Is G-Tech In Hot Water Again?
Posted: Tuesday, March 16, 2004
Updated: March 18, 2004 - GLOBO News Story Added
Updated: March 24, 2004 - Bloomberg Story Added
Updated March 31, 2004 - Wall Street Journal - G-Tech Exec's Charged
Below are just a FEW of the stories I have regarding G-Tech's
current problems in Brazil. My calls to G-Tech have not been
returned so I can not tell their side of the story.
I will say however, I have obtained a Roth Capital Partners
Equity Research Report, issued March 11, 2004, that says
these stories, in their opinion, are "politically motivated"
and "some of which have partial truths."
The Roth Capital Report also states, "We believe yesterday's
weakness in shares of GTK was related to such news and
believe the stock will recover." Roth Capital Partners is a
full-service "independent" investment bank
Of course, the Roth Capital Report also has a disclaimer on page 3
that says in part, "The material, information and facts discussed in
this report other than the information regarding Roth Capital Partners,
LLC ("RCP") and its affiliates, are from sources believed to be reliable,
but are in no way guaranteed to be complete or accurate. Etc, etc, etc."
Now read the stories so you can draw your own conclusions. Remember
though, newspapers (and I) generally have documents to support allegations
made in our stories. Those of us who report news don't want to be
sued nor do we maliciously report things to hurt businesses.
(Timeline of Events - below newspaper articles)
Brazil Prosecutors Charge Two Gtech Executives
Wall Street Journal
SÃO PAULO, Brazil -- Federal prosecutors in Brazil have accused two executives from the local unit of U.S.-based Gtech Holdings Corp., the world's largest lottery-systems operator, of corruption linked to a public contract.
The accusation stems from investigations into alleged criminal practices in the renewal of an agreement under which Gtech provides online bill-paying and lottery services for Caixa Economica Federal, a state-owned bank that runs Brazil's national lottery.
Gtech, based in West Greenwich, R.I., denies any wrongdoing. In a statement, the company said it has encouraged Antonio Carlos Rocha, Gtech's former president in Brazil, and Marcelo Rovai, the local marketing director, to "cooperate fully" with investigators. Brazil is Gtech's largest overseas market.
"Gtech is confident that their actions were appropriate and the company was simply the target of an extortion attempt that was promptly rejected," read the statement, signed by Robert Vincent, a Gtech spokesman.
At 2:35 p.m. EST (1935 GMT), Gtech 's share price in New York was down 0.4% to $59.10 on volume of 285,200 shares.
Brazil is Gtech 's largest overseas market, and has been operating in the South American country for 10 years. The company earlier this month took out newspaper advertisements insisting its dealings in Brazil have complied with the law.
The Gtech executives met early last year with Waldomiro Diniz, a former top aide to presidential Chief of Staff Jose Dirceu, to discuss the renewal of the contract. Diniz is also among those accused by prosecutors, in connection with alleged solicitations of illegal campaign donations.
Last year, Gtech received a significant contract extension to operate Brazil's lottery following the meetings with Diniz, but the company has said it dealt directly with officials from the federal bank to close the deal.
At the meetings last year, Diniz allegedly told the executives he could facilitate - thanks to his position in the government - the renewal of the contract. Local press reports estimate the contract is worth around 650 million reals ($1=BRL2.9) for a two-year period.
Diniz was forced to step down Feb. 13 after a videotape emerged showing his involvement in a scheme to solicit campaign funds, as well as a hefty commission for himself, from a numbers game runner in 2002 before he became a presidential aide. The funds allegedly were destined for gubernatorial campaigns by candidates of the Workers' Party.
The numbers game runner, Carlos Augusto Ramos, was also present in some of the meetings with Gtech executives, the government probe found.
Earlier this month, the Gtech directors told the federal police that Diniz urged them to hire a consultant, who sought millions of dollars in fees, in order to win an extension of the contract.
The executives confirmed they held discussions with the consultant Rogerio Buratti, but refused to hire him and didn't use any intermediaries to negotiate the contract extension with Caixa.
"We did not provide money or any other form of consideration to an individual, company, or political party to influence negotiations with our customer," said Gtech 's Vincent.
