Cahill associate is under scrutiny
Legality of pact with gaming firm is questioned
 Massachusetts State Treasurer Timothy Cahill during an afternoon meeting in October 2008. (Globe Staff/Jonathan Wiggs) |
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Thomas F. Kelly, a political confidant and close friend of State Treasurer Timothy P. Cahill, stood to make as much as $2.4 million in fees from a deal he tried to broker for a gaming company with the state lottery, which is under Cahill's control, according to a copy of his contract.
The payment would have been made as a contingency fee to Kelly from Bingo Innovative Software LLC of Johnston, R.I., according to the contract. Such a contingency fee would be illegal under state law if regulators determined that Kelly lobbied Cahill and other state officials on Bingo Innovative's behalf.
As it was, the bid by Bingo Innovative to provide a cable TV bingo game was rejected by the lottery. And Kelly insists he was operating within the law by providing "business development services" in exchange for the potentially huge payoff - not lobbying.
But the nature of Kelly's contract and his contacts with Cahill and state lottery officials are another example of a friend of a powerful Massachusetts elected official seeking to trade on his political connections.
House Speaker Salvatore F. DiMasi is facing questions after his close friend, State House lobbyist Richard McDonough, got $1.1 million in hidden fees from one of his clients, a state computer contractor. Another close friend and accountant, Richard Vitale, has been indicted for failing to register as a lobbyist when he received $60,000 from a trade group to push legislation at the State House.
Secretary of State William F. Galvin, who is investigating the legality of Kelly's contract with Bingo Innovative, is questioning whether Kelly was acting as a lobbyist without registering with his office, as required by state law. He declined to comment specifically on Kelly's contract be cause of the inquiry, but he described the state law that prohibits so-called contingency arrangements like Kelly's as an "anticorruption statute."
"When there is a tie-in to a particularly government decision to the payment of a success-fee, you come perilously close to a kick-back or corruption act," Galvin said. "That's why Massachusetts law has prohibited these types of payment arrangements for more than 100 years."
Kelly signed a contract with Bingo Innovative in June 2007 that guaranteed him 4 percent of its gross revenues from the sale of the online televised bingo game if the Massachusetts State Lottery used its product. The contract, a copy of which has been given to the Globe, said he was to act as a "business development agent" to "create business opportunities" with the lottery.
During several years of discussion over the project, Kelly put the firm in touch with Cahill and lottery officials and attended several meetings with the treasurer and others. The commission sought bids in August 2007, but rejected the proposals submitted by the Rhode Island firm and another company,
In an interview, Kelly insisted that he was only providing "business development services" for the company and was not trying to influence Cahill or the lottery to chose the firm's bingo game. He firmly rejected assertions by Bingo Innovative's executives that he would have won a cut of the potential gross revenues because of their expectations he would use his close ties to Cahill to land the firm the contract.
"There is nothing illegal about that," Kelly said of his activities. "I wasn't a lobbyist for them and I did no lobbying."
Kelly, who lives in Cahill's Quincy neighborhood and has been a longtime political adviser, fund-raiser, and close personal friend, said his only contact was to ask for Cahill and his top aides for meetings, and to accompany the firm's representatives to those meetings.
"The conversations [with treasury officials] were, 'Can you get me in,' and what they thought of their deal," Kelly explained. "There was no favors asked or favors given in any of this process. . . . I was not trying to influence anything."
Grace Lee, Cahill's first deputy treasurer, said state lottery officials conduct a rigorous procurement process. She rejected any notion that the contract was subject to outside influences. She said Kelly's role had come under scrutiny because Bingo Innovative executives were angry at not getting the work. The company has filed a $20 million lawsuit against Cahill and the lottery's executive director, Mark Cavanagh, alleging that its plans for a bingo TV game were rejected unfairly.
"Any representation that the process was influenced by anything other than the merits of their submissions is patently false and should be considered an unscrupulous attempt to bolster a frivolous lawsuit," said Lee.
Lee also said the Lottery was mistaken to indicate to Bingo Innovative that it would accept a deal based on the percentage of sales instead of a flat fee. She said the Lottery has never contracted with a gaming firm based on sales, claiming such deals are questionable under state law.
The firm had offered the deal in its bid, and the commission said shortly after the Aug. 2007 bid opening, that it would consider it as an alterative to the $30 million flat fee the company also quoted. The flat fee would have yielded Kelly about $1.2 million.
Bingo Innovative's own projection for its revenues from the lottery's purchase of its copyrighted game was close to $60 million, guaranteeing Kelly a huge windfall, far more than any normal lobbying fee.
Bingo Innovative had projected $1.2 billion in gross revenues during the first three years of its game, which would be played on a special
Kelly said Bingo Innovative's revenue figures were greatly overstated.
"Those numbers are bogus," he said.
Bingo Innovative canceled its contract with Kelly in October after the Globe reported that Kelly was also working for Scientific Games International, which is based in Georgia.
By that time, lottery officials had judged that the Bingo Innovative proposal was superior, but found both too costly.
Bingo Innovative signed an agreement with the lottery in last April to implement a two-month pilot program to evaluate the firm's online televised bingo operation. But the pilot project never got off the ground. Negotiations began to break down in the fall.
By late December, Bingo Innovative had filed its $20 million federal law suit in which it said Cahill and Cavanagh, a Kelly protege, favored Scientific Games because Scientific executives had contributed to Cahill's campaign coffers.
Kelly had been on Scientific Games payroll secretly since 2004, getting between $3,000 and $4,000 a month, when the company won $21 million worth of contract work with the lottery.
Under pressure from Galvin, both Kelly and Scientific Games registered with his lobbying division in September.
Kelly's work for Scientific Games ended last week when the firm learned of his work for Bingo Innovative.
