ANNAPOLIS -- "Everybody thinks everybody is a crook."

That is Maryland Gov. William Donald Schaefer's bottom line on a saga that for more than a year has consumed the State House with tales of corporate intrigue, political arm-twisting and more than a little brinksmanship.

The aim was simple enough: Replace the State Lottery Agency's aging computer with one that would allow more terminals, more games and presumably more revenue for the $800 million-a-year lottery system.

But with the country's four top lottery computer firms employing four of the state's top lobbyists -- and former governor Marvin Mandel to boot -- the purchase has generated a soap opera of conspiracy theories. Depending on the source, the bid process has been rigged by the lottery agency, the governor's office or the legislature.

There is nothing unusual about hardball competition over a lottery computer purchase. The industry is split among four main companies that supply the machines, and new contracts come up only periodically in states that sanction the games.

But according to a national consultant who is helping oversee the Maryland purchase, the level of political involvement in this state is unusual even for an industry where controversy over each bid has become the norm. The lottery companies often go outside the channels of rigid procurement law to complain to politicians. The difference in Maryland is that the politicians responded.

"Everybody tries desperately to put themselves in the best possible light to influence things or delay things or protest," said Richard Darwin, a lottery consultant with the Battelle Memorial Institute in Ohio. "They are all sinful as far as I am concerned," Darwin said of the companies.

The players are a Who's Who of the lottery industry and Maryland lobbying:Alan M. Rifkin, Schaefer's former legislative aide and a law partner to former Circuit Judge Edgar P. Silver, is representing Control Data Corp., the computer giant that has had the lottery contract for about 10 years. Bruce C. Bereano, who last year received more than $1 million for lobbying in Annapolis, teamed with Mandel to represent Rhode Island-based GTECH Corp., the aggressive leader of the lottery computer industry. Baltimore lawyer and influential capital lobbyist Joseph A. Schwartz III represents Scientific Games, while James J. Doyle Jr., the dean of the state's lobbyist corps, represents General Instrument, the radio and communications firm whose lottery division is based in Maryland.

The feud has been brewing for a year, ever since the lottery agency announced it was ready to shop for a new computer, but it has escalated over the past few weeks.

On Nov. 5, three days before bids were due, Control Data's three competitors sent letters to the Schaefer administration saying that they would not participate because they thought the technical requirements set by the State Lottery Agency had biased the process toward Control Data.

The arrival of the three letters on the same day is being examined by state Attorney General J. Joseph Curran Jr. because of possible antitrust concerns. Curran said the issue was raised with his office by Rifkin.

Schaefer said he found the situation discomforting because of the possibility that the vendors were trying to slant the system in their favor, rather than including their concerns in a formal bid protest. But he said he also was worried that if the complaints went unaddressed, the state could be left with a single bid for one of its largest purchases ever.

Consequently, Schaefer's budget secretary, Charles L. Benton, agreed to extend the bid deadline a month and make some technical changes the other companies had requested. Such 11th-hour changes are rare in a legal process that is supposed to insulate purchases from political pressure, but Schaefer said last week that he felt boxed in.

"Do I think they manipulated me? Yeah, I do," Schaefer said. "Three of the four pull out, all within a matter of days. That did not seem right to me . . . . They played this game.

"That put me in a very embarrassing situation . . . . I couldn't win. If we say, 'Okay, guys, tough, that's it,' I would have been thundered on that I all along had favored {Control Data}. And if I extend it, they say you are giving time so that others can come in."

Schaefer contends he has never spoken in detail with any of the lobbyists involved, including Mandel, although he acknowledges receiving at least one letter that persuaded him that the computer purchase decision would be better made outside the lottery agency. His remedy was to set up two panels of business leaders and state officials to recommend a firm to Benton. His ultimate decision will be reviewed by the Maryland Board of Public Works, composed of Schaefer, the state's treasurer and comptroller.

To procurement purists -- and the lobbyists for Control Data like to place themselves in that camp -- the process has been tainted, and they point to the time when state procurement law was rewritten in the mid-1970s to give more power over contract decisions to bureaucrats and less to elected officials.

Indeed, the presence of Mandel gives a historical resonance to the current battle: It was a fight over contracts for the Baltimore subway system that led then-transportation secretary Harry Hughes to resign, claiming Mandel was trying to steer contracts to an associate. The incident gave impetus to Hughes's successful campaign for governor as a reform candidate on the heels of Mandel's federal conviction that he sold his influence. The conviction recently was overturned, and Mandel has been reinstated to the Maryland bar.

If GTECH and other vendors had complaints with the technical requirements of the bid, they should have filed a protest and followed that through to court if necessary, Control Data lobbyist Rifkin said.

"The procurement law was created for a reason . . . to insulate state procurements from the eccentricities of political desires and political pressures," he said.

Bereano, GTECH's lead lobbyist, said the intricacies of procurement law were "too cumbersome, too time consuming," given the controversy that evolved. He said the lottery agency had turned down his client and Control Data's other competitors on several points, so it seemed futile to proceed inside a system that, from his perspective, was slanted to produce a renewal of Control Data's contract.

Because legislators had been involved in the process from the beginning -- and urged the use of a consultant to help ensure objectivity -- Bereano said he thought it appropriate to go back to those lawmakers when it seemed Control Data had an unfair edge.

Schaefer said it was a call from Del. Timothy F. Maloney (D-Prince George's), who had fielded complaints from Bereano and Schwartz, that led him to intervene.

Control Data's employees were "working in the lottery for the last nine years," Bereano said. "Day to day, you are going to the coffee machine with these people.

"You tell me the lottery agency is going to be impartial and fair and aboveboard. I did not come in on a pumpkin truck."



Former legislative aide to Gov. William Donald Schaefer and representative of Control Data Corp., the pared-down and recently restructured computer giant that is trying to hang on to the contract for the state's lottery computer system.


The first lobbyist in the state to make $1 million a year in fees; representative of Rhode Island-based GTECH Corp., a leader in supplying lottery computer equipment with a reputation for aggressively pursuing new business.


Former governor imprisoned on federal charges that eventually were overturned; restored to the Maryland bar, he was hired by Bereano to help represent GTECH.


The dean of Annapolis lobbyists, and representative of General Instrument Corp., the radio and communications firm whose Lottery Division is based in Hunt Valley, Md.

JOSEPH A. SCHWARTZ III (no photo available):

Baltimore lawyer and representative of Scientific Games Inc., of Atlanta, a subsidiary of the financially troubled Bally Manufacturing Corp.