[speaker001:] Tonight, as the lottery bill becomes law in Britain, in America there's growing concern about how lottery companies win contracts worth millions of dollars. But first flying in the face of the worst ever recession in air travel, Virgin Atlantic is doubling its fleet and adding new routes, a high risk strategy. But can Richard Branson land safely?
[Richard Branson:] I would put pretty well everything into making sure that er that Virgin Atlantic is here in twenty years' time.
[Floya:] Okay I'm off now.
[Tessa Curtis:] Floya flies with Virgin Atlantic, perhaps Europe's best known independent airline.... Tonight she's on the flight to New York, although Virgin Atlantic flies to seven international cities and is now the biggest part of the Virgin group.
[speaker006:] Across the U K this is Virgin twelve fifteen
[Tessa Curtis:] Virgin radio is one of the latest additions.
[speaker006:] Phil Collins. [music]
[Tessa Curtis:] The megastores, computer games, publishing, and even airships, all trade under the Virgin name. It's become one of the most famous brands in the world. But increasingly it's the airline that fascinates the man who built all this. He's one of Britain's most popular businessmen, Richard Branson.
[Richard Branson:] It's completely addictive I think an anybody that gets involved in the airline business will say the same. I think for me I love erm er er er I love a challenge, and er I suspect the fact that before I went into it people said it was erm something which was erm absolutely impossible er er and that the their was no way that one could make a go of it erm made it made it made it perhaps all the more [LAUGHTER] challenging to try to prove them wrong [].
[Tessa Curtis:] For the crew this is just another New York flight, but it's been a rough ride for Virgin Atlantic. Having won a libel case against British Airways over the much publicized dirty tricks, it's set to announce losses exceeding fourteen million pounds for nineteen ninety two, and all airlines have been tightening their belts in the recession.
[speaker007:] Anybody whose ambitious at this point in time is taking a risk, in the last three years the world's airlines have lost between them about ten billion U S dollars. Now at first people thought that was because of the gulf crisis an and the downturn in traffic, but actually it's the economic recession which has cut off demand er and which is lasting much longer than people expected....
[speaker008:] Drinks courtesy.
[Tessa Curtis:] Thank you... First class service at less than first class fares has become something of a slogan for Virgin Atlantic, but that's put it on a collision course with big international airlines, especially British Airways. Virgin wants to make itself less vulnerable, and it thinks it can do so by offering even better service to more passengers flying to more places. Trouble is, competition for passengers has never been so fierce and Virgin is still a tiny airline that's losing money. But Richard Branson is so determined to win he's now betting with his own fortune to put more planes like this one in the sky, it could be his biggest gamble yet. The picture looks very different from Virgin's early days in the record business. In nineteen seventy Richard Branson was making waves as a young businessman, even then he had aspirations to take on the giants.
[Richard Branson:] Virgin Records is t starting up new groups who ac you know have been scorned by some of the big companies.
[Tessa Curtis:] [music] He took a risk with the sex pistols, and landed up in court. [music] Then came the city, Branson floated Virgin but soon went private again. With every new stunt his boyish enthusiasm hyped the company's name.... And of course his own, then, nearly ten years ago Virgin bought its first plane. [music] As money from Boy George and Culture Club poured in the airline really took off. And then last year Branson sold the music business to Thorn E M I for five hundred and sixty million pounds so he could focus on the airline, which was losing money.
[Richard Branson:] Well obviously one would like [LAUGHTER] to make money rather than lose money [] erm I mean there's the there are quite a few factors why erm Virgin er lost money last year er first of all you know we had er the very well publicized er dirty tricks campaign being waged against us. Er we believe that cost us many many millions of pounds, secondly, there was the worst recession that the airline industry has had, thirdly, has been er a you know we're a growing company, we're investing.
[Tessa Curtis:] We built this model and asked professor John, an airline specialist, to explain Virgin's commercial problem.
[John Kay:] Running an airline is an expensive business at the best of times, during a recession it can be a way of using up money really quite quickly, now Virgin's particular problem was that they began this recession with relatively little in the way of capital and reserves, only about thirty six million in nineteen ninety one.
[Tessa Curtis:] So what would have happened last year when they lost over fourteen million pounds?
[John Kay:] Well that has to come out of their capital and as you can see it takes out quite a large chunk.
