A Project of The Annenberg Public Policy Center

‘Jackpot’ Ad Is a Loser


A new TV ad from a conservative group attacks Rep. Gary Peters’ record as Michigan Lottery commissioner. It’s called “Jackpot,” but there are no winners when the facts are this badly distorted.

The ad says Peters, who was the state commissioner from 2003 to 2007, “outsourced millions in contracts out of state, and even to China.” It displays a map and flag of China to drive home its misleading claim that Peters is “good for jobs in China, not for Michigan.”

The Chinese contract at issue was a $210,000 order for stubby pencils used to fill out lottery cards, and no Michigan jobs were lost because the state’s purchasing director said at the time that no state-based company made such pencils.

The claim about “millions” in out-of-state contracts refers to GTECH, a Rhode Island-based company that has been the state’s lottery operator since 1988 — long before and after Peters’ time as commissioner. And, again, no Michigan jobs were at stake because no Michigan companies competed for this highly specialized work.

Ending Spending Action Fund, a conservative super PAC, has been active in competitive Senate races in three states — Michigan, Georgia and New Hampshire — that could determine which party controls the Senate. In Michigan, Peters and Republican Terri Lynn Land are vying to fill the seat now held by retiring Democratic Sen. Carl Levin.

The ad starts with a spinning slot machine (which the lottery commission does not operate) that displays three identical photos of a smiling Peters.

“If you love outsourcing, Gary Peters’ record is the ultimate jackpot,” the narrator says. “With Peters in charge, the Michigan Lottery outsourced millions in contracts out of state, and even to China, while Michigan had one of the highest unemployment rates in the country.”

The ad cites two news stories as sources for the outsourcing claim. The first is a 2005 article from the Detroit News about the state purchasing 6 million pencils from a Chinese manufacturer at the cost of $210,000. “Michigan’s Club Keno lottery players are filling out their bet slips with little red pencils made in China,” the story began. Land cited the same article in a TV ad this summer that claimed “Peters allowed outsourcing a state contract to China” and cautioned that “our money should never be used to put us out of work.”

But the Detroit News story contained an abundance of information that discredits the bogus attempt to link the Chinese contract with Michigan jobs.

Sean Carlson, the state purchasing director, told the paper that “no Michigan jobs were at stake.” He said only one U.S. company bid on the contract, and it wasn’t from Michigan. A top official of the Writing Instrument Manufacturers Association explained why, telling the paper there were “probably only six manufacturers of pencils in the U.S.”

It’s also worth noting that the contract saved state taxpayers $90,000.

Detroit News, June 26, 2005: “A lot of thought went into this,” said Sean Carlson, the state’s purchasing director. “Knowing no Michigan jobs were at stake, and the platform of the governor and the state of Michigan is to get more money into the classroom, and clearly there’s a difference in price of about $90,000 here. That’s a teacher or almost two teachers depending on the school district.”

The ad also cites a Feb. 12, 2007, newspaper article in the Coldwater Daily Reporter. That story said the Michigan Lottery generated $688 million for state public schools in fiscal year 2006. The only mention of a contract came at the end of the article when the paper wrote that some state lawmakers wanted the state to consider privatizing the state lottery.

“The Michigan Lottery currently contracts with GTECH, a private company to handle lottery ticket distribution and online lottery games,” the paper said. “GTECH currently receives about 2 percent of the Lottery’s annual sales, which in FY 2006, was about $40 million.”

That supports the ad’s claim about outsourcing “millions in contracts out of state,” but there’s much more to the story. Let’s look at all the facts.

GTECH has been the state’s lottery operator since 1988, so the company already held the contract when then-Gov. Jennifer Granholm appointed Peters commissioner on April 9, 2003. In June 2003, after Peters was appointed commissioner, the Michigan Lottery exercised an option to extend GTECH’s contract through 2009 in exchange for the company agreeing to operate its keno game in the state.

At the time, GTECH was described by Bloomberg News as “the world’s biggest supplier of lottery systems.” As of Feb. 22, 2003, it operated or supplied services or equipment to 25 of the 39 online lotteries in the United States, according to the company’s annual report filed with the Security and Exchange Commission.

In that annual report, the company said in fiscal year 2003, it had just four “principal competitors” — and none was from Michigan.

GTECH’s primary competitors at the time were: Scientific Games International, which was incorporated in Delaware and based in New York; EssNet, a Swedish firm that was bought by SGI on March 22, 2006; IGT Online Entertainment Systems, which was incorporated and based in Nevada; and International Lottery and Totalizator Systems, a California-based company that was controlled by a Malaysian firm called Berjaya Lottery Management.

GTECH, which was acquired in 2006 by the Italian-based firm Lottomatica, is still Michigan’s lottery vendor and will remain so at least through Jan. 19, 2017.

The ad is correct in saying that “Michigan had one of the highest unemployment rates in the country” when Peters was the lottery commissioner. The state’s unemployment rate from 2003 through 2007 was consistently higher than the national average, according to the Bureau of Labor Statistics. But the out-of-state lottery contracts cited in this ad had no bearing on that fact.

— Eugene Kiely