Editors Note
I think every one of you should watch the hearing where Shelton Charles, an ex-lottery employee and the Texas Lottery executive staff told the legislature two different things about the recovery site and employee morale at the Texas Lottery. Here's your chance to meet those who run our lottery.

Clearly, ONE side is NOT telling the truth and I personally believe it's as clear as night and day. Please take the time to watch this hearing then I'll let you tell me who we should believe - just send me an email and I will post your comments for all to read. You will see two instances where someone has committed perjury. And those parties need to worry ... Also, below are the news stories that have appeared in today's and last week's papers.

Watch the hearing (Nov 14, 2005 - Licensing and Administration)

E-Mail Me Your Comments

Watch KVUE newscast

My Nov 17, 2005 Interview
Texas Public Radio- Texas Matters. Listen to
Nov 18, 2005 (#273) story. Very interesting! Click here.

Legislature Committee Checking Out Lottery Commission
KXAN - November 15, 2005

There are new allegations Monday night that the Texas Lottery is wasting lottery proceeds. One worker says it's already cost him his job, and it's so serious state lawmakers are investigating. The building on Sixth Street is the heart of the Texas Lottery. But say if it blew up or burned down, there's another building in town that would back it all up and keep you playing. Problem is some say it's a boondoggle.

The games would go on if disaster struck the Texas Lottery, you could still buy tickets and collect your jackpots. But Shelton Charles says he was fired by the lottery commission this month for blowing the whistle on the lottery's million dollar disaster recovery facility.

"If we spend $1.5 million, it should work. Somebody should be able to tell you the date that that was turned on. They can't. If they can't, it's because it doesn't work," Charles said.

What it's supposed to do is back up critical business functions and monitor lottery operations by a private contractor. Monday, lottery officials told lawmakers the off-site facility works fine, but admitted they don't know when it was turned on.

"I don't know that we'll have any document that has a date on it that says the site is now operational," Acting Director of the Texas Lottery Commission Gary Grief said.

"It could be just sort of a big problem that the guy who's running the lottery right now can't find out when this thing was operational. That troubles me that you can't find out when something as important as this operational sit started working," Rep. Corbin Van Arsdale, R-Tomball, said.

More troubling to some lawmakers, that allegations of fraud and mismanagement inside the agency continue creating an environment of fear and intimidation.

"This committee has had a whole bunch of concerns. Some that we have been able to validate, and nothing has happened at the lottery," Rep. Kino Flores, D-Chairman of the House Licensing and Administrative Procedures Committee, said.

Charles says he feared for his job by coming forward.

"When I spoke out, I clearly accepted that my life was going to go down the tubes financially," Charles said.

Lottery officials say he lost his job for insubordination, not speaking out.

"He refused to cooperate on items that were under his direct control," Grief said.

So what's next? The oversight committee plans to tour the secret back-up facility to assess it for themselves, then go from there.

Charles says he plans to sue the lottery for wrongful termination.

Lottery officials say the games are running just fine.

Ex-worker says bunker isn't ready

By JOHN MORITZ
STAR-TELEGRAM AUSTIN BUREAU

AUSTIN - A worker fired this month by the Texas Lottery Commission told a legislative panel Monday that the agency's top managers ignored his warnings that the facility to keep operation afloat in the event of a catastrophe is not equipped to handle the task.

Two of the lottery's top officials, commission Chairman C. Thomas Clowe and Acting Director Gary Grief, disputed the assertion and said the fortified facility in rural east Austin is fully operational. Grief also invited the members of the House Committee on Licensing and Administrative Procedures to tour the site to settle the dispute.

But several members of the panel appeared chafed when neither Grief nor any other lottery official could recall when the $1.3 million facility, dubbed "the bunker," was first operational. The best guess was late 1998 or early 1999.

"I think it would be disingenuous of me to try to tell you that on X date everything was done," Grief said. "I don't think I could do that and feel good about it."

But Shelton Charles, who was a lottery commission computer network analyst before he was fired Nov. 4, said the bunker's computers and data-collection equipment are insufficient to adequately communicate with the lottery's contractors and retailers in an emergency. He compared operations at the bunker and those at lottery headquarters to a garden hose and a hose on a firetruck.

"Which one would you want to battle a house fire?" Charles asked.

State Rep. Kino Flores, a Mission Democrat who is chairman of the panel, said he has become increasingly disturbed by operations at the lottery.

The agency, which runs a variety of games of chance and generates about $1 billion for the state treasury, has been under fire for inflating jackpot estimates, hiring a Las Vegas law firm to write proposed legislation and paying more than $300,000 to a Nevada supplier for promotional items that have never been delivered.