[Tessa Curtis:] How bad is that?
[John Kay:] Well that can be very serious. If you lose the same amount of money for a second year you're down to a position where one small slip would take the business into insolvency.
[Tessa Curtis:] So what can Virgin do to turn this round and start trading profitably?
[John Kay:] Well what most airlines have done has been to try and trim back their scale of operations, but what Virgin are doing is using Richard Branson's personal money to try and expand out of trouble.
[Tessa Curtis:] We can reveal he plans to invest about a hundred and fifteen million of his own money without going to the bank, much of it's for planes, staff and facilities, but we discovered he's just used forty five million to buy out Saboo Saison the airline's Japanese shareholder.
[Richard Branson:] We have erm er just bought Saboo Saison out so er the twenty percent share holding they had in the airline we've now bought back in-house.
[Tessa Curtis:] So does this mean you actually want to be in control of it yourself er or not?
[Richard Branson:] I think for the time being I I'd I'd I'd I'd I'd I think that it makes sense to be fully in control of it, I think that I you know have great faith in Virgin Atlantic, erm I think that it erm it's got a great future, erm but erm er I don't think it would be that easy to to erm you know to to I don't think we'd have partners falling over themselves to get into the airline business in in in this recession.
[Tessa Curtis:] This may look like drinks for the passengers, but it's actually part of Virgin Atlantic's expansion plan.
[speaker010:] Great, lovely Lisa, if you'd just like to stop it there, that was lovely. Can you remember when we did the classroom training.
[speaker003:] Mm.
[speaker010:] Which passenger would you normally serve first?
[speaker003:] The window seat.
[speaker010:] And today what should you have done?
[speaker003:] Well that's right...
[Tessa Curtis:] These trainee hostesses our among nearly five hundred new recruits being taken on for flights to up to eight additional cities starting in the new year.
[speaker001:] You're all looking very smart.
[speaker003:] [cheering].
[Tessa Curtis:] Celebrations as the new recruits graduate, some of them will be flying the new non-stop service between London and Hong Kong, which had been a duopoly for British Airways and Cathay Pacific.
[Richard Branson:] ... with Steeros we're both going to Miami and back...
[Floya:] Oh, which one? [LAUGHTER]
[Richard Branson:] I quite like it.
[Tessa Curtis:] Experience suggests that fares to Hong Kong will fall once Virgin arrives, the danger is that in flying to new places Virgin may reduce the money in it for everybody.
[John Kay:] Virgin will not pull it off if they add too much capacity in too many routes in a very short period of time, because filling capacity is becoming increasingly difficult. To fill the seats you have to drop the fares, there's a price war going on, especially in the markets that Virgin's involved in, price wars mean very low fares, fares which in many cases will not cover the cost of flying the aeroplane.
[Tessa Curtis:] What would you say to the criticism that by opening up new routes you simply add to the problem of over capacity, and so there's less money for everyone?
[Richard Branson:] I don't think the consumer would ev say that and I think sometimes one forgets er people forget the consumer I mean the erm er but obviously by us going onto the Hong Kong route we are going to reduce British Airways and Cathay Pacific's profits on that route considerably, we we think that because our costs are considerably less than British Airways, and I suspect considerably less than Cathay Pacific, that the player that er could be around in thirty or forty years' time is Virgin Atlantic.
[Tessa Curtis:] To open up new routes Virgin needs more planes, and it's come here to Airbus, in the South of France for some of them. Airbus is building four A Three Forties, like this, to fly on Virgin's long distance routes, in fact this one will soon be off to Hong Kong. Virgin may only be a small airline, but so far this year it's Airbus's biggest customer, that's because many bigger airlines struggling in a tough market either can't afford new planes or are cancelling their orders. Virgin says that by expanding aggressively and bucking the trend it's been able to get some really hard bargains.
[Richard Branson:] Ah, wonderful.
[Tessa Curtis:] Richard Branson has come
[Richard Branson:] Magnificent
[Tessa Curtis:] to see his new planes for the first
[Richard Branson:] Thank you very much
[Tessa Curtis:] time very first delivery.
[Richard Branson:] Yeah, were going to be using the first plane on Hong Kong on February the first...
