Ohioan Will Head State Lottery : Director, 31, Says First Games to Be Initiated by Fall

After a delay of more than five months, Gov. George Deukmejian on Saturday filled the post of executive director of the California lottery by naming 31-year-old Michael Mark Michalko, an Ohio lottery attorney, to the $73,780-a-year job.

Michalko promised to have some kind of instant “scratch-out” game “on the streets by the fall.”

Michalko, who will become the youngest lottery director in the nation, said he would begin supervising day-to-day operations this week. His appointment must be confirmed by the state Senate, but he can serve for a year while awaiting such action.

Eager for Challenge

The new lottery chief--a Republican and a gourmet cook who turned 31 on Thursday--said that he is in no way overwhelmed by the prospect of taking over California’s new $1-billion-a-year gambling operation, which will include supervising about 20,000 instant ticket outlets across the state. Nor, he said, is he worried about the dangers from cheating and mismanagement which have plagued some other state lotteries.

“We will have built-in security procedures to make sure the games can’t be compromised, that tickets can’t be forged or that people can’t gain access to computers to change the numbers,” Michalko said. “It can’t be done in Ohio and we’ll take steps to see it won’t happen in California.”

As for the vastness of California’s operation, Michalko said: “It’s a challenge. I’m not afraid of it, I’m excited about it. I’d like to see the California lottery become the best in the world.”

Deukmejian made the announcement of Michalko’s appointment while inaugurating a weekly series of Saturday morning radio broadcasts, patterned on a format begun by President Reagan several years ago.

Top Aide Named

The governor also announced the appointment of Chon Gutierrez, 40, as assistant lottery director. Gutierrez has been serving as interim deputy director since March.

The governor described Michalko, a native of Cleveland, as someone who will provide “a good balance of experience, energy, creativity and integrity.”

Michalko said he applied for the California job after receiving calls from colleagues in other states suggesting he might fit the bill. He passed an extensive background investigation before getting the governor’s approval 155 days after the new lottery law said a director should be named.

Under the lottery initiative that was approved by voters in November, Deukmejian was required to name a director and five lottery commissioners by Dec. 7, and begin sales of lottery tickets by March 21. But Deukmejian--a staunch opponent of the lottery--waited until January to appoint commissioners. And in March he was ready to appoint a director, a lottery official from Massachusetts. But much to Deukmejian’s anger and embarrassment, the Massachusetts official turned him down because the salary was too low.

On March 22, the governor named commission Chairman Howard Varner as temporary director. Varner now returns to his original post on the commission.

Awarding of Contracts

With Saturday’s announcement of the Michalko appointment, the lottery enters its busiest phase. Michalko will not only oversee hiring of four deputies to handle security, finance and administration, marketing and sales, but will also supervise the awarding of multimillion-dollar contracts for instant tickets and computerized “on-line” lottery gaming machines, plus contracts for promotion and advertising. He also will supervise opening of retail outlets for instant game sales.

Because of his age and the variety of jobs with the Ohio games, Michalko is considered a kind of wunderkind of lottery. But in an interview Saturday, he said he was beginning to get “bothered by all this fuss over my age.”

“I look at it as an asset, not a liability,” Michalko said. “This is the kind of job that requires a young, healthy person--someone with extraordinary energy, someone with the will and physical stamina to put in the long and demanding hours it is going to take.”

Michalko said that his relative youth was “almost a non-issue as far as the governor was concerned . . . it pales in comparison with my eight years’ experience.”

Aside from summer jobs while he was going through college, the Ohio lottery has been the only employer Michalko has ever had. He began there in 1977 as a legal aide and researcher right after graduation from Cleveland’s John Carroll University.

He cut his legal teeth on a variety of lottery issues while working his way through Marshall College of Law at Cleveland State University. He rose from legal intern to executive assistant to the director and in 1983, after passing the Ohio Bar, Michalko became the lottery’s chief counsel.

The Ohio lottery is considered one of the nation’s most successful in terms of gross revenue versus expenses.

Michalko’s salary will be more than double the $27,164 a year he has made in Ohio. He said he has been subsidizing his lottery income by taking private legal clients and teaching part time at a Cleveland college.

Over the last year and a half, Michalko designed and implemented new specification forms for gaming manufacturers vying for Ohio’s multimilliion-dollar lottery contract. By allowing the state to rely on several different manufacturers for its computerized lottery equipment, Michalko’s procedure has become a model for the nation, according to Ohio lottery public information officer Anne Bloomberg. “It is unique in that it finally puts lotteries in the driver’s seat as opposed to vendors,” Bloomberg said.

In addition, Michalko was part of a team of lawyers who successfully defended Ohio this year in a suit brought by a disgruntled lottery firm that lost a contract bid.

Attributes of Legal Mind

“As an attorney I’ve been trained to think in a certain way,” he said. “Attorneys generally are thorough and cautious in their approach to most business,” he said.

One of the immediate issues Michalko will have to face is the disposition of a lawsuit filed in March by a substitute teacher from the Bay Area wanting to force the commission to begin selling tickets or to explain why the deadline set by the lottery initiative was not being met. The class-action suit, which is scheduled for a hearing Wednesday in San Francisco Superior Court, alleges the state’s education system--beneficiary of 34% of gross lottery sales under the law--is losing up to $1.37 million a day due to the failure of state officials to get the lottery started.

During his radio address, Deukmejian said schools will still get $300 million from lottery sales in the 1985-86 fiscal year.

The lottery also has been under pressure to ensure that minorities and women get a 30% role in lottery contracts. Recently the commission approved a minor change in advertising bid language to stress the inclusion of small businesses or firms run by women and minorities as subcontractors.