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Judge Throws Out Fraud Charges in Lottery Case

January 12, 1995

BOWLING GREEN, Ky. (AP) _ A federal judge threw out criminal fraud charges Thursday against a former executive with lottery giant GTech Corp. and a former top Kentucky official.

U.S. District Judge John Heyburn called some practices by GTech _ which provides computer and other services to most of the country’s state lotteries _ ``part of an unusual way of doing business, to say the least″ but ruled no crime had been committed.

James David Smith, former national sales manager for GTech, and L. Rogers Wells, former Kentucky Cabinet and finance secretary, were accused of setting up a corporation to accept brokerage payments from GTech and splitting the money. Documents showed Wells paid some of Smith’s creditors.

The prosecution’s case collapsed after testimony that GTech routinely pays companies owned by influential people across the country who do no actual work in return, and that company officials knew about the practice.

The judge, whose ruling essentially prevented the jury even from considering the case, said prosecutors presented weak arguments and cited a ``glaring absence of proof″ that GTech didn’t know about Smith’s plans to pay Wells through the corporation they’d established

``These arrangements were, in fact, concealed from no one,″ said Heyburn, adding that failure to produce evidence the scheme was somehow secretive was ``unfathomable.″

After two days of testimony, prosecutors abruptly rested their case Wednesday without calling two scheduled witnesses. The defense immediately rested also, citing a lack of evidence by the prosecution.

After the ruling Thursday, Wells acknowledged he took money from GTech through his Bluegrass Industrial Distributors Inc. company even though he did no work.

Wells was among the most powerful people in state government under the administration of Gov. Wallace Wilkinson, who was in office when Kentucky voters approved the lottery in 1988.

``You don’t realize people get paid for goodwill?″ Wells asked reporters, describing himself as ``a good man to have on your side.″

Smith, who still faces federal charges in New Jersey that he accepted $157,000 in kickbacks from two lottery consultants, wept with his family as the judge made his ruling.

``I’m grateful to God, my family for being with me,″ said Smith, who resigned from Gtech last year. ``I just hope and pray that no other family has to go through this.″

Smith declined to comment on the New Jersey case, but his attorney called the criminal charges there ``weaker than these charges.″

Gtech, based in West Greenwich, R.I., is the nation’s leading provider of automated lottery services, with annual sales exceeding $600 million. Its stock rose $1.12 1/2 a share Thursday to $20.50 on the New York Stock Exchange.

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