City Council member Nadine P. Winter urged yesterday that the D.C. Lottery Board delay awarding new contracts to run the city's instant lottery and other games, citing a letter indicating that the current operator has experienced financial difficulties and management problems.
The letter, obtained by The Washington Post, was written by the chairman of the firm that has been involved in a joint venture with Games Production Inc. (GPI), the operator of the lottery. It stated that GPI recently suffered a $450,000 cash-flow shortage but refused to disclose the source of a loan to cover the shortfall.
John R. Koza, chairman of Scientific Games Inc., strongly suggested in the letter that Games Production had acted in bad faith by bringing in an undisclosed financial backer who might exert influence over the management of the lottery operation.
"It appears that the GPI with which we originally contracted is no longer the same GPI," Koza stated in the letter to William N. Suter III, president of Games Production. " . . . We do not consider it good business practice to do business with a company which has an undisclosed financial 'backer' of such magnitude."
Koza also complained in the letter, dated June 13, that Games Production did not give timely notice of key changes in personnel and that a subcontractor called La Mancha Inc. did not properly handle about $2.2 million in lottery revenues earmarked for advertising.
"We have received no assurance that this very considerable amount of money. . . has been spent beneficially for its intended purposes, nor do we believe these expenditures have been independently audited by anyone," Koza stated.
The letter also said that Suter's conviction in 1970 on two illegal gambling charges would jeopardize Scientific's business relationship with Bally Manufacturing Corp., which operates gambling casinos in Nevada and New Jersey.
Daniel W. Bower, president of Scientific Games, said last night in a telephone interview that the letter constituted formal notice that his firm plans to sever its relations with Games Production in October, after their current contract with the city to run the lottery game expires.
Winter (D-Ward 6), who is president pro tem of the council and oversees the lottery board, described Koza's allegations yesterday as "mind-boggling" in a letter she sent to Mayor Marion Barry.
Winter asked Barry to meet with council members next Monday to review her proposals for correcting serious problems in the operations of the lottery.
Suter could not be reached for comment late yesterday. Willie L. Leftwich Jr., a lawyer who represents the Games Production, dismissed the letter as mostly sour grapes on the part of Koza's firm.
"I can't imagine it being anything but internal bickering," Leftwich said.
Leftwich said that he was not aware of any evidence in the corporate records that Games Production had incurred a $450,000 cash shortfall and borrowed money to cover it.
"To my knowledge, Games Production has not gotten a loan," he said. "I don't believe they would have gotten a loan because they would be violating the scope and nature of their contract with the gambling board. It would be a violation not to reveal it."
Lottery Board Chairman Brant Coopersmith said late yesterday that "I heard something about" Games Production's cash shortage, but added, "No one ever said to me, 'Hey, there's a problem here.' "
Coopersmith confirmed that the La Mancha firm may not have lived up to the terms of its contract, which require it to subcontract out some of the advertising work. "There have been many questions raised about advertising," Coopersmith said.
The lottery board is considering extending the Games Production contract for 90 days to continue running the instant game, while the board decides whether its own staff can take over much of the operation and save money.
The board also is scheduled to meet Friday to select a contractor to operate a proposed daily numbers game. That contract has been at the center of Barry's attempts in recent months to gain more control over the board.
Under pressure from Winter and Council Chairman David A. Clarke, Barry sought yesterday to tone down his dispute with board members.
Barry told The Post in May that board member Jerry Cooper does not talk very much, but that when he does, "he's a liar." Yesterday, at his monthly news conference, Barry denied making that statement, adding that the lottery controversy "has been blown out of proportion" by the news media.
On another subject, Barry announced yesterday that the Mid-Atlantic Coca-Cola Bottling Company had contributed $60,000 to employ 50 teen-agers in the Department of Recreation this summer. They will be assigned to day care and early child development programs and to gardening and landscaping jobs.
The contribution will supplement the city's summer jobs program for young people, that will employ 795 people for 10 weeks.