O.C. will take keno to court Council decides to seek order to bar game in Md.

December 19, 1992|By Marina Sarris and C. Fraser Smith | Marina Sarris and C. Fraser Smith,Staff Writers

Ocean City will seek a court order to stop the State Lottery Agency from introducing its keno numbers game in bars and restaurants across Maryland Jan. 4.

Ocean City Council members decided yesterday to seek an injunction because they believe the keno plan violates state purchasing and lottery laws.

"The battle lines are drawn, and I'm going to give it everything I've got," said Guy R. Ayres III, the attorney for Maryland's most popular seaside retreat.

City officials say keno gambling -- with its drawings every five minutes, from 6 a.m. to midnight -- could hurt Ocean City's reputation as a family resort.

In an ironic twist, the man who would have to defend the new lottery in court, Attorney General J. Joseph Curran Jr., agrees that keno is bad.

At a news conference in Baltimore yesterday, Mr. Curran called on Gov. William Donald Schaefer and the Lottery Agency to suspend the contract for a computerized keno system until a public hearing can be held.

Mr. Curran said the state has the right to suspend or stop installation of the game by invoking a provision of its contract with the Rhode Island-based GTECH Corp. that provides for termination "at the convenience of the state."

Governor Schaefer proposed keno in September as part of a plan to eliminate a $450 million budget shortfall in the current fiscal year.

The game did not come under fire until this month, when state officials revealed details of the game and of the $49 million contract for it.

Mr. Ayres, the Ocean City attorney, plans to file the suit against keno in Worcester County Circuit Court on Monday. He said "a three-pronged attack" is envisioned.

First, he said, state law prohibits lottery agents from offering people alcoholic drinks as an inducement to buy lottery tickets. The lottery agency is violating that law by targeting bars, restaurants and taverns as the primary places where keno will be played, Mr. Ayres said.

Ocean City also will argue that the lottery agency should not have "unbridled discretion" to launch games such as keno.

Lastly, Mr. Ayres said, the state violated its own procurement law when it awarded the $49 million keno contract to GTECH without seeking bids from other companies. "There was no bona fide emergency" to justify the state's decision to bypass its competitive bidding rules, he contended.

The attorney general's office declined to comment on the pending lawsuit. But Mr. Curran has argued repeatedly that the state was within its legal rights to award the keno contract to GTECH, which provides Maryland's other lottery games.

Although he has acknowledged that no emergency existed, the state's top lawyer said Maryland was justified in negotiating solely with GTECH because it is the only company that can provide the keno game the state wants.

But Mr. Ayres and some state lawmakers, however, point out that other companies wanted to bid on keno.

"The state lottery agency had before them a request from one company that supplies the necessary computers and software, and the lottery agency wrote them and said they weren't interested," Mr. Ayres said. "Another company has filed a bid protest."

Attorney General Curran continues to insist that "neither keno nor the keno contract are illegal," but he may end up helping Ocean City if his plea for a contract suspension influences the governor.

Mr. Curran, a potential candidate for governor, said the state can legally suspend or cancel the keno contract while it holds hearings on the expansion of state-sponsored gambling.

The state might be required to pay GTECH for losses associated with a contract cancellation, but stopping an expansion of gambling and its associated "contamination" would be worth it, Mr. Curran said.

"Balancing the books on the backs of those who can't resist the lure of round-the-clock, state-sanctioned gambling isn't the way government should work," he said.

Lottery spokesman Carroll Hynson said the state would have to shell out at least $2 million if it stopped keno now to reimburse GTECH for

expenses already incurred.

"That's a starting figure, and it could increase drastically day by day," he said.

Page W. Boinest, the governor's press secretary, said yesterday that Mr. Schaefer has not changed his mind about introducing keno Jan. 4.

"He hasn't heard anything yet that's convinced him that the state needs to suspend the game," she said. "There still isn't an alternative budget solution."

Ms. Boinest said the governor is puzzled by the sudden outcry against keno. "This has been on the table for three months, and we're having a hard time understanding this."

If the state does not go through with keno next month, Mr. Schaefer would have to cut state spending by $50 million -- the amount the game was expected to produce within six months, said Frederick W. Puddester, the deputy budget secretary.

But the General Assembly's chief budget adviser, William S. Ratchford II, believes that stopping keno may have no effect in the current budget year, which ends June 30. Mr. Ratchford based that prediction on his generally rosier estimates of incoming tax revenues and his more pessimistic estimate of keno's proceeds.

He and Mr. Puddester agree that if keno is not operating by fiscal year 1994, which will begin July 1, the state would have to raise $55 million to $100 million more in revenues -- or reduce spending by that amount -- to balance the budget.

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