Intelligence Report: State rep says lottery contract fixed; Quinn defends process

May 4, 2012 4:55:22 PM PDT
In this Intelligence Report: A top Democratic state representative is calling for hearings on Governor Pat Quinn administration's role in awarding a contract to run the Illinois Lottery.

After Chicago privatized parking meters and the Skyway, Illinois sold off the state lottery in 2010 to a private company. State Representative Jack Franks says that deal was fixed, and Franks is calling for a legislative investigation of how Governor Quinn's administration struck the deal. Franks, the state auditor general, and a government watchdog investigation both identified conflicts of interest in the contract process.

"We are very excited to partner with the Illinois Lottery to be your private manager. Our group is the coming together of the world's leading lottery companies: G-Tech and Scientific Games." This from the internal video that Northstar Lottery Group produced to land the Illinois contract in September 2010, with a projected net income of nearly $5 billion over five years.

A year and a half after the panel appointed by Governor Quinn selected Northstar, State Representative Franks is calling for an legislative investigation of the deal.

"The contract was preordained to go to Northstar, because they got the contract before the votes were even counted," said Franks, who represents northwest suburban Marengo.

"He is completely incorrect" replied Gov. Quinn press secretary Brooke Anderson. "We followed the law. The procurement was conducted in accordance with all applicable state laws and awarded to a highly-qualified bidder who made a commitment to the best deal for the state. Northstar presented a bid that, over the first five years of the contract, was $600 million above the other bidder."

Franks, who opposed privatizing the lottery from the beginning, says the governor should rescind the contract until misconduct charted by the state auditor general can be sorted out.

The state investigation concluded that "failure to follow any statutory or administrative processes for a procurement that involves a $2 billion state asset, the Illinois Lottery, increases the possibility that the procurement was not conducted in a fair and transparent manner."

"We saw what happened when the former mayor privatized the parking meters," Franks said. "It was a fiasco, and it cost the citizens hundreds of millions of dollars, if not billions over the term. This is multiplied by 10."

Last month, the Illinois Statehouse News found evidence of irregularities in the state selection process and reported that Northstar and G-Tech donations were funneled to Quinn's 2010 campaign. When asked about the allegation, the governor's spokesperson issued a firm denial.

"The governor has never received nor solicited any donations from Northstar, so the premise of that question is just false" said Ms. Anderson. "Further, the governor has never been aware of any contribution from any of the bidders to the DGA (Democratic Governor's Association. The DGA is a national organization --like the DNC (Democratic National Committee.")

A statement from Northstar also noted that the company and its affiliates "contributed annually, in consistent amounts, to the DGA and RGA (Republican Governor's Association) for approximately 20 years - and 2010 was no different. There were 37 gubernatorial races in 2010 and our funds were not earmarked for any specific race."

The Statehouse News also reported that one of the governor's panelists who chose Northstar was identified as Northstar's director of lottery sales. "It's more than a red flag," said Franks. "This isn't a potential conflict of interest, this is a real conflict of interest...I mean this thing stinks from high heaven."

That employee never joined Northstar and still works in the state lottery office. Both Governor Quinn and Northstar say, therefore, it was no conflict.

"The nine-member evaluation panel was made up of employees with relevant expertise from several state agencies, including the Department of Revenue/the Lottery" said the governor's press secretary on Friday night. "As I understand, part of the private manager's proposal incorporated many of the existing lottery employees into the private manager's organization. By law, they remain lottery employees. (The employee in question) is a state employee, was not incorporated into Northstar's organization, and was never an employee of Northstar" she added.

The statement from Northstar executives makes the same claim: "The state did not reveal the names of the evaluation committee -- therefore, Northstar did not know any of the evaluators, nor of course that (the employee in question) was an evaluator."

The I-Team spoke with the lottery contract evaluator and he declined to comment.

STATEMENT FROM NORTHSTAR LOTTERY GROUP:

"The Illinois Lottery private manager procurement process was a highly competitive process in which Northstar bid the highest.

"Northstar included all 100 EUA employees within proposed organization charts in the bid showing both Northstar and state employees and their roles and responsibilities. The state did not reveal the names of the evaluation committee -- therefore, Northstar did not know any of the evaluators, nor of course that Mr. Golden was an evaluator.

"GTECH has contributed annually, in consistent amounts, to the DGA and RGA for approximately 20 years - and 2010 was no different. There were 37 gubernatorial races in 2010 and our funds were not earmarked for any specific race. "

STATEMENT FROM GOVERNOR PAT QUINN'S SPOKESPERSON:

"First, the governor has never received nor solicited any donations from Northstar, so the premise of that question is just false. Further, the governor has never been aware of any contribution from any of the bidders to the DGA. The DGA is a national organization --like the DNC, or the DNCC-- and you should speak with DGA's Kate Hansen who can tell you about that process and address your questions.

"The 9-member evaluation panel was made up of employees with relevant expertise from several state agencies, including the Department of Revenue/the Lottery. As I understand, part of the private manager's proposal incorporated many of the existing lottery employees into the private manager's organization. By law, they remain lottery employees. Victor Golden is a state employee, was not incorporated into Northstar's organization, and was never an employee of Northstar.

"While we in the governor's office were not part of the initial evaluation process, we understand that the 9-member evaluation committee conducted a rigorous evaluation to ensure the bidders were qualified and that recommended Northstar as the bidder that committed to provide the highest return to the state.

"Lastly, in regards to Rep. Franks' comments about a "pre-ordained contract," he is completely incorrect. We followed the law. The procurement was conducted in accordance with all applicable state laws and awarded to a highly-qualified bidder who made a commitment to the best deal for the state. Northstar presented a bid that, over the first five years of the contract, was $600 million above the other bidder."

Brooke Anderson
Press Secretary
Governor Pat Quinn


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