[Tessa Curtis:] It'll cost Virgin an estimated five million pounds a year to lease each new plane, with six on order
[Richard Branson:] then the others
[Tessa Curtis:] including two from Boeing, that's over thirty million.
[speaker006:] [footsteps] Urgh.
[Tessa Curtis:] And then there are other things to pay for like new in-flight gambling systems.
[speaker006:] Seventeen, this isn't I'm not going to
[speaker007:] No good I'm not playing with this thing any more.
[Tessa Curtis:] Virgin argues its new planes
[speaker006:] What else do you have?
[Tessa Curtis:] are much cheaper to fly but simply having more of them will push up costs so it'll need about twice as many passengers.
[John Kay:] Well we know that they plan to have fourteen planes in operation by nineteen ninety six and I reckon that will raise their cost of operations to something over six hundred million pounds.
[Tessa Curtis:] And how many passengers do they need to make that kind of money?
[John Kay:] Well to make that sort of revenue they will actually need to fly rather more than two million passengers a year, and in the present state of the world aviation market I reckon that's quite a tall order, in fact if they fell short of it by five percent in a particular year that would be capable of using up the kind of capital and reserves which we've been talking about.
[speaker008:] Well this looks fine Alan, how about the summary?
[John Kay:] Well
[Tessa Curtis:] The new survey for travel group O A G on what business passengers want. Whilst they only fill a tenth of seats they bring in a lot more income, in Virgin's case almost half. Ian, formerly Virgin Atlantic's marketing manager, says business passengers do value good service, but increasingly cost matters too.
[speaker010:] We discovered that the significance of value for money is creeping up the scale, particularly for the corporate buyer, the person in a company that's in charge of buying travel services. They are becoming increasingly more important as they want to er and try to impose policy on travellers, and therefore price is becoming much more of an issue with them.
[Tessa Curtis:] This man is a corporate travel buyer, the sort of customer that Virgin Atlantic most needs. His name Charles, his job director of the city bank Merrel-Lynch, his task to decide which airline staff here can fly, his annual budget for this is six million pounds.
[speaker003:] [car starting] Okay pilot, ready for take off. [music]
[Tessa Curtis:] With special services like this bike to airport escort Virgin hopes to tempt big wheels to send business travellers onto its flights. Such gimmicks have helped to make Virgin's upper class service tempting to business passengers, but Virgin knows the real business is done by men like this, and they're not just looking at service but also cost.
[speaker001:] Hello.
[speaker003:] Hello.
[speaker001:] Good afternoon.
[speaker003:] Good afternoon. A lot of companies actually er reviewed there there policies, and have down graded. We, for instance use mid- class on Virgin as well as upper class for some er levels of staff and departments. Prices are coming down because discounts are being raised, and it's got very keen in the market place.
[Tessa Curtis:] So to stay in the frame is Virgin going to have to get in there and
[speaker003:] Yes they are indeed, there going to have to compete on price as well as on service and value added.
[Tessa Curtis:] Clearly corporate buying habits matter to Richard Branson.
[Richard Branson:] Morning all.
[Tessa Curtis:] Everybody at his house for lunch is a corporate travel buyer, he has lots of these lunches. Branson wants feedback from people like these.
[Richard Branson:] The erm crucial questions I'd like to ask is that of cost.
[Tessa Curtis:] He assures them Virgin Atlantic can and does compete on cost as well as service, but he claims British Airways isn't playing fair and has complained to the European commission that B A is offering anti-competitive deals Virgin claims it's losing business as a result.
[Richard Branson:] If they can go around, for instance, and pick off all our key accounts and use their dominant route structure to effectively take all our principle clients away er we won't have any anybody flying on our planes, so er so we've got to strike quickly, erm you know relatively soon after they started this new attack to make sure that it erm it er it doesn't get doesn't get out of control.
[Tessa Curtis:] Sir Colin, British Airways chairman, rejects accusations of foul play.
[Floya:] Thank you very much. What we are doing is what is being done er in the market generally there is nothing unique about British Airways position in this regard, in the event the European commission er should find against er our interest in this respect er they are in effect going to find against the interest er of the er European airlines as a whole, and that would be very detrimental to the interest of European business and travellers.
