AUGUSTA — A state panel met for the first time Monday to hear an appeal by a Gardiner-based company that lost a bid to continue operating parts of the state’s lottery.

The six-year contract to provide instant lottery tickets and online lottery services is worth approximately $35 million.

Scientific Games hopes to prove the Bureau of Alcoholic Beverages & Lottery Operations did not follow state law or its own request for proposals when it awarded the contract to Intralot, a company based in Athens, Greece. The contract is for six years with the possibility of four, four-year extensions based on performance.

Intralot plans to move approximately 20 jobs to its data operations center in Vermont unless Scientific Games wins its appeal.

Rules on file with the state Division of Purchases Rules says a three-member appeal panel can invalidate the contract award if Scientific Games can prove something illegal or irregular occurred in the bidding process, or that the award was arbitrary or capricious.

Charles Dingman of Preti Flaherty, the attorney representing Scientific Games in the appeal, said there were flaws in the scoring mechanism used in awarding the contract, and in Intralot’s proposal.

He said the lottery is a mechanism for a steady stream of revenue to fund programs and that it is the bureau’s job to get the “best value” for Maine.

“I believe, in this instance, the process was not fair and did not end up with the best value for the state,” Dingman said.

Dingman said the state would have benefited more if the facility and staff were based in Maine because that would generate more economic activity for the state. Bidders location in Maine was one of the factors included in the scoring mechanism used to award the contract.

Dingman asked that the panel declare Intralot’s contract invalid and begin a new round of bidding.

An Ohio-based attorney for Intralot, Jeffrey Lipps, said the decision to award Intralot the contract came after a lengthy deliberation process by qualified professionals.

“The process was deliberated impartially and, in the end, Intralot won that race fair and square,” Lipps said.

He said there were no scoring irregularities and that Intralot is committed to Maine staffing.

Lipps said employment levels will be consistent with what Scientific Games has in place now in Kennebec County, about 20 jobs. He also claimed Intralot’s bid will save Maine taxpayers $300,000 a year.

Scientific Games attorneys turned to Intralot’s dealings in other states Monday as they sought to cast doubt on the company’s ability to run part of Maine’s lottery.

They tried to introduced material alleging Intralot had legal and management problems in other countries where it did business.

One such article, published in the State Journal-Register in Springfield, Ill., reported that a background check by the Illinois Department of Revenue turned up prior criminal indictments against a top Intralot official, as well as the company’s loss of operating licenses in South Africa and Bulgaria.

Published accounts indicate the official, Sokratis Kokkalis, was cleared in those criminal investigations, but Illinois refused to do business with the company. After Intralot was eliminated from the bidding, the state chose Northstar Lottery Group, a consortium that includes Scientific Games.

Scientific Games’ attorneys also mentioned a report from an investigative firm hired in the Illinois case, which contained “numerous criminal indictments brought against (Intralot) for alleged money-laundering, fraud, embezzlement, bribery, misleading investors and espionage.”

“Intralot would be hard pressed to establish that it would have passed Illinois’ probity standards for serving as private manager,” the report said.

Lipps dismissed the information as hearsay.

The public was asked to leave the hearing when the questioning was directed to Scientific Games about confidential material.

The hearing will continue today.

Brenda Devoe, secretary associate for the Division of Purchases, said normally an appeal hearing is scheduled for only one day, but because of some “preconferences” before the hearing, she set it up for two days.

The panel must notify the parties of its decision within 10 days, she said. The notification will include a decision and explanation for the reason of decisions and explanation of the petitioner’s rights.

“It’s going to invalidate or validate (the contract with Intralot),” she said.

The bureau issued an RFP for the lottery gaming system Jan. 11. Scientific Games, GTECH Corporation and Intralot submitted bids.

Mechele Cooper — 623-3811, ext. 408

mcooper@centralmaine.com

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