When Grief was asked to set the odds that the state would ever recover the money from the supplier, he said, "Slim to none."

Grief, who fired Charles for insubordination because he insisted that a supervisor's questions to him be put in writing, said steps are being taken to fix shortcomings. He said that when the panel tours the bunker this month, members will be satisfied that it can function in a crisis.

Lawmakers hear allegations about lottery disaster recovery site

11/14/2005
By LIZ AUSTIN / Associated Press

The Texas Lottery Commission would not be able to resume critical functions in a timely manner if its headquarters were destroyed because its disaster recovery site lacks important equipment, a former lottery employee told lawmakers Monday.

Shelton Charles, a senior lottery systems analyst who was fired Nov. 4, told the House Licensing and Administrative Procedures Committee that he warned his bosses that backing up data was useless if the agency didn't have the equipment to access it. He said his managers told him they didn't have enough money to buy the hardware.

Charles' testimony came during a nearly four-hour committee hearing on management practices at the $3.5 billion a year agency, the second such hearing in five months. The committee oversees operations at the nation's third-largest lottery.

Top lottery officials disputed the claims, saying the site has been fully operational since late 1998 or early 1999.

The hearing was prompted by a scathing e-mail Charles sent to state Rep. Ismael "Kino" Flores, the committee's chairman, saying agency officials misled the Legislature about the disaster recovery site, tried to block public information requests that might have revealed wrongdoing and bullied employees into silence.

Most state agencies back up their critical data at a central disaster recovery site, but the lottery has spent about $1.3 million creating and maintaining its own site in an Austin warehouse.

Lottery Commission Chairman C. Thomas Clowe and Gary Grief, the agency's acting executive director, told the committee the site has been fully functional for years. But none of the half dozen lottery employees who testified knew the exact date it became operational.

Grief said creating the disaster recovery site was a massive undertaking done over a span of many months with different systems being brought online at different times.

"I think it would be disingenuous of me to try to tell you that on X date everything was done," he said. "I don't think I could do that and feel good about it."

He insisted, however, that lottery employees could quickly resume their duties at the disaster recovery site if necessary, and he invited the committee members to tour the facility.

Lawmakers plan to tour the facility after Thanksgiving.

Grief also pointed out that GTECH Corp., the contractor that runs the lottery's gaming operation, backs up its information in four places. He said that means a problem at lottery headquarters wouldn't affect wagering and prize claiming.

But Charles said there isn't enough bandwidth at the emergency facility for lottery employees to electronically communicate with either GTECH or retailers.

"If you get an analyst, a third party to review that, you're going to find out that I'm right on the money - no ifs, no ands, no buts," Charles said.

Charles was fired two days after he sent the e-mail to Flores and hours after the e-mail became public. He was dismissed after telling his bosses he wouldn't answer questions about his allegations unless they were put in writing.

Grief said that demand was "insubordinate and dysfunctional" and wouldn't be tolerated in any state agency or private office. He said lottery managers would never get anything done if they had to write down all the questions they want to ask their employees.

But Flores said he has noticed over the past several months that employees who have spoken up about problems have been quickly dismissed. The South Texas Democrat also criticized the agency's termination practices at a similar hearing this summer.

"We're just spinning our wheels," Flores said. "Nothing is happening. None of these problems are getting fixed."

Charles said he is planning to sue the agency and has filed a discrimination complaint with the Equal Employment Opportunity Commission, citing unequal salary, treatment and advancement opportunities at the lottery.

Proposal has lottery officials wary
Possible sale of firm that runs the games prompts OK to hire outside legal consultant

Houston Chronicle - By R.G. RATCLIFFE
November 15, 2005

AUSTIN - Texas Lottery officials told a state House committee Monday they are hiring an outside lawyer to monitor the proposed $4 billion sale of Gtech Corp. for fear the deal could disrupt the state's Lotto games.

Testimony about the Gtech sale occurred during a meeting the House Licensing & Administrative Procedures Committee called to investigate claims by fired lottery technologies official Shelton Charles that a disaster recovery site is not fully operational.

Lottery officials disputed Charles and said the lottery games are secure because Gtech separately runs three computer backup systems.

But Gtech's role as the state's lottery operator is in question because an international group of investors has offered to purchase all of Gtech's stock in a complex deal, Lottery General Counsel Kim Kiplin told the committee.

Kiplin said lottery officials are afraid one of the purchasers might be ineligible to run the lottery in Texas, forcing the state to cancel its contract with the Lotto operator. Individuals convicted of felonies and certain misdemeanors are ineligible to sell lottery tickets, as are companies who employ such persons in high executive positions.