[Tessa Curtis:] Most corporate buyers we spoke to agreed that B A's doing deals much like those from other airlines, indeed Merrel-Lynch said they'd just dropped B A having got a better deal elsewhere.
[speaker003:] I think British Airways offer a fair deal erm but it's not necessarily the largest deal, they invest a lot in in their service and what they do, and I think erm Virgin do offer generous deals.
[Tessa Curtis:] Right so is there anything unfair in your view about the kind of deal British Airways is offering?
[speaker003:] Erm in my experience erm I don't think so.
[Tessa Curtis:] This flight simulator, Virgin's lofty lady, is part of another row with B A which is just as important in the battle for business passengers. Inside, Virgin's pilots are landing on runway twenty seven at Heathrow, in the simulator they can take off and land as often as they like at this the world's busiest airport, but in real life Virgin says it has to fight for slots to take off and land at the times to suit business travellers, it blames B A. B A says it doesn't allocate slots or monopolize Heathrow Airport.
[Richard Branson:] B A er had a very clear dominance at Heathrow, erm it was a dominance that erm has effectively been erm given to them on a plate by the government, or successive governments over the last fifty years, erm and which in effect saw off you know, Laker, B Cal, Dan Air, Air Europe, erm and er and er and er it's it's them having that dominance and then being able to erm er effectively misuse that dominance by er by using the dom the dominance on say the routes which say Virgin Atlantic don't fly to er actually damage Virgin on on on the routes that erm that we do fly.
[Tessa Curtis:] Virgin's determined to fight, on Thursday it began legal action here in the United States. Virgin's filed this complaint against British Airways here in the federal court of New York. The central allegation in what's certain to be a bitterly contested case, is that B A has a monopoly based on its dominance of Heathrow, which it's abusing in a bid to force Virgin out of the market for transatlantic travel. In establishing this Virgin finally hopes to win compensation for the dirty tricks affair and damages awarded here could easily run to one billion dollars. In bringing its fight to the streets of New York, Virgin also hope to win an injunction restraining B A. B A say there's no basis for the claim. It all hinges on B A's share of slots at Heathrow which is about forty percent. The complaint is really a litany of er a whole host of the old grievances there that we have heard several times er before and we will be dealing with the matter in the proper place through our U S council in the U S courts, in terms of er suggestions that it is that it surrounds the question er of monopoly we certainly er do not accept that thirty eight percent of slots at Heathrow in any way constitutes a monopoly it certainly does not. According to anti-trust lawyers, independent of both sides, most successful anti-trust cases involve market shares of over sixty five percent, Irving Sher who recently acted in another aviation anti-trust case says they often last three to five years and cost millions dollars. And this case looks tough.
[speaker006:] It would seem from what you've told me that the market share is on the low side of a monopolization case and that kind of case to begin with is always a complicated and long drawn out case.
[Tessa Curtis:] How sure can Virgin Atlantic be of winning this case do you think?
[speaker006:] I don't think they can be extremely confident if there basing it on a forty percent market share.
[Tessa Curtis:] So with a fight on two fronts, in the market place and the courts, what are Virgin's chances of success?
[speaker006:] It's certainly a tall order to win both courts and market battles and we have to recognize that the background is one in which number two scheduled airlines in the U K have not been successful, look at British Caledonian, look at Air Europe, look at Dan Air.
[Tessa Curtis:] So how do you rate their chances?
[speaker006:] Well it might be that this turns out to be an extremely successful gamble, and Branson has expanded Virgin into a world recovery, or it may be that this airline runs into more serious financial difficulties in the middle of the decade, and it either contracts or it sells out to either an American or a continental European carrier.
[Tessa Curtis:] Branson's already ruled out bank loans, so if there is serious need in future will other Virgin companies fund the airline?
[Richard Branson:] No, fortunately the other companies are stand alone companies erm making erm you know making their own way, and they don't have to fear erm Richard coming and stripping them of their hard earned earnings to put into the airline erm because erm you know because fortunately we've got resources elsewhere to look after the airline and see its development through.
