Lottery vendor paid $132,000 to Cahill ally
Treasurer steered tens of millions to a ticket maker
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The Massachusetts State Lottery's largest vendor paid in excess of $132,000 in consulting fees to one of state Treasurer Timothy P. Cahill's closest friends and political confidants, at the same time Cahill steered tens of millions of dollars in contracts to the national firm, according to records and officials.
Cahill first decided in August 2004 to renew a $21 million contract with Georgia-based
Cahill has since given Scientific Games three one-year extensions worth over $30 million in additional state payments.
As Scientific Games was successfully vying for its contract renewal and subsequent extensions, the company was paying Thomas F. Kelly $3,000 a month in a consulting arrangement that began in November 2003 and continues today, according to records obtained by the Globe and confirmed by people involved in the payments. Kelly is Cahill's Quincy neighbor, a chief political fund-raiser, and a longtime friend.
While there is nothing overtly illegal about Kelly's role, it again serves as an example on Beacon Hill of political friends appearing on the payrolls of companies who are trying to win lucrative contracts with the state. The Globe has reported on friends of House Speaker Salvatore F. DiMasi working on behalf of a software company and a consortium of ticket brokers as they tried to win contracts and push legislation beneficial to their cause.
Kelly, who is not registered to lobby for Scientific Games, did not return repeated calls to his Boston office. If he tried to influence the outcome of the contract with Cahill or his aides, he would be required to register as a lobbyist with the secretary of state's office and report his payments.
Cahill declined repeated requests for an interview. In response to written questions submitted to his office, Cahill's spokeswoman, Francy Ronayne, said Cahill was not aware of Kelly's financial relationship with Scientific Games.
Ronayne said that Kelly never spoke to Cahill about the two-year renewal of the instant games contract in August 2004 or the three one-year extensions he and the commission approved. In her statement, Ronayne also disputed assertions that Cahill was getting advice at the time to scale back Scientific Games' share of the state lottery business.
The payments to Kelly were initially made through the Boston public relations firm, Regan Communications, which was hired by Scientific Games to coordinate an aggressive media campaign in the company's battle to remain the primary lottery vendor. Part of Cahill's decision in renewing the firm's contract in 2004 was whether to cut back on Scientific Game's 80 percent share of the contract work to service the state's $3.4 billion instant game market.
As Regan conducted his media push, a debate was unfolding inside Cahill's office in the State House, and some of his most senior aides were urging him to scale back on the Scientific Games contract, say people who were aware of the discussions.
Those people, who talked on condition of anonymity, said that Cahill aides - including the Lottery's executive director at the time, Joseph C. Sullivan; First Deputy Treasurer Doug Rubin; and the lottery's director of sales, Paul Sternburg - felt that more competition among key vendors would boost lottery revenues.
The idea was that if more vendors were allowed to create scratch tickets, the games would be more creative and appealing to the public. Those aides also pointed out that Scientific Games was facing criticism in Massachusetts, particularly in Boston Herald reports, over the quality of its scratch tickets and the sluggish performance of several of its games.
The aides recommended splitting the $24 million contract more evenly among several vendors, instead of renewing the contract with Scientific Games, the world's biggest supplier of instant lottery tickets with over $1 billion a year in revenue.
Ronayne said Cahill's decision was based entirely on the recommendation of the lottery's procurement team.
"The only influence on the commission's unanimous decision was the findings of the RFP [request for proposal], which proved Scientific Games to be an industry leader with a proven track record of excellence," she said in a statement e-mailed to the Globe.
Kelly's role during the process is unclear. Invoices that Regan Communications sent to Scientific Games, recently obtained by the Globe, describe Kelly as providing "grass-roots services." An executive with Scientific Games, Thomas Hodgkins, described Kelly in an e-mail yesterday as a "nonlobbyist consultant" hired for his "understanding and insight on the lottery and gaming markets" in Massachusetts.
Regan Communications, owned by Boston public relations executive George Regan, said in a written statement that Kelly was hired at the suggestion of Theodore Aleixo, Scientific Games' veteran State House lobbyist and a former state senator, to provide information on the various proposals on Beacon Hill to expand legal gambling in Massachusetts. The firm said Kelly was specifically barred from lobbying on behalf of the gaming company.
According to the Regan invoices, Regan paid Kelly's company, CanAm Consultants, $3,000 a month, then billed Scientific Games for the payment. Regan also billed Scientific Games $5,000 a month for its own services. Since June 2007, Scientific Games has paid Kelly directly. Hodgkins, who asked that the Globe inquiries be sent to him by e-mail, did not respond to a question as to whether Kelly's monthly retainer remained at $3,000. If it did remain at $3,000 a month, he would have collected $170,000 by now.
Kelly has no apparent gambling expertise. A top deputy to state Treasurer Robert Q. Crane in the 1980's, he is an influential but little-known figure in state political circles, best known for his sometimes controversial work marketing investment firms to public pension funds.
In 2005, Inspector General Gregory W. Sullivan uncovered what he called "a secret arrangement," in which Kelly and a colleague received $2.8 million in hidden fees charged to the Middlesex Country Retirement System for an investment they arranged and that lost $35 million.
In the private sector, Kelly is still heavily dependent on public officials, and he regularly raises money for political candidates. Two people with direct knowledge said Kelly frequently asked Scientific Games' officials during the contract renewal process to hold a fund-raiser for the treasurer.
Three months after the Lottery Commission gave the firm the work, Scientific Games' chief executive, A. Lorne Weil, hosted a fund-raiser in Manhattan at the Water Club, a pricey restaurant on the East River. Campaign reports show that Weil and his associates raised nearly $20,000 for Cahill's campaign committee at the Oct. 26, 2004 event.
Hodgkins did not respond to questions about his firm's fund-raising activities for Cahill. Ronayne, Cahill's spokeswoman, said the treasurer did not know of any role Kelly played in setting up the fund-raising event.
Kelly has been a Cahill insider since the treasurer was elected treasurer of Norfolk County in 1996. Kelly is a one of several top fund-raisers for the treasurer, say those familiar with Cahill's political operations.