Mattoso, the president of Caixa Economica, belongs to the Workers' Party. He is not as closely linked to President Luiz Inacio Lula da Silva as Diniz, however, who until last month worked closely with Lula's right-hand man, Dirceu.
The scandal, dubbed "Waldomirogate" by the local media, was the first in Lula's government since assuming office in January 2003 and has significantly tarnished the president's image.
The approval rating of Lula's government fell to 34.6% from 39.9% in February, according to a poll published Monday that was conducted by the survey firm Sensus and sponsored by the National Transport Confederation.
In another poll, released Friday, approval for Lula's government dropped to 54% from 66%, according to the National Confederation of Industry, which sponsored a poll by the firm Ibope. Lula's personal confidence rating fell to 60% from 69%, according to results from the quarterly poll.
Local markets have also been affected by fallout from the scandal. Market participants increasingly are concerned about a virtual paralysis in the government while officials work to contain its consequences and avoid more damaging accusations.
The recent political noise also has stopped the Lula administration from making progress in Congress as it tries to win approval for key economic reforms.
Brazil Says Former Dirceu Aide May Have Helped Gtech
March 23 (Bloomberg) -- Brazil's government said it has ``strong evidence'' that Waldomiro Diniz, a former aide to Cabinet Chief Jose Dirceu, may have helped a U.S. lottery equipment company extend contracts in the South American country.
The government, in a report of an internal inquiry into corruption allegations, said it has evidence Diniz discussed matters that weren't related to his official functions in meetings with Gtech Holdings Corp., the world's biggest supplier of online lottery systems. The investigation looked at Diniz's activities after he started working for President Luiz Inacio Lula da Silva, who took office Jan. 1, 2003.
``I am surprised with the result of this report,'' said Luiz Guilherme Vieira, Diniz's lawyer, in an interview from his office in Rio de Janeiro. ``We were denied the right to have access and read the documents and the preliminary hearings, which in my view is completely illegal.''
Lula fired Diniz last month, after Epoca magazine published allegations that the aide accepted campaign donations on behalf of Lula's Workers' Party from an illegal gambling business in 2002. A week later Epoca reported that Diniz allegedly used his position in the government to help West Greenwich, Rhode Island- based Gtech.
``The government is saying that irregularities happened,'' David Fleischer, a professor and political analyst at the Federal University of Brasilia, said in a telephone interview. ``These are surely signs that weightier facts will emerge.''
A spokesman for Gtech in Goiania, Brazil, who asked not to be identified, said the company hasn't received the report yet and will only comment after that.
To contact the reporter on this story: Carlos Caminada
To contact the editor of this story: Laura Zelenko at
Globo Article - Translated into English - Posted 3/18/04
Headquarters of Gtech in the USA even investigated Buratti and Cachoeira
Regina Alvarez and Jailton Carvalho
BRASILIA - Attorney Rogerio Buratti, who according to Gtech former directors would have been referred by former presidential aide Waldomiro Diniz to provide consulting services to the company for R$20 million, tried in fact to be hired by Gtech do Brasil and even sent documents both personal and from his companies to the multinational company, that had been negotiating the
After receiving the documents, Gtech headquarters conducted an investigation to learn if there was a legal claim against Buratti. The same investigation was conducted for bicheiro Carlos Ramos, the so-called Carlinhos Cachoeira.
Gtech attorneys gathered information about the firing of Buratti for suspicion of corruption from Ribeirao Preto City Hall in 1994, during the term of present Minister of Finances, Antonio Palocci. (This would have prevented his hiring.) Buratti's hiring was mentioned by Gtech executives, during deposition at the Federal Police, as a condition imposed by Waldomiro for renewing the contract with CEF.
However, Gtech was not as strict with Cachoeira. Documents obtained by GLOBO show that, on April 28, 2003, the negotiations with him were advanced for a partnership in the state lotteries of Rio de Janeiro, Parana, Rio Grande do Sul, Goias and Minas Gerais. The multinational company received information about connections between their future partner and his companies with illegal activities, and about the investigation by the FP about his connections with bicheiros. But the negotiations continued, according to a communiqué dated May 6, in which it is written that the contracts with Carlos Ramos will be signed this afternoon.