[Tessa Curtis:] It's here in the Channel Islands that most of Richard Branson's money is held. It may seem curious given Virgin's talent for publicity that the full details of its financial affairs and ownership are actually intensely private. St Peterport here in Guernsey is one of the offshore tax havens through which Richard Branson and his family control most of Virgin's shares. Many of them are held through trusts with names like Jupiter, Venus, and Mars, registered here at Morgan-Grenfell. It's hard to tell how much money's in these trusts because they're not open for public scrutiny, but they may indeed be the main source of funding to expand the airline. Our research suggests that after the sale of the music business to Thorn, the trusts would have got about four hundred and fifty million pounds, even after paying off debts and setting aside money for the initial expansion of Virgin Atlantic, that would still leave about two hundred and fifty million. That sounds a lot of money, but it's not difficult to spend it on an airline. Neither Branson nor Virgin Atlantic as a private company, have to make such matters public. Using offshore trusts like this is entirely legal, it also frees up extra money, and that may be needed in future.
[Richard Branson:] I would have had to pay tax unless I'd set up trusts, er by setting up trusts I could then effectively delay paying the tax er use that money to invest in new companies.
[Tessa Curtis:] You've told me that you're putting in about a hundred million pounds for this initial expansion, is that the limit?
[Richard Branson:] I suspect that erm er that erm er a sane person should say, Yes definitely that's the limit. erm but er I don't live my life erm er just with a profit motive in everything I do. As I said at the beginning I love a challenge and I would put pretty well everything into making sure that Virgin Atlantic is here in twenty years' time.
[Tessa Curtis:] But the future of this airline could be decided much sooner than that, and with it the levels of service and fares we can all expect on long haul flights. In the end it may all depend on the depth of Richard Branson's pocket, in moments of nostalgia even he may wonder if he sold the wrong business....
[speaker001:] With annual sales worth four billion pounds, the British lottery is expected to be the biggest in the world. As lobbying becomes fierce for lottery licenses here, across the Atlantic how companies win contracts is under investigation. [music]
[Tessa Curtis:] Saturday night is lottery night here in the streets of Dublin, where Ireland's game of chance is engrained on the culture.
[speaker007:] Grab a hold of that please, and give it a good hard tug. [cheering].
[Tessa Curtis:] Everyone's hoping for that dream ticket, and tonight there's a big win.
[speaker007:] Five, four, three, two, one, thirteen thousand pounds. [cheering].
[Tessa Curtis:] Now it's Britain's turn. With the granting of royal assent on Friday, the lottery is finally on its way.
[speaker008:] Millions of people undoubtedly will gain great pleasure from their weekly flutter.
[Tessa Curtis:] Targeted revenues could top four billion pounds a year and provide a war chest for good causes such as sport and arts, the treasury's cut will be twelve percent of proceeds, leaving a honey pot of six hundred million pounds of turnover a year for the operator. Four consortia have already declared their intention to bid, the Great British Lottery Company comprising of Granada, Vodaphone, Hambrose Bank, Carlton Communications, and Associated Newspapers. N M Rothschild and Tattersalls of Australia, the Rank Organization, and Camelot comprising of G Tec, De La Rue, Reikel, Cadbury Schweppes, and I C L. Installing computers and ticketing machines will be a key part of the job for any lottery operator. World wide there are only two major suppliers, and the question of how those crucial contracts are awarded is now under scrutiny across the Atlantic. [music]. California, the richest and largest state in America, here the state lottery is big business, with annual sales of more than one point seven billion dollars, it helps fill the Federal coffers through taxation and provides about one percent of the states education budget.
[John Kay:] Hello, California state lottery, this is Nicol, can I have your retel I D number please.
[Tessa Curtis:] Federal government officials run the California lottery and equipment is supplied by G Tec, the company has experienced meteoric growth, it now runs lotteries in twenty six of the thirty six U S states which operate them. Today G Tec boasts world wide sales of over five hundred million dollars.
[speaker010:] I'm gonna need three.
[Tessa Curtis:] Shops like this sell lottery tickets all over California, these machines link directly to G Tec's mainframe computer. G Tec has supplied the lottery with equipment since nineteen eighty six. Its contract expired earlier this month, but last year an independent consultancy recommended California replace its existing system, it had already purchased it outright from G Tec for sixty million dollars.
[speaker003:] Sure.
[speaker001:] I hope so.
[Tessa Curtis:] Sharon, director of the California lottery since nineteen ninety one, was appointed by the state governor. A former nurse, she used to run the Illinois lottery. Last February, acting on the report she recommended that a new four hundred million dollar contract be awarded to G Tec for a replacement system, there were no other bidders.
