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Illinois Lottery war puts state official under a microscope

Illinois Lottery Supt. Michael J. Jones  |  John H. White~Sun-Times

Illinois Lottery Supt. Michael J. Jones | John H. White~Sun-Times

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Updated: May 30, 2013 2:22PM

A s the top state official overseeing the Illinois Lottery, records show, Michael J. Jones has:

Tried to get the private company that runs the lottery to hire his daughter’s ballet company for a promotion.

Hired a consultant who got more than $115,000 for four months of work assisting with Internet lottery sales — even though the private lottery manager oversees those sales. The same consultant made another $46,000 in that time working for Illinois Senate President John J. Cullerton (D-Chicago), who met her through Jones.

Found himself facing questions raised by the lottery manager’s lawyer over free tickets to professional basketball, baseball and hockey games that he and other state employees got.

Jones says he’s done nothing wrong and calls the questions about his ethics a diversionary tactic on the part of Northstar Lottery Group, the company hired by Illinois officials in 2011 in a deal that made Illinois the first state to have a private manager run most of its lottery operation.

Since being appointed lottery superintendent a year and a half ago, Jones has repeatedly criticized the deal that brought in Northstar. Last month, he said the company owes the state $20.1 million for failing to meet its goals — a claim Northstar is fighting.

“I’m not having a feud with” Northstar, says Jones. “I’m just doing my job.”

Jones, 64, of Evanston, previously headed the lottery under Gov. James R. Thompson between 1981 and 1985 before starting a marketing company that worked with lotteries in 13 states, as well as several other countries. In 2010, he assembled a group to bid for the Illinois Lottery management contract but decided against bidding. Among his reasons: The state required bidders to have $20 million in cash to compete.

Gov. Pat Quinn’s administration entered into a 10-year deal with Northstar in January 2011, and the company began disputing how much income the deal required it to bring in for the state, records show. Jones says he confronted Northstar after taking the $142,000-a-year lottery chief job in October 2011.

“We put together a financial team to try to develop the methodology that would be fair to Northstar and fair to the people of the state,” Jones says. “When we started doing this, it bruised some toes and egos.”

In January 2012, he and his chief of staff traveled to Rome to meet with officials of Lottomatica, part owner of Northstar. Justifying the trip, lottery officials wrote: “Northstar has been underperforming on a monthly basis, . . . subjecting the contract to termination.”

The trip was among eight out-of-state trips Jones took during his first year as superintendent. The total cost to taxpayers: $10,391. The lottery has spent a total of $20,368 on out-of-state trips for four top officials since July 2011.

Jones says a shift in the lottery landscape — from traditional in-store sales to more Internet sales — has been one of the reasons he’s traveled to conferences on lotteries. He went to Rome, he says, because “I wanted to make sure Lottomatica was committed to making privatization work.”

Illinois Lottery emails show Jones was involved in a multiple sclerosis instant-ticket game promotion in which Northstar was considering paying his daughter’s ballet company, the Civic Ballet of Chicago, $6,000 to cover “the dance, rehearsals, costumes, dancers, etc. with an additional cost of $1,300 per performance after the initial show.” Molly Jones was the contact person for the ballet company.

A Northstar employee originally pitched the idea of a single dance company doing the promotion, Jones says. He suggested that others — including the Civic Ballet and Hubbard Street Dance — also be involved.

“I was flabbergasted that Northstar was coming up with a promotional idea­ ­— I thought it was a great thing,” Jones says, adding he told Northstar officials “from the very beginning” that his daughter wouldn’t be paid for performing in the promotion.

“If there was an ‘optics’ problem, then [Northstar] could have said, ‘Let’s not do it,’ and I would have said, ‘Fine,’ ” Jones says. “It wasn’t my idea.”

He says the promotion never happened because “there was a window to do it, and [Northstar] missed that window.”

Northstar questioned Jones’ and other lottery officials’ use of hundreds of sporting-event tickets the company gets through cross-promotional deals with pro sports teams, asking last June 22 for a “legal opinion” from the lottery’s general counsel regarding the circumstances under which lottery employees are entitled “to event tickets provided by Northstar.” The tickets are supposed to be used “solely for marketing and sales related activities,” according to state records.

Jones says the lottery never responded to the legal question from Northstar because “it isn’t up to us to give you a legal opinion. You’re the private manager.”

State records show Jones obtained seats to a Cubs-Sox game last year and brought Molly Jones and another guest. He also took his son and another guest to a Blackhawks game in 2011. He says he donated the value of the tickets for his children and the other guests to charity and was at the games himself to attend promotional events.

In dozens of other cases, state records don’t identify the people who got the Northstar seats — including 28 tickets to six Bulls and two Blackhawks games obtained by the lottery’s deputy superintendent, Victor Golden, during a two-month span last year. Jones says he, Golden and lottery salespeople — who are state employees — have used the sports tickets legitimately, including giving them to vendors who sell lottery tickets.

Still, he says the lottery and Northstar should stop accepting sports tickets altogether.

“Let’s just get out of the ticket business,” Jones says. “It requires a tremendous amount of work with someone staying on top of it, and we have incomplete records.”

Since Jones became superintendent, the lottery has hired two consultants — Scarlet Robinson, of Las Vegas, and Craig Scott, who lives near London — to assist with Internet lottery sales, even though Northstar oversees those sales, which began in March 2012. Jones hired Robinson that month to “provide technology oversight services” of Internet sales programs, “including attendance at all oversight meetings . . . and providing updates to the governor’s office or General Assembly.”

Robinson previously had done work as a consultant for the Washington, D.C., lottery and was “exceedingly valuable in our meetings with Northstar” on Internet sales, Jones says. The state of Illinois paid her $115,050 for that work, done between March 7, 2012, and June 30, 2012.

In about that same period, Illinois Senate President Cullerton also hired her to “provide advice on legislative proposals and attend meetings concerning the implementation of Internet gaming legislation.” The Senate paid Robinson $40,000 for that, plus another $6,000 to produce an analysis of potential Internet gaming revenues and $1,484 in travel reimbursements.

Scott — who once worked for a subsidiary of Camelot Group, which runs the British lottery — has been paid $151,500 since May 2012. He is to be paid $102,200 more by June 30, the end of the state’s budget year, records show.

“Because of his experience with Camelot, he’s been through all of these issues we face with Northstar,” Jones says of Scott.

Robinson and Scott could not be reached for comment.

Northstar’s deal calls for it to pay the state when it fails to reach certain income targets. The company won the lottery contract by projecting a net income of $851.2 million last year, but it generated $756.8 million, which triggered the $20.1 million penalty, according to lottery officials.

Northstar is fighting the claim, and the dispute will be heard by a mediator. Company spokeswoman Avis LaVelle says Northstar’s 2012 income is more than the lottery reported — about $780 million — and that the penalty “payment of over $20 million is premature” in light of the complicated issues involved in the dispute.

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