Special note from sibkkc.ru:
Study Confirms Fraud in Gtech Contract
The hearing held by the Department of the Public indicates that multinational company, Gtech, used fraudulent methods to win contracts to provide gaming equipment to the lottery games of the Federal Savings Fund. According to the hearing, Racimec was used as a cover company for Gtech to win the contract. Gtech also illegally raised prices, breached contracts, and stole from the Federal Saving Fund.
Brazil's popular `Lula' nudged by U.S.-linked gaming scandal
By Kevin G. Hall
RIO DE JANEIRO, Brazil - An American gaming giant and the U.S. Embassy in Brazil are being sucked into a widening scandal that threatens the credibility of Brazil's leftist president, his reform plans and his once squeaky-clean party.
GTECH Holdings Corp., a Rhode Island-based information technology company and the world's biggest supplier of online lottery systems, is under fire in Brazil for secret meetings its executives had last year with Waldomiro Diniz, one of the president's top congressional relations strategists.
The bribery, which Diniz acknowledged, occurred in 2002, before da Silva took office. But the scandal hurt da Silva because Diniz is a close friend and former roommate of the president's chief of staff and confidant, Jose Dirceu. Were Dirceu to be implicated in the growing scandal, it could cost da Silva the gifted wheeler-dealer he's counting on to win congressional passage of promised political and financial reforms.
The incriminating video was filmed secretly in 2002 when Diniz - who wasn't then a member of da Silva's party - was the lottery chief for the state of Rio de Janeiro. In the video, he meets with Carlos Ramos, aka Charlie Waterfall, a gaming entrepreneur who manages lotteries in two Brazilian states. Diniz shakes down Ramos, who taped the meeting, for contributions to two rival gubernatorial campaigns in Rio de Janeiro state, including da Silva's candidate. Diniz also asks for a cut for himself.
The respected Brazilian magazine Epoca broke the story and followed it with a second piece that alleges Diniz also sold his influence in 2003 after joining da Silva's party and government as an assistant chief of staff for congressional relations. Diniz had an office in Brazil's equivalent of the White House, the Planalto.
GTECH, the U.S.-based lottery supplier, came into the picture on Jan. 6, 2003, less than a week into da Silva's term, Epoca reported. Diniz went to the luxurious Blue Tree Hotel, next to Planalto, to meet with GTECH'S then-president of Brazilian operations, Antonio Carlos Rocha, and its marketing chief, Marcelo Rovai. At the time, GTECH was locked in a dispute over the renewal of a $130 million contract to run lotteries overseen by the federal bank Caixa Economica Federal. GTECH's dispute with the bank had begun when the previous administration sought to change the bidding rules when GTECH's contract expired. The da Silva administration had installed its own appointees at the bank.
Also at the meeting was Ramos - Charlie Waterfall. Diniz told Epoca that Ramos arranged the meeting to discuss ways that he and GTECH could crack the lottery market in Sao Paulo, Brazil's richest state. GTECH describes itself as the world's largest supplier for online lottery gaming, operating in 46 countries. Brazil is its largest overseas operation.
Less than two weeks after the first of five meetings, GTECH was granted a three-month contract extension, according to Epoca. The magazine quotes an unidentified GTECH official as saying that after a subsequent meeting, a company official complained that Diniz sought an "extra" for rewriting GTECH's contract. Two weeks after that meeting, on April 14, 2003, GTECH won a 25-month renewal of its contract to operate the online lottery systems.
In a statement this week, GTECH Brasil denied any wrongdoing, but confirmed that it once had a contractual relationship with Ramos because GTECH had purchased his equipment-supply company Racimec. The contractual relationship ended in 2000, GTECH Brasil said. The company described its subsequent relations with Ramos as typical among competitors who communicated.
GTECH Brasil said Ramos approached the company with business proposals that GTECH analyzed. The proposals "were considered not to be in the best interests of the company and, for that reason, were rejected."
The company didn't disclose what Ramos proposed or when. In a statement earlier this month, the company said it met with Diniz at his invitation to make clear to the new government why it had a contract dispute with the previous government.
