UK: The Davidson Interview - Bill O'Connor.

UK: The Davidson Interview - Bill O'Connor. - The chairman of GTECH, the systems specialist that set up the National Lottery, has been to hell and back after his company suffered allegations of kickbacks and bribery. He tells Andrew Davidson how he plans

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Last Updated: 31 Aug 2010

The chairman of GTECH, the systems specialist that set up the National Lottery, has been to hell and back after his company suffered allegations of kickbacks and bribery. He tells Andrew Davidson how he plans to rebuild.

Welcome to management heaven. You get a call. You've been head-hunted for one of the world's zippiest companies. Your wife, who knows about these things, tells you to grab the opportunity with both hands. You meet the company founders. They are great guys. They promise you the top slot once you have settled in. The company, which has a reputation as a pretty sharp competitor, is carving up its home market and going global. Rivals are so far off on the horizon that you can barely see them. Those stock options - pat yourself on the back, shrewdly negotiated on the way in - look a better bet every day. Who could ask for more?

Then the world goes upside down. Rogue employees emerge. Allegations emerge of bribes and kickbacks. Whispers go round that you've got close links to the Mob. One of the founders is branded a liar after getting involved in a catastrophic court case in a country where the company runs its biggest contract. The world's press bear down. Other business leaders avoid you. Politicians berate you. No one wants to know you. Even the founders, who by this time have quit, are unhappy with you. This isn't heaven, this is management hell.

Welcome to the world of Bill O'Connor, chairman of GTECH, the fast-growing systems and software specialist that set up the UK Lottery and became, in the process, one of the most mistrusted companies in Britain. O'Connor, 53, a grey, determined, thoughtful character, is a prime example of the yin and yang of modern business. He used to work for General Electric, the $280 billion (£175 billion) manufacturing and services giant judged to be America's most admired corporation.

But since arriving at GTECH in 1994 with a brief to instil some conventional corporate disciplines, he has been on permanent fire-fighting alert. First the kickback allegations in America, then the high-profile London libel case between GTECH founder Guy Snowden and Virgin's Richard Branson, then Snowden's rapid exit from the company, then the swift sale of its stake in UK Lottery operator Camelot followed by the start of Snowden's sniping at the new GTECH regime: it has all left O'Connor, who has clung on throughout and in February emerged as the company's new boss, with a tough message to sell.

But sell it he does. GTECH, which operates 29 of the 38 US state lotteries as well as government authorised lotteries in 49 countries overseas, is squeaky clean, he says. He has spent four years sniffing out illegalities and he cannot find any. Sure, there were errors of 'judgment' at GTECH before he arrived, but that's all in the past. Everything is straight now. Let's just get on with business. Well, you have to hand it to him.

He is not here to duck any issues. But you also have to ask: what kind of man would fight determinedly through the kind of flak that has been fired at GTECH?

A resilient one, that's for sure. Beneath his quiet exterior, O'Connor, an engineer-turned-manager, draws on a deep well of ambition and keeps his eyes firmly on the main prize. GTECH, which has doubled its turnover since 1994 and could easily do so again in the next four years, is on the cusp of joining the select band of America's top 500 corporations.

Even its critics acknowledge it's going to be huge, despite the recent hammering its share price has taken (it has yo-yoed between $26 and $40-plus in the last eighteen months). Now, perhaps, is not the time for faint hearts to waver.

We meet at GTECH's small London base, a tiny converted stable block in Mayfair's Farm Street, just opposite the office from which Martin Sorrell runs WPP. The GTECH HQ is dark and quiet, decked out like a mid-market hotel in flowery chintzes and dark wood. It is only a formal front, of course. GTECH's real work processing the UK Lottery goes on at offices in Watford and Liverpool, home to its 150 UK staff. Upstairs, in a small boardroom, O'Connor hovers, plump and cautious. He has the dark, round eyes and down-turned mouth of a wary trout. Meeting the British media, after what GTECH's been through, probably comes on O'Connor's wish-list second only to being grilled alive, but he is courteous, feeling his way into the interview carefully.

As a personality, he is the other end of the spectrum from the exuberant and loquacious Snowden, who was the more visible half of the company's founding duo (the other was Vic Markovicz, the software whiz whose genius propelled GTECH into the forefront of the electronic lottery market).

