Casket office wastes millions

by Chris Griffith
Published 7 August 1994 in The Sunday Mail


my face


Queensland's Golden Casket Art Union Office has lost over $3 million of public funds on a failed research project and legally questionable promotional activities.

Documents obtained by The Sunday Mail indicate a research project to develop alternative Casket and lotto newsagency terminals faltered amid concerns of inadequate accountability, the wastage of public funds, and the blurring of interests held by some public servants and contractors.

Further, Crown Law advice obtained by Auditor-General Barry Rollason says Golden Casket "was not empowered to spend monies" on one of these projects, nor was it empowered to promote the sale of Casket overseas through its now- inactive entrepreneurial subsidiary, GC Systems Ltd.

This means the Crown Law Office regards entreprennual activities of Golden Casket and its subsidiary GC Systems in 1991-93 which cost $1.54 million as technical unlawful.

GC Systems, which was set-up in 1991, sought unsuccessfully for a major slice of the lucrative $1,000,000,000 European lottery market that existed after the fall of Communism in Eastern European.

Treasurer Keith De Lacy yesterday confirmed he would amend Queensland's Lotteries Act to satisfy criticisms by Auditor-General Barry Rollason, and that the amendments would clarify Golden Casket's role.

Mr De Lacy said Golden Casket had originally obtained the opposite legal advice from solicitors Clarke and Kann which had been corroborated by barrister Richard Chesterman, QC.

The failed project involved development of a new Scratchit terminal for use in Queensland agencies capable not only of initialising and validating Scratchit tickets, but also of providing full banking and bill payment services at Casket agencies.

It was proposed patrons could withdraw cash at a local Casket agency through EFTPOS, participate in Scratchit and other on-line gaming, and pay their bills - all at the same time. The hardware contract was awarded to a Nerang-based company, Trac Systems Australia Pty Ltd, and several software contracts were awarded to other companies.

However the machine, called the E7000 "MAID" terminal, was not developed beyond prototype stage because of contractual difficulties. The plan was abandoned after a development outlay of $2.72 million.

Mr De Lacy said a legal case involving the hardware designer of the "MAID" terminal was settled out of Court last year, that Golden Casket had retained the intellectual rights to the project, and that it would pursue development of a revenue collection system on lotto terminals.

Publication of its failure follows the recent disputed success of another Golden Casket project, the "J1000", a computer-based device for processing Gold Lotto and other gaming at its low-volume agencies.

Without going to tender, in February 1990 the State Government awarded a $662,000 contract for 100 terminals to Janglass Pty Ltd , a Woodridge-based company registered only one month beforehand.

One of Janglass's directors and shareholders, Mr Paul Egan, had previously worked as a consultant to Golden Casket on initial project development. He was later employed at Golden Casket .

National Party MP Alan Grice said in State Parliament that the J1000 project had been a failure, and tabled memos from Golden Casket's former director Kevin Leyshon admitting that Casket agents were having to key in manually all 72 numbers from a crossed coupon.

By March 1993 all units had been scrapped despite the addition of swipe-readers at $900 per unit.

Last week, Mr Rod Arthur, the Acting Director of Ithaca College of TAFE, confirmed that Golden Casket had donated 40 units to his College for pulling apart by Computer Science students.

In Parliament Mr De Lacy said the decision to award the contract without tender had been cleared by the Auditor-General's office. Mr Rollason yesterday said there was no legal requirement for statutory authorities to conduct tenders until July 1990.

Mr De Lacy yesterday denied the J1000 project had failed. He said the 80 J1000's installed in Casket agencies were a temporary measure due to a shortage of the standard E3000 casket terminal in 1990.

He said the units had boosted the turnover of small-volume agents by up to $15million, and the units were withdrawn despite the protests of some agents.

GC Systems Ltd, the now defunct subsidiary of Golden Casket was set up in May 1991 as its entrepreneurial arm, charged with promoting the sale of Queensland lottery technology overseas.

In its two years of operation, it sought to corner the lucrative Eastern European lottery market, a one-off opportunity after the collapse of Communism.

A 1991 document prepared under its former name, Golden Casket Systems Pty Ltd, said an enorrmous new market for Western lotto technology awaited anyone with the expertise, equipment, and know-how.

"In the case of Hungary, a unique situation exists where some 22 million coupons are currently handled manually per weekly draw. We are in a unique position to provide a whole range of solutions to their problems," it said.

"Thorough research of the European Lotto/Toto system market for the period 1991-95 shows A$1,000,000,000 potential sales in terminals and central systems without networks, facilities, management etc.

"The major portion of this business is ours if we are only capable of handling it correctly.

GC Systems was to especially target Hungary and the Ukrain, a huge gambling market with a population of around 53 million. At one stage Ukrainian officials flew to Brisbane and inspected our gaming facilities, including a prototype of the MAID terminal.

Industry sources say Ukrain's business could have brought weekly earning to Queensland of $2-$3 million per week.

The document also discussed the selling of Queensland lotto systems to Ireland, the UK, the Canary Islands, and Spain. It said Golden Casket was the only system designed in house by people experienced at running Lotto, and it was highly regarded in Europe.

However the company's major overseas success was to come second in the Irish lottery tender. GC Systems is now inactive after sustaining a loss of $625,000 in 1992-1993. It cost $652,000 to established.

Enterprise Council executive director Geoff Moss yesterday said he had first-hand knowledge of "the company's wastage and extravegant use of public money".

"We were asked by GC Systems to find private investors willing to finance the technology's development. The company did not attract private investment as the government withdrew its request for private investment funding", he said.

Mr Moss said he was "dumbfounded" when one GC Systems representative admitted to him that he had flown to Europe for nothing other than one 15 minute meeting.

"On another occasion a representative went through two sets of batteries while talking to a Hungarian contact from his mobile phone in the middle of dinner at a Brisbane restaurant", he said. "We were alarmed at the manner some employees did their business."

Mr Moss said he was also amazed at the extravegance of some overseas travel by company representatives and said an investigation should take place into whether the individuals or the government were credited with the frequent flyer points.

Auditor-General Barry Rollason yesterday said frequent flyer points accrued by public officials in their public capacities were for Crown use only.

However company sources said such incidents were isolated, and that its real problem lay in its relationship with the conventional government bureaucracy.

In two years of operation, the company spent $118,000 on legal fees, $168,000 in travel and accomodation, and $428,000 on "miscellaneous expenses". In 1992-93 it spent $518,000 on consultancies, including $44,000 to a company called 2i Corporation.

2i Corporation has as a principal Mr Ian Ovens, who was also a director and founder shareholder of GC Systems, which employed his consultancy.

The other founder and non-beneficial shareholders of GC Systems are Golden Casket, the company Jeeps Pty Ltd, and Office employees Mr Mervyn German and Mr Mark Harrison. Jeeps Pty Ltd is a company owned by solicitors Clarke and Kann who at that stage provided GC Systems' legal advice.

Mr Grice yesterday said he would raise in Parliament another matter involving the Casket Office, namely the fate of 1000 internal encryption boards, a device designed to provide a tamper-proof transfer of data by a Telecom line between agents and the Golden Casket computer.

by Chris Griffith