At the U.S. Embassy in Brasilia, press secretary Wesley Carrington confirmed that embassy officials from the economic and commercial sections last year pressed GTECH's complaints with the new government's team of lottery managers at Caixa.
"It is normal practice for U.S. missions abroad to assist companies overseas," Carrington told Knight Ridder. "In Brazil, we have about 30 active cases of what we call advocacy that the foreign commercial service handles."
Carrington also confirmed that U.S. Ambassador Donna Hrinak received a letter on Sept. 19, 2002, from Rep. Patrick Kennedy, D-R.I., seeking the embassy's help in renewing GTECH's contract. The letter said the Brazilian government was planning new bidding rules that would work against GTECH. The letter was passed on to officials at Caixa and to Pedro Parente, the chief of staff to then-President Fernando Henrique Cardoso.
Estado De Minas - Brazil
BRASILIA - An audit by the Federal Public Ministry indicates that the multinational Gtech used fraudulent means to take over the contract to furnish electronic and operating equipment for the lotteries of the Caixa Econômica Federal. According to the audit, the firm Racimec was used as a "front" for Gtech to take over the contract. Gtech also improperly raised prices, failed to meet contract standards, and caused damage in the millions to the public coffers.
The MPF audit was concluded yesterday, and will be annexed to the proceeding that is investigating contract irregularities. According to the report, after Racimec won the bid, Gtech took US$ 30 million on loan from Banco de Boston and loaned it to Racimec in December 1995. In January 1996, the director-president of Racimec, Simão Brayer, resigned from his position.
On April 2, the Board of Directors of Racimec was abolished and on the 31st of that month, the principal office of the firm was transferred from Rio to Barueri, in São Paulo. The door was open for Gtech to take over Racimec and therefore inherit the contract with Caixa without having taken part in the bidding process.
Conducted by Representatives of the Attorney General of the Republic in the Federal District, Raquel Branquinho and Gustavo Velloso, the audit revealed 18 illegalities, enough to cancel the contract. The report asks for the damages to be calculated, asks for reimbursement of Caixa, and filing criminal and civil charges against those involved. Among the latter, they mention Gtech and six former Caixa directors: Eduardo Tavares Almeida, Isabel Pereira de Souza, José Maria Nadeli Pinto, Sandra Beatriz Tavares, Sérgio Cutolo dos Santos, and Valter Hiebert.
The irregularities started with formalization of the contract with Caixa, signed in 1997. The name of SB Indústria e Comércio, a member of the consortium, was left out of the contract. Later, Gtech took the place of SB, which the audit concluded was another front company.
For the auditors, this illegality is sufficient to cancel the contract. The specifications prohibited changes in the charters of the winning consortium, which would include the replacement of SB by Gtech.
The Board of Directors of Racimec, which ratified the loan in 1995, bears the signatures of Brayer and of the directors José Richa (former governor of Paraná), Karlos Rischibietter (former Minister of Treasury), Carlos Alberto Vieira, and Antônio Carlos Lino da Rocha.
The auditors found that, Gtech later made a series of requests of Caixa, for the purpose of "legalizing all the tricks used to become the owner of the winning consortiums" of the bid. These requests, notes the report, were rejected in opinions by the Legal Department of Caixa, but ended up being authorized by the institution.
These facts convinced the auditors that the bidding was a stacked deck. It started with the preliminary public hearing in 1994. Even though a number of companies picked up the specifications, only two submitted bids. The only competitor of Racimec, the consortium headed by Companhia Internacional de Tecnologia - IT, was declassified among other things, because it was having problems with the Tax Authorities and had debts with the INSS and FGTS.
Rates - Over the following years, Gtech failed to comply with contractual clauses, raised rates improperly, and committed various irregularities. Since 1997, the law firm of Sigmaringa Seixas (PT-DF) acted to defend Gtech in the actions against Caixa. Yesterday, the vice leader said that since his election, last year, he has been totally removed from the business of the office and was unfamiliar with the Gtech case.
TCU WILL EXAMINE ALL THE CONTRACTS
by JOÃO DOMINGOS
BRASILIA - On Friday, the Union Audit Office (TCU), opened an investigation of all the contracts between the Caixa Econômica Federal with GTech, which handles processing for the federal lottery system. TCU set itself a period of 30 days for the task. The Office itself, the Federal Public Ministry, Caixa, and the administration are already analyzing the relationship between the State Bank and the company. But the audit is looking at specific aspects of the contracts, since the first one was signed back in 1997.