Up until recently, Snowden was GTECH's British face, a keen Anglophile who sat on the Camelot board and was determined to make the UK Lottery his company's flagship operation. That was before the Branson libel case, where the court found that Snowden had tried to bribe the Virgin boss not to pitch against GTECH's consortium back in 1993. And before the growing chorus of allegations from America that, in the late 1980s and early 1990s, the company habitually stretched the bounds of propriety to obtain lucrative lottery contracts. This spring, in an effort to appease the UK Lottery regulator, GTECH not only sold its stake in Camelot, for whom it operates the Lottery, but also severed all connection with Snowden. No wonder Snowden's nose is out of joint. If he thought he had hired a pliant line-manager, he has had a rude shock.

I haven't spoken to Guy since early February and I kinda miss that, but that was part of the deal with Oflot,' shrugs O'Connor. 'I may carry it to extremes but then no one can criticise me. It's rough, extremely rough on one side, but it has been pretty well publicised what the regulator asked us to sign up to.'

Does he feel Snowden did anything that could be criticised? O'Connor doesn't squirm. He looks squarely ahead. 'I don't have the right to tell you that. All I will say is that when I have been with Guy he has always conducted himself well in my presence.'

Does he think he was fairly treated? 'I don't have the right to criticise or second guess what went on.'

That doesn't sound very supportive.

'Well, I understand that,' O'Connor shrugs again, almost imperceptibly, 'but in the British court system you have no right to second guess that judgment.'

So, a Bill of rights, you might say. O'Connor, according to another GTECH director, has already learnt to tread warily with the British media. But it is also no secret that Snowden, who spent 15 years building up GTECH, is himself feeling rather ambivalent about O'Connor now. Speaking from his home in Connecticut, Snowden positively bristles about the terms of his excommunication. 'I think it has been interpreted in the extreme by both the regulator and ...' he catches himself, 'well, primarily by the regulator.'

Anyway, O'Connor has enough on his plate trying to sort out the public relations mess that Snowden left behind. That, say his friends, has not been easy to live with. 'I think it has been difficult for Bill,' says Jack Acker, president of STM Wireless, a telecommunications start-up on whose board O'Connor sits as a non-executive director. Acker has worked with O'Connor on and off in the electronics industry for nearly 20 years and describes him as a 'high integrity person', one of the reasons why Snowden and Markovicz hauled him in when GTECH's image started taking a battering. 'Bill is known over here as a very straight guy, his word is his bond. I think if you British get a chance to know him, you will realise he is a man of integrity.'

Lord Moore, chairman of Credit Suisse Asset Management and a GTECH non-executive director, backs that up. 'Bill is tough, thorough and unbelievably ethical,' says Moore. It was that visible integrity, they say, that persuaded the UK Lottery regulator to give GTECH another chance.

Even so, O'Connor is going to have his work cut out changing GTECH's image. He may cite as his business hero the ruthless GE boss Jack Welch - 'Neutron' Jack, as he's called (workers get laid off, only the plant remains standing) - but Welch took over a vast, respected corporation and improved it further. O'Connor has to rebuild GTECH against a wall of public antipathy.

Despite the fact that it has won two key decisions this year, being passed fit to keep its £30 million-a-year UK Lottery contract and having its deal to run the Texas State Lottery reapproved, the sudden sale of its Camelot stake (for £51 million) implied that others were not totally convinced.

Perhaps the real difficulty is that GTECH, which sells its software and systems to lottery operators worldwide, has simply been too successful for a lot of people's liking. Analysts point out that not only has it achieved remarkable technological success in the on-line lottery market - and remember, the potential for glitches is huge - it also has no real competitor on a global scale. And it appears recession-proof.

The barriers to entry in its market are political and regulatory, and if anything, global financial insecurity only makes politicians more willing to consider raising cash from sources such as on-line lotteries. Even the recent crisis in Asia is an opportunity. 'Economic hardship,' says a recent brokers' report on GTECH from Credit Suisse First Boston, 'has always been the catalyst for the proliferation of lotteries and we believe it will be no different this time.' Operationally, at least, GTECH's prospects appear almost too good to be true. No wonder people question how it got to this position.

So just what is the truth behind the allegations of impropriety? O'Connor sets out his stall patiently. When he joined GTECH, (pushed by his wife, who used to work in software and knew it was a hot company) the stories about how the firm got its contracts had already started and he checked them out thoroughly. All he could find, he says, were a couple of 'judgment calls' that weren't up to snuff and an individual - not one of the founders - who abused his power.

