GTECH history has its dark side

Company: Ethics emphasized now

GTECH, the company chosen to run the N.C. Education Lottery's games, is a name-brand business with a history of controversy.

The Rhode Island company's dominance in lotto-type games -- in which players typically choose their own numbers -- has made its stock a better investment than the long odds that come with buying lottery tickets. GTECH, which has agreed to be acquired for $4.65 billion by Italy's Lottomatica, is No. 1 in lotto-type games with 27 contracts in the U.S. market and 59 overseas, a Citigroup report says.

Still, charges of influence-peddling have dogged GTECH, including:

* A Brazilian prosecutor started a criminal investigation in 2004, alleging that two GTECH employees offered bribes to win a contract. The case was dropped, and no charges were filed. The Securities and Exchange Commission has begun its own investigation.

* In 2000, the lottery commission in Great Britain began investigating a GTECH software malfunction. The problems, which resulted in overpayments and underpayments to some prize winners, had occurred two years earlier, but GTECH had not disclosed them. The failure to do so triggered the resignation of CEO William O'Connor and the company's president, Stephen Nowick.

* In 1998, the company's chairman, Guy Snowden, resigned after he lost a libel suit against British billionaire Richard Branson. Branson had accused Snowden of offering a bribe in connection with the British lottery.

"We have had problems and controversies in the past," company spokeswoman Angela Geryak Wiczek said. But, she added, the company turned a corner when Bruce Turner, a former Wall Street analyst, was named permanent CEO -- after a stint as interim CEO -- in August 2002. Some analysts agree.

Turner has stressed a code of ethics that all employees must adhere to, Wiczek said. She pointed out that since 2000, GTECH has won more than 40 new or renewed lottery contracts.

"Lotteries around the world have taken the time to investigate GTECH on their own, and they have come to the conclusion that they can put their trust in GTECH," she said.

So how did the situation in Brazil happen on Turner's watch? GTECH spokesman Robert Vincent said the company's internal investigation found no wrongdoing and contended the employees were the victims of attempted extortion by Brazilian officials.

GTECH has a lot riding on each contract. About 87 percent of its revenue, which totaled $1.26 billion in the fiscal year that ended in February 2005, comes from its lottery operations.

GTECH traces its roots to 1976, when a former IBM systems analyst and a mathematician started a lottery consulting business called Gaming Dimensions. In 1981, they acquired a lottery business and renamed the company GTECH, for Gaming Technology.

GTECH shares closed Monday at $33.55, down 11 cents. Shares have tripled in value since the beginning of 2002.

GTECH has been handicapped in competing for instant lottery contracts because it doesn't have the special printing presses needed to create the ticket coatings that players scratch off to see whether they've won. That's why GTECH combined with a lottery ticket printer, Oberthur Gaming Technologies of Texas, to bid on North Carolina's instant lottery business.

(News researcher Becky Ogburn contributed to this report.)