In 2003, after analyzing one of the five actions by the TCU involving relations between Caixa and GTech, the curiosity of the ministers was raised by a technical aspect: no one at the bank had the slightest notion of how the data transmission and lottery recording system, which is totally the responsibility of the company, actually works. Accordingly, Caixa was not in a position to know about any type of irregularity that might have occurred during the recording of a wager.
With the scandal involving the former Casa Civil advisor, Waldomiro Diniz, who had some type of influence on the revoking of the contracts between the Caixa and GTech, TCU decided then that a new audit of the contracts would be carried out starting Friday. Caixa itself, in a document sent to the leadership of the PT in the Senate, admitted that it signed a contract extension for 25 months, even though an internal audit and an investigation were under way to find possible irregular relationships between its officials and GTech.
Recommendations - In an agreement on February 10, 2003, TCU told Caixa to find a way to inform itself about the electronic lottery system. The document was forwarded to the President of the Caixa with recommendations: Caixa should adopt ways and means to absorb and acquire full knowledge of the system used by the company in terms of the 2000 contract; to make efforts to develop a system of confirmation and to standardize a policy of security and information
Salt Lake Tribune
RIO DE JANEIRO -- An American gaming giant and the U.S. Embassy in Brazil are being sucked into a widening scandal that threatens the credibility of Brazil's leftist president, his reform plans and his once squeaky-clean party.
GTECH says not linked to scandal in Brazil
West Greenwich-based GTECH Holdings Corp., the world's biggest supplier of online lottery systems, said yesterday a Brazilian government aide who was fired amid a probe of campaign finance allegations wasn't involved in extending the company's contract in the country.
Waldomiro Diniz met with two executives from the company's Brazilian unit last year to discuss a contract dispute with Caixa Economic Federal, a federal bank that runs Brazil's national lottery, GTECH spokesman Robert Vincent said.
GTECH dealt with officials of the bank, Vincent said, and won the extension through cooperation and by granting concessions to Caixa. Diniz, who oversaw the Rio de Janiero state lottery, had requested a meeting with GTECH about the dispute, but didn't participate in later discussions.
"He had no involvement," Vincent said.
Diniz was fired this month for allegedly soliciting campaign contributions from an illegal gambling ring on behalf of President Luiz Inacio Lula da Silva's Workers' Party in 2002. Vincent said GTECH didn't make any contributions to Lula's Workers' Party because it is corporate policy.
GTECH won a 25-month contract extension with Caixa in April 2003, which it said is expected to generate as much as $140 million in service revenue.
The meeting between GTECH executives and Diniz was reported earlier by the Wall Street Journal.
REPORT CONFIRMS FRAUD IN GTECH CONTRACT
O ESTADO DE S. PAULO NATIONAL
The Government and the PT are giving clear signs that, from now on, they will jointly adopt the so-called common crime version of the Waldomiro Diniz case.
Slowly but following a well-designed strategy, they are beginning to create the impression that there is no political scandal in the events, which affect only the gaming world and in which, by mere happenstance, a former government official whose name they purposely do not dare pronounce, became involved.
Doctor Waldomiro, better known as "Minister" in the Congress, has come to be referred to as "an element," "a subject," and other appellations used to denote distancing and disdain for a common bandit.
It would be a repeat of the attitude assumed toward the assassination of Celso Daniel were it not for the evidence that, in the events of 2001, there was and may still be room for doubt, which will be cleared up in the investigations re-opened by the Public Ministry.
Now, however, it is not possible-except by resorting to absolute shamelessness-to take the political aspect out of the story. This is irrespective of any assignment of blame or any interpretations as regard to who has to leave or remain on Luiz Inácio da Silva's team, a decision that is strictly up to the president.
The nature of the job of the investigating attorneys and of the Federal Police, which is concentrated on the links between bingos and lotteries and organized crime, is one thing. They are not responsible for any considerations of a public order.