That has all been sorted out. New policy and procedure were introduced to ensure integrity and security. An ex-FBI executive was brought in to run compliance. The stories are old, and unreliable, news.

Yet why do the rumours persist?

Because, he explains, of the way lottery commissions are handed out, and because America, in particular, is a highly litigious country. GTECH has won so many tenders that competitors are inevitably going to try and stir things up against the company. And it's all too tempting for politicians and media to pile in afterwards.

'Look at this,' says O'Connor, pulling a sheet of A4 out of the pile of papers on the table in front of him. 'I drew this for you, it will help explain.'

On the sheet he has sketched four interlocking triangles, with the straplines government, media, environment and people.

Each corner of the triangle represents a different issue or interest group, he says. Executive, legislative and regulatory for the government triangle; players, critics and voters for the people; content, integrity and benefit creation for the environment; national, local and tabloid for the media triangle.

The drawing is cute - perhaps too cute, the late-'90s equivalent of all those flow chart boxes that executives were so keen on sketching in the 1980s. But it makes an important point, showing the complex interactions of everything involved in running a government lottery business. The bald truth is that everyone has a stake in it, and an opinion, and an axe to grind. 'And I will just repeat this,' says O'Connor, spelling it out slowly, 'because it's real important: save for the problems with the civil trial over here, the company itself has never had an issue of legality.'

Clearly there is more to O'Connor than the rather cautious, soft-spoken reasonableness he exudes in interview. He says initially that he doesn't want to discuss his own background but after an hour or so he loosens up and starts to talk about his upbringing in Florida. His mother was Scottish, born outside Dunfermline, divorced from his father. O'Connor, the third child in a family of four, took his stepfather's name. He was evidently adept at business from an early age. He tells a revealing anecdote about running his own commercial diving business before he even went to college, hauling golf balls out of lakes on golf courses and selling them on to the pros. 'I could get 28,000 balls a month. I would pay the people who dived for me eight cents a ball, and make between 10 to 13 cents a ball. It paid my way through college. I sold the company before graduating.'

He spent 16 years at GE, training as a weapon control engineer and progressing into management and marketing. He has also done stints in the satellite systems division of Harris Corporation, and as a senior executive at the systems and telecommunications businesses Contel, Scientific Atlanta and Ascom Timeplex. Most importantly - at least as far as GTECH shareholders are concerned, who have probably had enough of colourful characters - he appears to lead a quiet, downhome, executive life.

He has a house in Saddle River in New Jersey and an apartment in Rhode Island, where GTECH's head office is based. He drives a BMW 7 series, supplied by the company, but says he doesn't really know what he spends his $765,000 salary plus bonus on. His kids, a son and a daughter, are grown up and working, one for an internet company, the other for Ernst & Young. He plays a bit of tennis and golf, at which he is not very good (one who has played with him says he hits the ball very hard, and doubtless he is pretty good at finding it afterwards). He still dives a lot too.

'I dived in Bora Bora a few years ago,' says O'Connor. 'That was incredible.'

But if you are looking for colour, that's as much as you will find. He just wants to concentrate on business. Doesn't he worry about the kind of business it is? All those accusations that lotteries are predatory on the poor, for example? No, he says, calmly. The accusations are wrong.

He cites figures from the New York lottery showing how the affluent pile in when the rollover jackpots go up. It balances out demographically, he says.

In fact, whatever others may think of the gaming industry, O'Connor has no doubts that GTECH can be a top-notch, blue-chip business, but it has to get better at providing a service first. His goal now is to ensure that his managers get closer to their customers and find out what they really want.

He in turn vows to do the same with his managers. 'I belong to the Jack Welch school of boundarylessness,' he says, inevitably. 'I like not to encumber people with any kind of bureaucracy. You try and put the decisions on the holders of the knowledge.' Like Welch, he lays great store in getting out and about among his managers, using 'cafeteria roundtables', where he will sit and listen, and make his staff feel comfortable about telling him their problems.

It's conventional, multinational management stuff, using the kind of disciplines that would have seeped into his pores over 16 years at GE.

Indeed Tim Holley, the Camelot boss, sums up O'Connor as the complete multinational executive - and something of a change of style for the company.