Choosing Gtech
Lottery acting Executive Director Gary Grief said no other company has the experience to run the Texas Lottery as efficiently as Gtech. Texas is the company's second-largest customer. Other companies have run smaller states' operations.

"We'd be scared to death. Running Oklahoma is a lot different than running Texas," Grief said. "We know Gtech is an industry leader in being a lottery operator. They're the 500-pound gorilla."

Committee Chairman Kino Flores, D-Palmview, said the Gtech sale could put the state "into a bind" over whether to keep the company as the lottery operator.

Rhode Island-based Gtech runs the Texas numbers games such as Lotto, Mega Millions and Pick 3. Another company runs the scratch-off games.

Gtech has worked for the state since the lottery games started in 1992. When the Texas Lottery Commission attempted to rebid Gtech's contract in 1997, the company sued and implied it would shut the lottery down if it lost the $130 million-a-year contract. The lottery dropped the rebidding process.

Kiplin said very little is known about the potential buyers, except that some are from foreign countries. She said Texas Attorney General Greg Abbott has given the lottery permission to hire an outside lawyer with experience in mergers and acquisitions to review the sale.

She said Texas also is negotiating with other states that use Gtech to share the legal costs of monitoring the sale.

Gtech spokesman Robert Vincent declined to discuss the proposed sale other than to say the company's board of directors is considering it. Vincent said maintaining the Texas contract would be an important consideration because it is so important to the company's profitability.

The committee heard three hours of testimony in connection with Charles' Nov. 4 firing after he sent committee members an e-mail saying the state's lottery disaster recovery site was not operational.

Backing up data
Grief and other lottery officials testified that two computer systems "mirror" each other at the downtown Austin headquarters and at a warehouse in north Austin. He said if the main computer fails or is destroyed by fire, the warehouse computer would have the data on it to restore lottery operations.

But Charles told the committee that there are no servers at the backup site designed to tap into the stored information. He also said the computer lines at the disaster site lack the bandwidth to communicate with Gtech's computers.

Charles said employees are afraid to take problems to management because they might be fired in what he described as a culture of fear. Grief denied such a culture existed and said he fired Charles for insubordination.

The committee decided to obtain a computer expert to tour the disaster recovery site to see if there are real problems or just a difference of opinion over what a backup site should include.

Lottery officials to testify
Lawmaker calls a hearing to address analyst's claims of mismanagement
By LISA FALKENBERG
Copyright 2005 Houston Chronicle Austin Bureau

AUSTIN - Texas Lottery officials were summoned Tuesday to testify before a legislative committee for the second time in five months, this time over allegations of mismanagement brought by a lottery systems analyst who was fired the same day the Houston Chronicle reported his concerns.

Shelton Charles, who oversaw much of the lottery's technical operations before his firing Friday, planned to testify Monday at a hearing of the House Licensing and Regulation Committee, which oversees the lottery.

The committee's chairman, Rep. Kino Flores, called the hearing after receiving e-mail from Charles last week accusing top lottery management of misleading lawmakers about an emergency control center that he said doesn't work, blocking open-records requests and bullying employees into keeping quiet about problems at the $3.5 billion agency.

"If this is the case, we'll get to find out and hopefully, we can try to come up with some remedies to fix the problems," said Flores, D-Palmview.

Flores said he felt he owed it to the state to air the concerns in public and to give lottery officials a chance to defend themselves against the claims.

The lottery's spokesman, Bobby Heith, has declined to comment on Charles' claims, saying the agency doesn't discuss personnel issues. But he said Tuesday that acting lottery Director Gary Grief and other officials who were summoned to the Capitol welcome the opportunity to tell their side.

Charles wasn't sure how much a hearing would accomplish.

"A hearing is a great thing, but unless they have some ability to do something, what good is a hearing?" he said. "You need a major investigation to clean up the Texas lottery."

Lottery officials were last called to the Capitol in June, after lottery officials admitted inflating several Texas Lotto jackpot estimates advertised on billboards across the state. The lottery's executive director, Reagan Greer, resigned two weeks after he acknowledged approving the estimates.

The incident opened the commission to media scrutiny in which former lottery employees aired concerns about a culture of fear and intimidation at the agency and questionable firing practices of apparently well-performing employees.

Charles' accusations echo what other former and current employees have told the Chronicle in the past several months.

Charles claimed that the lottery's disaster-recovery or business-resumption site — a steel-reinforced concrete bunker estimated to have cost more than $1.3 million — "has never been operational."

Texas law requires state agencies to maintain disaster-recovery sites that would keep state agencies operational in the event of an emergency.

lisa.falkenberg@chron.com