Commission to Add Sales Outlets for Lotto Game

The California Lottery Commission voted Wednesday to expand sales outlets for its computerized lotto game even before the game gets under way.

Commissioners decided to add 2,600 computer sales terminals to the 5,000 previously authorized. The system will be the largest computerized lottery system on Earth.

Contract proposals approved at Wednesday’s meeting would raise the cost of the system to about $230 million, adding an estimated $42 million to what already is the biggest deal ever negotiated by the state of California.

Legal ‘Numbers Games’

The system, which will add legalized “numbers games” featuring multimillion-dollar jackpots to the scratch-off “instant games” currently provided by the California Lottery, is scheduled to start this fall, probably in September.

Responding to arguments by Lottery Director Mark Michalko that sales projections justify expansion of the network of terminals, telecommunications equipment and computer centers currently being set up throughout the state, the commission approved a supplemental, $21-million communications contract with Pacific Telephone, AT&T;, MCI and Pacific Bell.

The addition of another 2,600 terminals is expected to cost another $21 million. The terminals will print out the tickets, expected to cost $1 at sales outlets throughout California.

When Michalko and his staff recommended that the contract for the added terminals be awarded directly to GTECH Corp. of Providence, R.I., which already is installing 5,000 terminals, the commission balked. Instead, commissioners decided to award the pact through the conventional competitive bidding process.

Michalko argued that since GTECH had won the initial $121-million terminal contract through competitive bidding in February, there was little likelihood that new studies of bid proposals would produce different results. But the commission voted 3 to 2 to call for new bids.

Michalko later called the commission’s decision “a step in the wrong direction,” saying that it would delay the extra revenues generated by the added terminals. He said that schools, which get 34% of the money bet on the lottery, would be the principal losers.

Michalko suggested that “political pressure,” including letters from Assemblywoman Sunny Mojonnier and state Sen. William Craven, both San Diego-area Republicans, and lobbying by former GOP Assemblyman Paul Priolo, may have contributed to the commission’s decision. Priolo represents General Instruments Corp., a Maryland-based firm that was one of those beaten out for the original contract by GTECH. Another losing bidder was International Totalizator Systems Inc. of San Diego.

Can Use Plant

Meanwhile, a judge in Georgia ruled Wednesday that Scientific Games Inc., which lost an extension of its contract to provide tickets for the lottery’s scratch-off game, can use its printing plant in California if it wins a new contract.

Michalko had demanded that Scientific Games give up the contract if it could not sever subcontracted printing commitments with Dittler Brothers of Atlanta. Dittler had been found by court-appointed officials to have fraudulently overcharged for materials, and Michalko said the fraud finding threatened, by association, to taint the California games.

When Fulton County Superior Court Judge Osgood Williams ruled last month that Scientific Games had to honor its exclusive subcontract with Dittler, that meant that Scientific Games could not use its printing plant in Gilroy, and Michalko asked that Scientific Games’ recently negotiated six-month contract extension with the California lottery be rescinded. The commission canceled the contract on Wednesday.

But Scientific Games is among several firms expressing interest in bidding on new scratch-off ticket contracts, and Wednesday’s decision by Williams frees the Norcross, Ga., company from his former restriction that Scientific Games could not bid independent of Dittler.

Emergency Contract

Tickets on hand are expected to last through the lottery’s eighth game, probably sometime in October. A contract for tickets for the ninth game will be awarded next week.