Jackpot

Why is the state's gambling watchdog getting a bite of slot-machine profits?
By LANCE TAPLEY  |  June 6, 2007
inside_gambling

Three years ago, state government hired Scientific Games Corporation, its long-time lottery contractor, to monitor the slot-machine receipts at the state’s first casino. But since the casino opened in late 2005, in Bangor, this “watchdog” of gambling has been fed part of the casino’s profits. This dual role, which has not been widely known, is causing some well-placed people to be concerned about the state’s ability to oversee gambling as it grows in Maine.

“You monitor it and certify it and receive money from it? How do you maintain credibility with the public?” asks Mike Peters, a business consultant from Dixfield who recently quit the state’s Gambling Control Board to protest how the state is allowing the industry to develop in Maine. “It smells to high heaven.”

Peters, who remains on the state Liquor and Lottery Commission, thinks the tolerance of what he sees as Scientific Games Corporation’s conflict of interest is an example of lax state regulation of gambling. He calls the thinly staffed Gambling Control Board “a paper tiger.” By contrast, Scientific Games is a huge lottery-and-horse-track-gambling firm, with $242 million in revenue in just the first quarter of this year and 5500 employees worldwide.

Scientific Games is not only sizeable, it is controversial: in recent years, it was caught up in a big scandal in North Carolina. According to newspaper reports, its chief lobbyist, a company vice-president, was fined and banned from lobbying in the state after the company’s financial relationships with state politicos were discovered, including payments to a lottery commissioner, Kevin Geddings, who last month was sentenced to four years in federal prison for mail fraud. He had tried to win a state lottery contract for the company. Recently, South Carolina’s attorney general began investigating whether Scientific Games and Geddings had been involved in similar activities there.

“The Gambling Control Board, the Liquor and Lottery Commission, and the Maine attorney general should all take notice of these things,” says Peters about these out-of-state events. “It’s extremely important that all companies responsible for assisting Maine state government in monitoring the gaming industry be above reproach.”

Though no one raising questions about Scientific Games alleges that the company has done anything harmful to the state, key legislators say they want to look into its double role. One of them, Lisa Marraché, the Waterville Democratic senator who heads up the Legal and Veterans Affairs Committee, which watches over gambling, was not even aware of the company’s two roles, she says, until informed by the Phoenix.

Since the 1980s, Scientific Games has handled the state lottery’s electronic betting and provided instant-lottery tickets and electronic ticket-sales machines. At the end of 2004, the state awarded it a $2.6-million, five-year contract to keep track of, and report to state regulators on, the cash flowing through Maine’s first big-time gambling house, Hollywood Slots, located near the Bangor Raceway. The casino or “racino” had been approved in a 2003 statewide referendum.

As part of legislation levying a state tax on Hollywood Slots’s proceeds, the off-track-betting (OTB) parlors in Sanford, Brunswick, Lewiston, and Waterville together receive two percent of the racino’s profits, to compensate them for losses they theoretically suffer from the slots’ competition for the gambling dollar. As of early April, their take had reached $790,000, or close to $200,000 each.

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