Probe looms over state keno deal Legislator's letter is prompting action

December 09, 1992|By C. Fraser Smith | C. Fraser Smith,Staff Writer

The U.S. attorney in Maryland is set to begin an investigation of state contracts for lottery computers, including the recent no-bid, $49 million deal for a keno game approved last week.

Richard E. Bennett, the U.S. attorney, said he would disclose detailed plans after he meets tomorrow with Del. Leon G. Billings, a Montgomery Democrat who wrote to him on Dec. 4 requesting an investigation. Mr. Bennett said yesterday that he took Mr. Billings' request "very seriously."

The U.S. attorney has been concerned about the lottery contracts and has been examining them unofficially for some time, sources say. The keno award, along with Mr. Billings' letter, has moved him to act.

"I don't routinely get such letters like this from Maryland state legislators," he said.

Mr. Bennett, a Republican, will be replaced by a Democratic appointee after President-elect Bill Clinton is inaugurated. But in previous changes of administration, the incumbent has served for up to 18 months and no fewer than nine months -- probably enough time to complete an investigation.

Keno is a bingo-like lottery game that will be played beginning Jan. 4 in outlets such as bars, restaurants and bowling alleys. It will be available from 6 a.m. to midnight every day of the week.

Mr. Billings wrote: "If the state of Maryland is to be the gambling sewer of the East Coast, I would at least like to know whether those activities are legally conducted, properly procured and sufficiently regulated."

Mr. Bennett's inquiry would be the second review announced this week into the keno contract. State Senate President Thomas V. Mike Miller Jr., D-Prince George's, said he is concerned about the state's venture into another avenue of gambling without legislative approval.

"There are allegations that this is some form of sweetheart deal," Mr. Miller said yesterday. "It's important enough for there to be legislative input and review.

"We're going to provide a public forum so that any questions can be fully aired," he said. The Senate Finance Committee will hold a hearing on the contract next Tuesday at 10 a.m. in Annapolis.

Although the keno contract between GTECH and the State Lottery Agency has been signed, it is contingent on an appropriation by the General Assembly. Contracts are routinely approved in this way and, in most cases, the appropriations are automatic.

Mr. Miller said yesterday the contract could theoretically be stopped by withholding an appropriation, but he said he thinks the process has gone too far for this year.

The state moved without legislative input after Attorney General J. Joseph Curran said in a ruling that keno represents only an extension of the original lottery contract and did not need legislative approval.

Mr. Curran also said his criminal, contract and anti-trust units had investigated the original contract with GTECH Corp. and found "no evidence of wrongdoing."

But Mr. Billings asked the U.S. attorney to investigate whether GTECH, a Rhode Island firm specializing in lottery computers, had intentionally submitted a "low-ball" bid for Maryland's lottery computer system in 1991 -- in the anticipation that it could make up the difference with add-on contracts such as the keno game.

"The question, of course, is whether GTECH knew or had reason to know that the Lottery would expand without a formal bidding process thereby making its original decision profitable," he said in his letter.

GTECH, through its Maryland lobbyist, Bruce C. Bereano, has vehemently denied any suggestion that it had any guarantees beyond the original contract.

Gov. William Donald Schaefer advocated the lottery expansion as part of his plan to eliminate a $450 million budget deficit. He said last week he welcomes investigation "by the attorney general, the U.S. attorney's office, the federal government or anyone else who would like to investigate to determine if this was done in a proper fashion or if there were any illegalities or irregularities in any action that we've taken."

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