[speaker001:] The lottery business is basically a very very small business with limited competition, and for a state the size of California it makes it very difficult to have large competition because only a certain number of companies can actually put in a system of this size.
[Tessa Curtis:] The decision created ripples throughout California, Joanne is a computer expert, she was head of the technical division at the California state lottery until her firing earlier this year after a period of sick leave. She has argued for more competition in state lottery tenders. Why did only one company bid for the contract in California?
[Richard Branson:] I think there was a perception from other vendors that the bid itself had specifications that could only be met by G Tec. That it was unfairly biased towards the incumbent vendor and therefore chose not to participate, it is very costly for companies to put together proposals to bid for an online game.
[Tessa Curtis:] These concerns were reflected in memos like this, Gordon head of the state lottery finance department was part of the team charged with evaluating G Tec's bid, he warned on November the third last year.
[Floya:] If we are accused of structuring a massive bid proposal to expressly favour G Tec, and if G Tec end up being the only bidder we should expect to encounter major public relations and or legal problems, and we could end up paying far more than we had anticipated for the needed goods and services.
[Tessa Curtis:] Three weeks later in another memo he wrote.
[Floya:] I continue to have graver concerns that four months is simply not enough time for any vendor other than G Tec to implement a turnkey online gaming system.
[Tessa Curtis:] It was memos like these that concerned politicians like state senator Tom, better known as Jane Fonda's ex-husband, he teaches at a religious college in Oakland. He dislikes gaming, but he is also concerned about the way in which the contract was awarded. The largest er state contract in the history of the state of California, something like four hundred million dollars was let to G Tec, and competition, er I believe was suppressed. Why? We don't know, and that happened not once but several times, leading to er er er a good ne honest professional members of the lottery commission er to warn in internal memos er that this was going to raise legal and public relations problems. Sharon defended the decision, she argues that few companies have the resources to undertake the hefty capital investment needed.
[speaker001:] For instance to er to put in this lottery, and put in the new system that we just converted, recently, a couple of days ago err takes tens and tens of millions of millions of dollars, and most companies who come in and work on a percentage of sales, don't get their capital investment back until several years into the contract.
[Tessa Curtis:] The contract was probed by the governor's office last March, as a result Pete Wilson sanctioned the go ahead of the G Tec deal, but said that the state lottery's bidding process needed amending. Processing scratch cards like this needs a central computer system, last year a hundred and fifty million dollar contract to do the job was awarded to a smaller rival, High Integrity Systems, in April Mrs cancelled that contract, after, the company says sixty five million dollars had been spent on the project. HISY is currently suing the California lottery.
[speaker006:] No luck.
[Tessa Curtis:] But a third, much smaller contract twenty three million dollar contract for scratch card machines brought things to a head at two public hearings. Sharon recommended the contract should be awarded to G Tec without any competitive bid, there was a public outcry, ten days ago she was forced to change her recommendation to the state lottery commission and opt for a tender.
[speaker001:] There was a lot of controversy involved, a lot of name calling if you will, erm a lot of accusations, none have merit I'll put that right up front, none have merit, I would recommend that you go out to bid to satisfy those concerns.
[Tessa Curtis:] That was after Joe, HISY's lawyer had claimed at a previous hearing that yet another G Tec rival, Scientific Games, had been told not to bother bidding by lottery officials.
[speaker007:] It is our understanding that were it not for the contact that was made by the state lottery with Scientific Games, that they would be a bidder, the Scientific Games system is a good system.
[Tessa Curtis:] G Tec say the allegations are unfounded, and the companies representative Robert was dismayed at the loss of the contract.
[speaker008:] We are beginning to wonder what it what it takes to engage in good faith negotiations as a business with the state of California, if all it takes is one person to get up, make some kind of scurrilous allegations, and throw the entire bidding in into cast some kind of doubt upon it.
[Tessa Curtis:] But it's not just contractual procedures that are under scrutiny in California. Here at the Sacremento federal court the trial of a lobbyist, Clay, is now under way. has been indicted on twelve counts of racketeering, and offering bribes to elected officials to advance the interests of his clients, one of whom was G Tec. State Senator Allan was a regular recipient of 's patronage.