'Guy Snowden was a tremendous entrepreneur, he built GTECH up. Now it's appropriate for Bill to be running the company at this stage in its development.' Snowden, for his part, says rather sniffily that O'Connor's GE experience was not the reason he was hired. 'In fact it was a deterrent. I have never been impressed by heavy industry management techniques.' Rather it was O'Connor's track record at companies like Ascom Timeplex and Scientific Atlanta that got him noticed. But it is perhaps inevitable that Snowden feels aggrieved. As he points out, O'Connor was hired to lead the team and structure that he put in place.

That has all changed now. Almost unnoticed behind the drama of GTECH's problems, O'Connor has begun a radical restructuring of the corporation.

Earlier this year he laid off a sixth of its workforce, around 800 people - whiffs of Neutron Jack - and told managers he wanted the company to focus on gaining more lottery business, and then on the back of that to expand the sort of services it offers. This is where analysts get genuinely excited about the prospects for GTECH as a 21st-century business. If it can leverage its on-line capabilities to build a global network, allowing customers to use it for a variety of purposes, the potential is frightening.

Already, in one experiment, lottery customers can pay utility bills over the network. There are plans to put together an 'extranet', combining global standard games, sports betting and the internet. Lotteries, says one American rival, is just GTECH's way in. O'Connor's real plan, he believes, is to transform the company into a telecommunications giant for the future.

Snowden confirms that he too believes that O'Connor has this dream - but he adds that he thinks any diversification out of gaming is unworkable, and that GTECH is already losing too many senior staff to hold onto its lead. He also suggests that if GTECH doesn't take up the slack in the gaming market, competitors will swiftly fill the empty spaces.

It is no coincidence, perhaps, that he and Markovicz have just set up their own new venture, though he says that 'at the moment' he would never compete with GTECH because it is 'his baby'. O'Connor plays all this down, saying his aim for the company is simply to hit $3 billion or $4 billion turnover in the next five or six years, ambitious enough targets for most people.

And there are a lot of hurdles ahead, not least the prospect that a predator, noticing how the company's share price has wobbled, might simply gobble it up. There are also rumours circulating that O'Connor would like a management buyout.

He shrugs, saying that he wouldn't be doing his job properly if he didn't study every option for increasing shareholder value. 'We have looked at the whole range, from buying back more stock, right over to the MBO. We will decide in the next three months. No alternative has any more probability than the other.'

Can O'Connor hold GTECH on course? It is too early to say. Certainly, if he has been in management hell, he is not out of it yet. Taking over a company when its colourful founder is sitting sniping from the wings is not a task any manager would wish for.

But clearly GTECH hopes that O'Connor, cast as Mr Visible Integrity, can pilot the company through the storm. Some are even suggesting that if he does seem a little dull after the larger-than-life Snowden, then that suits their purposes even more. To hell and back is a perilous journey.

A bit of stable, corporate dullness is what GTECH needs right now.

BIOGRAPHICAL NOTES

1944

Born 11 June Washington DC, America

Educated Rensselaer Polytechnic Institute, New York

1967

Flight control engineer, General Electric (GE)

1977

Manager, flight control sales, GE

1979

Product line manager, GE

1981

Marketing manager, GE

1981

Vice president sales and marketing, satellite systems division, Harris Corporation

1983

General manager, sales and marketing, GE

1985

Senior vice president, Contel

1987

Senior vice president, Scientific Atlanta

1992

Chief executive, Ascom Timeplex

1994

President and chief operating officer, GTECH

1997

Chief executive and president, GTECH

1998

Chairman, GTECH

WHAT PEOPLE SAY

'It is always difficult selecting your own successor. When you found your own company it fits you like a glove and you will never get someone with the same blend of skills. Bill is very straight forward individual. He has got no gaming experience and he is a very technical individual, but he has got good leadership skills. My plan was to leave a team in place that he would lead. The only part that is troubling now is that the team seems to be disintegrating.'

Guy Snowden, co-founder of GTECH

'Bill has always set his sights on being head of a company. He has been very focussed and each time he has moved it has added to his portfolio of skills. Now he has the skill set that covers the whole spectrum and he is a very competent manager.'

Jack Acker, president, STM Wireless and former colleague at Scientific Atlanta

'Bill is tough, thorough and unbelievably ethical. He won't have people in the company if they don't conduct business with total honesty.'

Lord Moore of Lower Marsh, non-executive director, GTECH

'Bill is straight-talking. He is someone you know you can do business with: a professional, multinational manager. Guy Snowden was a tremendous entrepreneur.

Now it's appropriate for Bill to be running the company at this stage.'

Tim Holley, chief executive, Camelot.

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