R.I. firm was subject of probe when Miers ran Texas lottery

WASHINGTON -- When George W. Bush became governor of Texas in 1995, he chose Harriet E. Miers to sit on the problem-plagued lottery commission, which was then wrestling with accusations of financial improprieties involving the Rhode Island company that ran the sweepstakes.

After Miers became chairwoman of the panel, it hired a new director, Lawrence Littwin, to investigate the company's practices and to solicit bids from others who were seeking to run the lucrative gaming operations.

Littwin launched a sweeping investigation, but after only five months on the job he was dismissed by the three-member commission. The panel never publicly explained its decision, other than to issue a statement saying it had ''lost confidence" in him. Then the new director halted the inquiry and renewed the company's $130 million annual contract.

Now, as Miers prepares for Senate hearings on her nomination for the Supreme Court, Bush and other supporters have praised her work as head of the Texas Lottery Commission, saying she had helped to clean up the operation.

But Littwin, the man who was hired to clean things up, said in a lawsuit in 1998 that the commission had dismissed him after being heavily lobbied by the company running the lottery, and its political allies, to halt his investigation.

''Ultimately, and without apparent justification, Littwin was instructed by commissioners Harriet Miers, John Hill, and Anthony Sadberry of the Texas Lottery Commission to stop his investigation," said the suit against the company that has always run the lottery, GTECH Holdings Corp. of West Greenwich, R.I.

The suit was settled; GTECH paid Littwin $300,000.

Littwin declined to elaborate on his allegations, saying he was bound by a confidentiality agreement in his settlement with GTECH. But, he added, ''If I get a subpoena from the Senate Judiciary Committee, I will have to testify to what I know."

Miers has not granted any news interviews since her nomination Monday, following the tradition of Supreme Court nominees declining to offer statements until their confirmation hearings.

But Sadberry, who was one of the two other commissioners serving with Miers, said that while he did not remember all the circumstances surrounding Littwin's removal, he recalled that Littwin had been gathering campaign records on state officials as part of his investigation of GTECH's efforts to curry favor with Texas politicians.

''The issue was whether he was using state time to pull contribution records on state officials," Sadberry said, adding that such an inquiry was inappropriate for someone in Littwin's position.

And Sadberry acknowledged, ''It may well be that whatever the commissioners did was seen or characterized, properly or improperly, as halting his investigation."

He declined to discuss Miers's role in the removal of Littwin, but praised her oversight of the lottery. ''I have very high regard for her as a professional, as a colleague, as a person," he said. ''I think the world of her and have every expectation she will serve with honor and distinction."

A state audit conducted in August 1997, two months after Littwin took over as lottery director, appeared to corroborate Littwin's assertion.

It found that GTECH was not properly performing its contract and that the company was charging huge fees for work that it could not document.

GTECH ''did not live up to its obligations under the contract and its own ethics policies to serve the public trust, avoid embarrassment to the lottery, and perform all business activities in a manner that is beyond reproach," the audit said.

The investigators said they had encountered ''a lack of timely cooperation by the lottery operator and certain individuals with first-hand knowledge of the events in question."

After Littwin was dismissed, the Democratic-controlled Texas House of Representatives passed a resolution accusing the commission of quelling the investigation of GTECH.

''The investigation was never completed," the resolution stated. ''The Texas Lottery Commission did not take any action."

It continued: ''Mr. Littwin's termination did not come as a result of poor job performance, but rather, his attempts to uphold the laws of the state and eradicate inappropriate activities by the Texas Lottery Commission and GTECH."

Littwin was replaced as executive director by Linda Cloud, a longtime commission official, who quietly rejected all the bids submitted by other companies to take over the lucrative lottery operations. She then renewed GTECH's contract. Cloud, who no longer heads the lottery, did not respond to several messages left at her home in Colorado.

Robert Vincent, GTECH's vice president for communications, said yesterday that the company has revamped its operations.

''Five years ago the company went through a major reorganization and changed its management team," he said. ''Most of the leaders involved in Texas are no longer with the company."

Vincent declined to comment on the allegation that the company pressured the commission to remove Littwin.

GTECH continues to run the Texas lottery.

Walter V. Robinson of the Globe staff contributed to this report.