[John Kay:] I'm not going I'm not prepared to in any manner er discuss er the case of the proceedings.
[Tessa Curtis:] Senator is now serving a jail sentence for racketeering and tax fraud. In an affidavit at his trial he said...
[John Kay:] As part of my agreement with, I received campaign contributions totalling thirteen and a half thousand dollars from G Tec in October ninety eighty six. The campaign contributions were in return for my agreement to, and actually taking, official action at 's request.
[Tessa Curtis:] This is where Senator sold his vote to big business. When a G Tec rival Scientific Games sponsored a lottery bill detrimental to G Tec's commercial interests agreed to vote it down. In a new development on Thursday the court heard a conversation between Clay and Senator secretly taped in November nineteen ninety one as part of his cooperation with Federal prosecutors, during that conversation the lobbyist Clay boasted to his one time crony that Sharon, newly appointed by Governor Pete Wilson, was our girl.
[speaker010:] Pete Wilson put a new gal in, who's our gal, yeah the woman from Illinois, she ran the Illinois state lottery.
[Tessa Curtis:] Sharon was unavailable for comment this weekend, but her spokeswoman Joanne described the recording as a bunch of boasting rantings. In London this weekend Robert described the revelations from the Clay trial as media sensation, Mr who is still on the payroll, he said has not lobbied for G Tec for more than a year.
[speaker008:] I think the bottom line of this issue, frankly, is that the U S er attorney the governmental er investigating authorities in this matter have had this information at their disposal for several years now, had there been any question of G Tec's behaviour er we would certainly be the subject of something that we are not right now, and that the bottom line is we have been assured from the outset that G Tec has not been a subject of this investigation, that G Tec's behaviour has been above reproach, and as far as his comments go we we don't really know what context to put them in. They certainly weren't speaking on behalf of the company and appear to be, frankly, incomprehensible ramblings.
[Tessa Curtis:] What is the relationship between er your company and Mrs Sharp?
[speaker008:] Our relationship between any lottery director and G Tec as a company has always been professional and above reproach and as far as our relationship with the current director in California, we've had instances were we've been successful in California in gaining business while she was a director, and we've been unsuccessful.
[Tessa Curtis:] But doubts about G Tec have spread beyond California, in Baltimore, Maryland, the company also operates the state lottery, here too the awarding of contracts is being scrutinized, a forty nine million dollar contract to provide a popular computerized casino game called Keyknow is being investigated by a grand jury. Leon is a local Maryland politician. He dislikes gaming and was instrumental in triggering the current Federal investigation.
[speaker003:] In California there was no competition, in Maryland there was no competition, every place that G Tec operates, they go in, they hire the highest price talent, they hire the most politically connected talent and they end up getting the contract. Now what we have to know is whether or not they are in fact getting these contracts because they are the best and the cheapest, or whether they are getting it because they have the best connections and they are paying the most money.
[Tessa Curtis:] What do you personally believe?
[speaker003:] I believe it's because they have the best connections, and they're paying the most money.
[speaker008:] I I can't comment on on comments that you are referencing, however I will say that in Maryland er we displaced an incumbent vendor who had been there a long time, er that vendor was a bit upset as you might imagine with being displaced as a vendor, and in Maryland we had a situation that kind of evolved into the same kind of political row you would expect when a company loses a long time business.
[Tessa Curtis:] What are people in Britain to make of this as you come here to present yourselves as a a future er lottery operator?
[speaker008:] What people have to keep in mind, and what people really should be very concerned about here in Great Britain is the fact that this is a very contentious industry, that there are a number of competitors out there who have taken to slinging innuendo around as if it were mud. Er frankly, these investigations at any level are very thorough, we depend upon the very thorough investigations in probity of all the government jurisdictions in which we operate.
[Tessa Curtis:] The government announced on Friday the appointment of Peter as the National Lottery's director general, he's to ensure the propriety of the national lottery.
[speaker001:] Our preoccupation er straightforwardly is that we have a lottery which is run with probity and without impropriety, and the director general has very widespread powers, fact to investigate the backgrounds of any bidders.
[Tessa Curtis:] A flutter for the punter is the battle cry, but much will ride on how the burgeoning industry is regulated. [recording ends]