Embattled Director of State Lottery Resigns : Government: Sharon Sharp cites family reasons. She had been criticized over awarding of major contracts.

Sharon Sharp, the embattled director of the California Lottery criticized for her handling of major contracts, resigned Monday, saying that months of controversy had made her “tired and angry.”

Insisting the resignation was her idea and not that of Gov. Pete Wilson, Sharp said she was stepping down so she could spend more time with her husband, who lives in Illinois. However, a source in the Administration said she was urged to resign.

“It’s just time for me to go home,” said Sharp, who is credited with adding several lottery games, including Keno, and of helping to turn around the agency’s downward revenue slide.

“I’m grateful to the governor . . . who I’m sure wished many times that the lottery would stay out of the news and most especially that I would stay out of the news.”

Sharp’s resignation came several weeks after it was disclosed that the former lobbyist for a company that received lucrative lottery contracts described Sharp in a secretly tape-recorded conversation as “our gal.” The conversation was played during a federal court trial of lobbyist Clayton R. Jackson, who has been charged with racketeering and money laundering.

On Monday, Sharp dismissed Jackson’s comments as the idle boasting of a lobbyist who wanted to impress others with his ability to gain access to public officials. Calling Jackson’s statement “ridiculous,” she maintained that her relationship with his former client, GTECH Corp. of Rhode Island, had always been professional and that there was no conflict of interest.

“I’m Don Sharp’s gal,” she quipped, referring to her husband of 34 years.

In a short statement, Wilson praised Sharp for “innovative leadership” at the lottery, especially improvements in customer services and the addition of new games--Keno, Fantasy 5, Daily 3 and multiple Scratchers, which helped boost sales. A spokesman for the governor said Wilson’s staff would conduct a nationwide search for her replacement.

“Her job is completed,” Wilson said. “She will give her successor a more efficient and more effective lottery to support education for California’s children.”

But the tense news conference announcing Sharp’s resignation contrasted starkly with the one two years ago in which the governor proudly announced her appointment.

At the time, Wilson said Sharp was his handpicked choice to revitalize a demoralized lottery and reverse a decline in sales that had caused deep reductions in the agency’s contributions to public schools.

Sharp, 53, left office Monday having accomplished the sales turnaround but also having created so much controversy over her handling of contracts that she became a political liability for the Wilson Administration.

Sharp was director of the Illinois lottery before coming to California. She commuted to her home in Chicago throughout her tenure and said Monday that she has no job lined up after leaving.

Although the governor’s office Monday had nothing but public praise for her work, staff members privately have been expressing concern about the appearance of favoritism in the awarding of lottery contracts.

Just days before Sharp’s resignation, Wilson’s chief of staff, Bob White, spoke generally of worries about the lottery’s contracting process.

“You want to make sure that the process and every contract let, on something as major as this, is above suspicion,” he said. “Our main goal was to make the things not sole sources; to make it as competitive as could be in a not very competitive world.”

White denied that Sharp was pressured to resign, but a source familiar with the lottery said an Administration official sent to review the lottery’s operation came away “concerned at the way they conducted business.” The source said the governor’s office urged Sharp to resign.

“I think it’s a welcome step,” said Sen. Tom Hayden (D-Santa Monica), one of Sharp’s most vocal critics. “I think it has just become a tainted and unmanageable mess over there. She would have nothing to look forward to but grief.”

Hayden said he will ask the governor and attorney general to investigate the lottery’s relationship to GTECH and to work with other states where the company’s contracts are being criticized.

As one of her final acts in office, Sharp said she had asked for a state audit of the lottery’s handling of a $400-million, five-year contract awarded GTECH to operate its computerized games. “For the sake of the future of the California Lottery, this issue must be put to rest,” she said.

During Sharp’s tenure, GTECH was awarded three lottery contracts totaling nearly $500 million and was recommended for a fourth--all without competitive bids.

Sharp had been in office only a few months in 1991 when she proposed a one-year extension of GTECH’s contract to operate the computerized games.

Her recommendation came just days after former state Sen. Alan Robbins pleaded guilty to a series of charges including accepting a $13,500 bribe allegedly from Jackson, to influence legislation of interest to GTECH.

Although the company was never implicated in the charges, an embarrassed governor’s staff asked the agency to delay awarding the contract for at least a month. Before the contract extension expired, Sharp again recommended--and the Lottery Commission approved--a $25-million amendment for the purchase of 2,000 additional terminals and upgrades to the computer system. Several staff members complained internally that the purchase should have been handled by competitive bids.

A year later, she did seek competitive bids, this time for a new computer contract, but GTECH was the only company to submit a proposal.

Rival companies complained that the specifications for the contract so favored GTECH that it was useless for them to bid. Sharp insisted that the specifications were standard for the industry and again recommended that GTECH get the contract. The commission agreed.

In September, she proposed that GTECH receive another contract without competitive bid to provide an automated system that would make it easier to cash lower-prize Scratchers. She later withdrew her recommendation after the governor’s office expressed displeasure at the lack of competition. That contract is still pending.

Asked at the conclusion of proceedings Monday in his corruption trial for his opinion on Sharp’s resignation, Jackson said: “That’s too bad. . . . If this (the trial) was all over, I’d say something.”

Times staff writer Mark Gladstone contributed to this story.

Out of the Game

California State Lottery Director Sharon Sharp announced her resignation Monday, two years after she was appointed to the job by Gov. Pete Wilson. Here is a snapshot of the performance of the lottery under her tenure.

NUMBER OF PLAYERS: 8 million a month

GAMES INTRODUCED

* Dec. 1991: SuperLotto

* Feb. 1992: Fantasy 5

* April, 1992: Daily 3

* Nov. 1992: Keno

ANNUAL LOTTERY REVENUE (In billions of dollars) ‘85-’86: $1.8 ‘86-’87: $1.4 ‘87-’88: $2.1 ‘88-’89: $2.6 ‘89-’90: $2.5 ‘90-’91: $2.1 Sharp’s term: (Sept. 1991 to Nov. 1993) ‘91-’92: $1.4 ‘92-’93: $1.8