But it is a whole other thing to try to ignore the scenario involving the execution and origin of the criminal activity. If a flagrant case of extortion by the principal intermediary between the Palácio do Planalto and the Congress is not a political case, what would constitute a political case?
Let's go back to the time of the filming of the conversation between Waldomiro and Carlos Cachoeira: a state president (Loterj) placed into that job with the backing of a party chief (José Dirceu), the approval of a governor (Anthony Garotinho), and the assent of the successor (Benedita da Silva) in the act of asking for a bribe, a political case anywhere in the world, under any circumstances.
And, even if none of this was in any way related to politics, there would still remain one irrefutable fact: the second most powerful man in the Republic received reports about his right-hand man and took no action.
I leave aside the fact that now the PT and the Government are trying to overlook the political nature of the scandal, considering the episode to be just a second-rate crime committed by a fifth-level consultant. One has to be really at the end of one's tether to consider this version as acceptable.
Just as unacceptable from the public service standpoint is the second thesis according to which the Chief Minister of Waldomiro Diniz is brought down by the "mistake" he made in ignoring the warning signs about his subordinate.
The fact that the intimate martyrdom of José Dirceu is being turned into a justification for burying without verification a serious charge, says a lot about the strong underdeveloped emotionalism that makes us tolerant in relation to the public power, a body where impersonality in the service of the collective good is required. This tendency to celebrate each and every act derived from emotion is not a prerogative of the PT alone, but he has worked it up very well into a clear calling to make himself a victim in adverse situations. And that is not a recent phenomenon.
The three defeats suffered for the Presidency of the Republic, for example, were never attributed to a discrepancy between the behavior of the party and the will of the electorate. They were taken as an unequivocal sign of the "bias" of the electorate, of the pact between the elites and the anger directed against defenseless workers.
Now, the president of the PT, José Genoino, has already picked up this megaphone, denouncing the "Lacerdista operetta of conservative sectors" which, according to him, are interested in weakening the PT in an election year.
This support, concentrated at this time in the attempt to prevent the installation of the Bingo CPI, with an argument that does not merit the experience of the leaders of the operation.
They tell Parliament that the CPI makes no sense because the government has already ordered the bingo games shut down. It is as if the ban in and of itself had a purifying effect on all the correlations past, present, and future of the game with organized crime and the political underworld.
For later on
If it was just up to the wishes of the Minister of Justice, Waldomiro's statement before the Federal Police would not be taking place today. Márcio Thomaz Basto thinks that, as the principal person involved, he should be the last one to talk.
Feb 19, 2004
It looks like Buratti is the "missing link" .....
Cesar Nunes, the PF's chief investigator, has asked a judge to supeona banking, financial and telephone records of Rodrigo Buratti who was named by ACR and Rovai as the "midleman" referred to them by Diniz. From what I can see in another article, they supposedly paid R$20 million to Buratti for a "consulting fee."
A Senator of the majority party in the Federal Senate has called on CEF President, Joge Levy-Mattoso, to explain the goings on relative to the 6 month extension (with 25% discount) and the 25 month extension. Also, further to the claims of Sen. Jose Jorge, he believes enough evidence has been released by former CEF VP Mario Haag and current CEF VP Paulo Bretas to warrant a Senate investigation of the CEF and its staff starting with the current president Jorge Levy-Mattoso and working their way down.
The Feds will interview 3 CEF officials who were not named in the release. They also announced that they are now looking into allegations made by ACR and Rovai that Rodrigo Buratti was involved in the negotiations, the relationship between he and Gtech, and how Diniz fits into the whole mix.
When G-Tech's contract came up for renewal
here in Texas, the
After the Dallas Morning News reported the deletion of this
One can't help but wonder who received contributions during the interim.
Also let's not forget. G-Tech is the one who "really" turned in
Noteworthy - During the April 13, 2000 Commissioners meeting,
The Commissioners didn't care - they had what they needed
This is why the Govenor recently signed HB3459 (June 2003). The
They were afraid the people might object to which game Texas
Folks - boycott the Texas Lottery and our elected officials.
Think the above stories are is just sensationalism?
British tycoon wins case against US lottery boss (the founding
Definitely read "Corruption," "Evolution of Lottery Games"
The Real Kicker
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