lottery records show the Arizona agency had negotiated with GTECH since August 1991, with little success. GTECH promised to act, but never signed an agreement. Mayberry wrote to GTECH last January, saying the lottery wanted the new system on-line by July 1. GTECH was hesitant to upgrade the system, because it would cost about $450,000, and GTECH wanted the state to foot the bill.
Taking a page from its Maryland strategy, GTECH hired Leckie as a lobbyist last March.
GTECH spokesman Craig Watson says Leckie was hired to monitor the development of Indian gaming in Arizona, and to "provide us information and at times advice" on other issues. Leckie did not return phone calls from New Times.
Before long, the close relationship between Mayberry and Leckie soured. But Mayberry persisted. In a May 6 letter to GTECH, Mayberry reiterated that the upgraded program must be implemented by July 1, and this time he added a powerful threat: "If the system is not functional by July 1, 1993, we will be forced to evaluate all options available to us, including, but not limited to, forfeiture of GTECH's [$1 million] performance bond."
The threat stirred up a hornet's nest. Watson says GTECH felt Mayberry was misinterpreting the contract by assuming GTECH was obligated to install the upgraded system. "He's within his rights to make a threat like that, but he was somewhat overstated," Watson says.
Lottery commissioners say Mayberry was simply conducting solid business negotiations by trying to get as much as possible from state vendors. "This was an opportunity to play the game just like any other business," says Jess Finerman, a lottery commissioner and Phoenix accountant.
But sound business and politics don't always mix. Two weeks after threatening to seize GTECH's $1 million bond, Mayberry was told by the Governor's Office that he would be replaced. The governor wanted him to go quietly and take a job, with a $5,000 raise, at the state Department of Administration.
Mayberry rejected the payoff.
With time running out, Mayberry managed to force GTECH to the table on June 30 to hammer out a formal agreement to install the new computer system by November 30. The agreement also calls for the state to pay GTECH $250,000 to help defray costs of the installation--that's $200,000 less than GTECH had initially demanded. Mayberry's strategy worked. He signed the agreement on July 27.
Two weeks later, he was dismissed. With Mayberry out of the picture, there is no assurance the new lottery director will force GTECH to abide by the agreement.
Mayberry not only took on GTECH and its $6 million per year contract, he also was reading the riot act to Evans Group, which enjoys a $10 million annual lottery contract. Mayberry is said to have been angry about Evans Group's performance; he believed the company was taking orders from Leckie rather than from the lottery staff.
Lottery commissioner Finerman says Evans Group's performance was the topic of several commission meetings. "Some of the commissioners weren't happy with the results we were seeing," he says, adding that the commission instructed Mayberry to improve the company's performance.
Mayberry responded by pressuring Evans to roll back its commission in an effort to save the lottery several hundred thousand dollars per year. Mayberry also reportedly wanted Evans to replace the company's manager handling the lottery contract.
While Mayberry had the support of several lottery commissioners in his assertive stance with Evans Group, Mayberry is out and Evans Group retains its contract, which has not been altered.
There are indications that Mayberry's replacement, former Kansas lottery director Ralph Decker, was selected by Symington to smooth relations with GTECH.
For starters, Symington's stated reasons for the firing of Mayberry and the hiring of Decker don't add up.
Although a key part of the Arizona State Lottery's strategy for dealing with Indian gaming was to have GTECH upgrade the system, Symington said Mayberry was not qualified to deal with competition from reservations. The governor's spokesman, Doug Cole, also told reporters that Decker was hired, in part, because he led a successful sales campaign in the face of Indian-gaming competition in Kansas.
There is one problem with this reasoning. There is no Indian gaming in Kansas. In fact, Kansas lottery officials have stayed out of a debate raging there about whether tribes should be allowed to set up gambling operations.
"We've been totally uninvolved," says Bertie Johnson, a spokeswoman for the Kansas lottery. "We're just watching to see what happens."
A more likely reason for choosing Decker: He has lots of experience working with GTECH in Kansas and, prior to that, in Missouri and Colorado.
Last July, Decker extended GTECH's seven-and-a-half-year Kansas contract an additional two years, to run through June 30, 1997. The amended contract, which was not subject to bidding, also called for GTECH to install a keno game in Kansas. The keno game has boosted Kansas lottery sales from $77 million for fiscal 1992 to $114 million for 1993.
Kansas, under Decker's direction, also has provided more lucrative returns for GTECH, allowing the company to receive up to 6.5 percent of gross sales. In Arizona, GTECH's commission is 3.1 percent of gross sales, which reached $251 million in fiscal 1992.
Mayberry's departure also came just months before the state lottery begins drafting the bidding terms to be used when GTECH's contract expires in November 1995. This process is crucial in determining how many competitors bid.
California saw just how sensitive bid guidelines can be earlier this year, when a GTECH competitor loudly protested that the bidding process was rigged in GTECH's favor. California Governor Pete Wilson conducted an informal review of the bidding and determined there were no improprieties.
When GTECH was awarded its last contract in Arizona, in 1988, it was the sole bidder. With Mayberry out of the way and Decker in his place, GTECH is in the driver's seat for another long-term contract.
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