If you visited Providence Place Mall recently, you may have noticed a rather large sign on the corner of Memorial Boulevard and Francis Street, which reads, "Future home of GTECH World Headquarters." The vacant lot located on the corner will soon be home to $88.5 million corporate headquarters by 2006, perhaps some months after the "LiSci."
So who is our newest neighbor? GTECH is an unusually generic corporate moniker, and perhaps this is one reason why few, even in Rhode Island, know exactly what its billion-dollar bearer does in our wacky economy.
GTECH Holdings Corporation isn't making organic toothpaste or No. 2 pencils - it inhabits the shady world of state lottery contracts. The lottery has been termed a "stupidity tax," and whether on stupidity, or addiction or impulsivity, it is essentially taxation. Lotteries are state-run monopolies, and private companies bid to operate and service a state's lotto.
In our federal system, national budget deficits are passed on to the states and local communities. When Congress underfunds public education, for example, the states are pressured to come up with additional dollars. Enter GTECH, whose "retail points-of-sale" - the lotto vending consoles common in most convenience stores - apparently bring in top dollar for states in a pinch.
The company began as a core group of investors bidding for lotto contracts in the early 1980's, and their aggressive business practices - and a deficit happy Reagan administration - catalyzed the growth of the nation's state lotto industry. In the 1990's, GTECH broke into newer markets, including Internet gaming and financial transaction technology to make buying a lottery ticket as easy as grabbing a Coke or swiping a credit card.
Today, the company provides gambling technology for nations in five continents and has acquired at least six regional lottery companies in the last year, most recently in Eastern Europe and the Caribbean. Their Web site confirms spokesman Bob Vincent's statement, "We generally have 70 percent of the worldwide lottery markets."
GTECH is thus especially big business for Rhode Island, and now that the state has agreed to a 20-year no-bid lotto contract, it is big business for Providence. The city will be paid for the property in gradually increasing multimillion-dollar installments, and GTECH will provide preferences to Providence residents and businesses in hiring and construction, as well as 30 after-school computer centers and a small call center in the city's south side.
Indeed, Providence desperately needs investment, and the prospect of more stable jobs in Providence might seem worth the view of the state capitol building from Prospect Park. Yet it is disheartening when a company with close ties to the Bush family and to the GOP, that benefits from state deficits and "starve-the-beast" economic policies and that extracts revenue largely from society's poorest, builds a new world headquarters in your backyard.
In 1994, the company hired lobbyist and former Texas Lieutenant Governor Ben Barnes to quash a re-bid on the state's lotto contract. Even though the state house largely wanted the re-bid, a newly elected Gov. George W. Bush handed GTECH a no-bid contract.
Barnes' silence may have been his most persuasive argument. During that year's Texas Gubernatorial race, Bush had taken heat because his father allegedly pulled strings to get him into the Air National Guard during Vietnam, and Barnes, who admitted on CBS this year that he did the string-pulling, stayed mum, allowing Bush to beat the rap. After Bush was elected, he pulled the state lottery commission's director, dropped the GTECH competitor who had been announced as the winner and kept Texas with GTECH. Barnes was paid $23 million by GTECH.
Additionally, in order to capture Florida's state lotto, GTECH made a concerted effort to cultivate ties with the state and national Republican Party. GTECH began getting active in Florida politics in 1998, helping to elect Governor Jeb Bush and putting Bush family members and Republican activists on the company payroll. The payoff came last year, when Florida's lottery contract came up for bidding and GTECH won the contract despite the current contractor's lower bid.
Besides GTECH's questionable political maneuvering, this year the company ran into trouble with the Brazilian government and the Securities and Exchange Commission, prompted by allegations of corruption and a $650 million lawsuit.
Investors seem only moderately shaken, though, both because the Brazilian Supreme Court failed to come up with any indictments and because GTECH continues to win contracts and retain huge market clout. St. Petersburg Times columnist Ron Trigaux notes that, "colorful past aside, GTECH's lottery reputation is one of extreme efficiency. Florida has picked a company well known for extracting the maximum amount of money from the public for its clients."
So while we should all be hopeful about the prospects of local economic development, now is a great time to write a letter or an e-mail. Go to gtech.com and send them your thoughts on good corporate citizenship. Tell the company to get cracking on the computer centers. And tell them you'll see them around the neighborhood.
Ari Savitzky '06 is a Keno kind of man.
