Woes beset next operator of Md. lottery AWI's problems keep Ariz. from collecting $14 million in receipts; 'Some serious questions'; Company takes over here in July, succeeding GTECH


The company that will be taking over Maryland's $1 billion-a-year lottery business is having big troubles in Arizona, where persistent glitches have marred its first few months of running that state's lottery.

The problems have worried the treasurer of Kentucky, where a lottery contract with the company is pending, and prompted speculation about what is in store for Maryland.

The contractor, Automated Wagering International Inc., is facing hefty fines over computer problems that have kept the Arizona lottery from collecting more than $14 million in instant ticket receipts from stores.

In addition, AWI computers have taken longer than expected to process sales of lotto and Powerball tickets and to validate winning instant tickets, said Arizona lottery spokeswoman Andrea Katsenes.

The lottery's patience with the Atlanta-based company has worn thin, she said.

"We have 2,500 retailers around the state using equipment that is not operating as it should, which affects the customers, said Sam Wakasugi, the Arizona lottery's marketing director. "We have not determined how it has affected sales."

On Nov. 1, Arizona switched lottery contractors from GTECH Corp. of Rhode Island to AWI. Maryland plans to make the same change in July.

AWI -- for a fee estimated at $53 million over five years, less than half of what GTECH had bid -- will provide and service the computers that run Maryland's lottery games.

GTECH spokesman Stephen G. White said his competitor's problems in Arizona do not bode well for Maryland, which has a much larger lottery. The Maryland lottery, now operated by GTECH, raises $385 million a year for state government coffers, the third-largest source of state revenue.

"Certainly, the situation in Arizona raises some serious questions concerning AWI's ability and competence to install, operate and maintain an on-line lottery system," Mr. White said.

AWI President Mark L. Cushing said his company has encountered a software problem in Arizona but that "it is very close to being fixed right now."

Maryland need not worry, he said.

Although his company will be installing a similar computer system this summer, Maryland will benefit from the knowledge AWI has gained in working out the bugs in Arizona, Mr. Cushing said.

Problems from start

In Kentucky this week, state Treasurer John Kennedy Hamilton raised concerns about the desire of that state's lottery to switch from GTECH to AWI.

"My review of the Arizona lottery's experience with bringing in a new contractor is alarming," he said in a letter to the Kentucky lottery agency Tuesday.

"Even minor glitches or equipment failures can be disastrous to lottery players, retailers and taxpayers," Mr. Hamilton said.

AWI has faced problems in Arizona -- its eighth state lottery contract -- from the beginning.

An assortment of malfunctions kept the new system from starting on time, and some terminals failed to work for days.

At first, lottery officials gave AWI the benefit of the doubt, noting that a thunderstorm and other problems beyond its control had contributed to the bumpy start.

But Ms. Katsenes said AWI is responsible for software problems with the instant ticket system.

The lottery is unable to determine exactly how many of those tickets have been sold by retail stores since Nov. 1, making it impossible to bill for them, she said.

"Winners are being paid, but the stores have not paid us," Ms. Katsenes said.

Penalties delayed

AWI has a plan to remedy all of the problems by March 8, and the lottery will not assess any financial penalties until then, she said.

Ms. Katsenes declined to speculate on the amount of those fines, which could be in the hundreds of thousands of dollars.

AWI's Mr. Cushing said he would not comment on any possible fines.

Arizona lottery sales have been high due to big jackpots for games in recent months, Mr. Wakasugi said.

"Could sales have been higher with a system that was working to the specifications of our contract? We don't know," he said.

'Not concerned'

Maryland Lottery Director Lloyd W. Jones said he does not anticipate problems when AWI begins supplying Maryland's +V lottery computers.

"Our people are not concerned," he said, adding that every aspect of the AWI system will be thoroughly tested in coming months.

Mr. Jones noted that AWI has more time to focus on the Maryland switch-over than it had in Arizona.

After losing the bid in Arizona, GTECH filed a protest that diverted AWI's attention from the complicated business of converting that state's lottery system, Mr. Cushing said.

"We had to do the implementation in 60 days," he said.

GTECH chose not to pursue such a protest in Maryland.

"We're working hard with the Maryland lottery," Mr. Cushing said.

"There's no reason for alarm in Maryland. We are on schedule."

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