Foreign companies drop bids to run Indiana lottery

Two foreign companies have dropped out of the bidding to become the first private manager of Indiana's lottery, with one charging the state's process encourages bidders to set expected revenue levels too high.

Camelot Global Services, which runs the national lottery in the United Kingdom, and Tatts Group Ltd., which operates several lottery licenses in Australia, were among four companies that submitted information to Hoosier Lottery officials for background checks in anticipation of submitting private management proposals.

Camelot officials decided last month to not pursue the contract, saying the Indiana process won't allow the operator to maximize returns in a responsible way, company spokeswoman Laura Pearson told The Indianapolis Star for a story Thursday.

Pearson said the proposed agreement "strongly incentivizes all bidders to propose artificially high income targets" and does not adequately protect the state if the winning company fails to achieve those projections.

Hoosier Lottery spokesman Al Larsen said the agency disagreed with Camelot's assessment.

"We are aware of Camelot's decision," Larsen said. "We understand they are unwilling to meet our high expectations and respectfully disagree with their conclusions."

Tatts spokesman Michael Mangos said his firm dropped out because "the final model did not work for us."

Lottery officials have declined to release information about formal proposals from bidders that were due last week.

Gov. Mitch Daniels and state lottery officials are hoping a private firm can boost revenue for the state, which last year received $188 million in lottery proceeds.

Indiana officials announced in July that they would seek a 10-year contract for lottery marketing, sales and distribution services. The state's lottery commission expects to choose a winner by Sept. 26 and sign a contract by Nov. 1.

Pearson said Camelot officials also believed the state's bidding process favored companies already working for the Hoosier Lottery.

The two remaining competitors that submitted to initial background checks currently do business with the lottery. Rhode Island-based Gtech supplies and maintains instant ticket and vending machines, and New York-based Scientific Games provides the lottery's central online system and terminals.

Illinois last year became the first state to agree to a private lottery management contract. New Jersey and Pennsylvania are considering doing so as well.

Northstar Lottery Group, a partnership between Gtech and Scientific Games, beat out Camelot for the Illinois contract, in part because Northstar promised more money for the state.

In its first year, the firm brought in record revenue but fell well short of the $825 million it promised to Illinois officials. The company and the state are in arbitration over the issue.