Ohio Official Favored for State Lottery Director

A young Cleveland attorney who worked his way through law school as a clerk with the Ohio Lottery and went on to become the agency’s legal counsel is the leading choice for the job of running California’s lottery, a state official involved in the selection process indicated Tuesday.

M. Mark Michalko, 31, is favored for the job of California lottery director, according to state Lottery Commissioner Laverta Montgomery, who interviewed candidates for the position.

The appointment will be made by Gov. George Deukmejian, but Montgomery said, “I think the governor and I are agreed on the top candidate.” Montgomery’s comments came after a Lottery Commission meeting in Compton, where she is city manager.

Asked the identity of the candidate, Montgomery hesitated, then replied, “I think Mr. Michalko is a very good candidate.”

Later she said:

“I just felt that he was knowledgeable and that he would present a very good image. . . . He knows the (legal) pitfalls.”

Asked about Michalko’s relative youth, Montgomery replied:

“But it’s a young industry. . . . We can’t go by age.”

Deukemjian said in Sacramento on Tuesday that he expects to make an announcement regarding the appointment of a director “around the end of the week.” However, he did not name the candidate, and a press aide later refused to confirm that Michalko is the top choice.

“I can’t confirm,” said assistant press secretary Kevin Brett. “Our policy is. . . we do not discuss appointments until the appointment is made.”

Michalko, who is considered an expert in computerized “on-line” lottery gaming, began his career with the Ohio Lottery Commission in 1977 as a 23-year-old graduate of Cleveland’s John Carroll University, according to the commission’s public information director, Anne Bloomberg. He worked as a legal aide researching contracts and other legal matters while attending Cleveland Marshall School of Law.

He became the commission’s chief counsel shortly after graduating from law school in 1980.

Michalko turns 31 years old today.

He is a native of Garfield Heights, Ohio, and his wife, Kim, is an official with a downtown Cleveland department store.

During the last year, Michalko has been devising a new specifications form for gaming manufacturers vying for Ohio’s multimillion-dollar lottery contract.

The specifications form, according to Bloomberg, has become a model for lotteries around the nation and “is unique in that it finally puts lotteries in the driver’s seat as opposed to vendors.”

Bloomberg said Michalko’s work with the form and his knowledge of on-line gaming systems were among the reasons he gained the attention of California lottery officials.

According to Bloomberg, Michalko’s salary is in the $25,000 to $30,000 range, less than half the salary to be paid California’s lottery chief. Some out-of-state lottery officials considered the California salary too low to apply for the director’s job.

Deukmejian was angered and embarrassed in March, when his first choice as lottery director, Thomas O’Heir, assistant director of the Massachusetts lottery, turned down the job at the last minute because the $73,780 annual salary was inadequate.

Deukmejian then appointed Commission Chairman Howard E. Varner as interim director, and the search for an executive officer was renewed.

The state lottery initiative, approved by voters last November, called for appointment of five commissioners and a lottery director within 30 days and sale of tickets by March 21. The commissioners were not appointed until six weeks after the deadline, however, and ticket sales are not expected until September.

The Lottery Commission, meeting with only three members Tuesday, took several steps toward beginning California’s first lottery game. With Commissioner John Price in Europe and Varner serving as interim chairman, the commission unanimously voted to:

- Approve the final draft of a “request for proposals for instant game tickets”--a document to be used by suppliers of instant “scratch-off” lottery tickets to submit bids to the commission by May 17.

The commission is expected to award the contract, which could be worth almost $50 million, in early June. Some estimate that as many as 1.9 billion tickets will be needed for the first year of the lottery, including tickets given away as prizes, as well as those that go unsold.

- Approve application forms and procedures for lottery ticket retailers. Prospective retailers will be charged a $30 application fee, plus $20 for each retail location. The commission estimates that about 20,000 retail outlets will be needed for instant game tickets.

- Approve a draft of bid specifications for advertising firms seeking to promote the lottery.

The advertising contract could total $15 million during the first year of sales. The commission approved a staff recommendation that 1.5% of gross lottery sales--estimated at $1 billion the first year--be earmarked for advertising and promotions.

The lottery initiative calls for about 3.5% of gross sales to go toward “advertising, promotion, public relations, incentives and other aspects of communications” for at least the first year of the lottery.

It has been widely speculated that this clause in the initiative could mean a $35-million bonanza to an advertising firm. Varner maintained after the meeting, however, that more than half of the 3.5% could legally go toward incentives, public relations and other non-advertising uses.

- Approve a minor change of language in the advertising bid specifications in order to stress requirements that prospective contractors submit plans to subcontract with small businesses or firms run by minorities or women.

Times staff writer Richard C. Paddock in Sacramento contributed to this story.