Luck of the draw
The doctor was probing, trying to determine the extent of the injury. How bad was it, Charles Sanders asked Kevin Geddings, a public-relations consultant and member of the N.C. Education Lottery Commission, which Sanders chairs. Before moving to Charlotte, Geddings had helped start the South Carolina lottery and befriended a lobbyist for Scientific Games Corp., which operates the gaming there and wanted to run the new lottery here. His ties to a company vying for a multimillion-dollar contract had critics howling.
In late October, Geddings called Sanders at his office in Chapel Hill to discuss the controversy. “He said, ‘If this is an embarrassment to you, I’ll resign.’” Sanders, a cardiologist-turned-CEO who retired from Glaxo to run for U.S. Senate a decade ago, gave his prognosis. ”And I said, ‘Kevin, if that’s all there is to it, a friendship, I think we can get by that. But if there’s another shoe to drop, we’ve got a problem.’ And he was like, ‘Mr. Chairman, there’s no other shoe to drop, I promise you.’
“Three or four days later, the news came out that he’d made $25,000 from Scientific Games.”
Though he had opposed the lottery, even contributing money to the campaign against it, Sanders says this was the only time he had serious misgivings about agreeing to chair the commission. “He just flat lied,” Sanders says — and Geddings denies — “and I’ve never had anybody do that to me that smoothly.”
Sanders hates surprises. He’s had plenty since the legislature, with last-minute arm twisting and parliamentary shenanigans, passed the lottery last summer and Gov. Mike Easley, in a cunning bit of political jujitsu, asked him to head the nine-member panel overseeing it. Since then, three members — including Geddings — have resigned, and investigators are probing the role a key adviser to House Speaker Jim Black played in getting the lottery passed. According to published reports, Meredith Norris set up dinners for Scientific Games executives with lawmakers and even arranged for the company to suggest language that was written into the legislation. She was not registered as a company lobbyist.
The stakes are high, with the games expected to rake in $1.2 billion next fiscal year and the $425 million profit earmarked for education. But long before the first scratch ticket is sold — that won’t be until March 30 — the lottery had gained an unpleasant odor that, like strange perfume and stale cigarette smoke, has a way of clinging to those who get too close. “It’s looked bad and smelled bad,” says Raleigh lawyer Dan Blue, an opponent and former speaker of the state House, “and you get the feeling that the stench hasn’t subsided.”
Sanders, at age 73, understands the risks. “My integrity is very important to me, and I do not like to have it impugned.” So he’s approaching the job the way he’d treat a diseased heart — dispassionately diagnosing, prescribing and pushing ahead to the next problem, nurturing something he would rather not have seen come into being. But, as he learned long ago, a doctor can’t always pick his patients.
“This isn’t a job I aspired to,” he says. “I’m doing this as a public service.”
As far back as anybody can recall, he’d always said he wanted to be a doctor. “Everybody called him ‘Doc’ in high school, even our father,” says Barefoot Sanders, a federal judge in their hometown of Dallas. The main religion in the Sanders household was achievement, and his parents — his dad, a lawyer; his mother, a homemaker — expected their children to excel. That drive marked him throughout his career, and even today as a rich retiree, he’d rather work, serving on about a dozen boards, than kick back. “Entertaining myself isn’t what makes me tick,” he says. “I want to try to make things better.”
“I'd just as soon not have it. But since we do, I want to make sure we do it the best way we can."
He earned a bachelor’s from the University of Texas at Austin and his M.D. at the university’s medical campus in his hometown. A mentor nudged him toward cardiology and helped him land an internship at Harvard and a residency at Boston City Hospital. That led to a faculty post at Harvard’s medical school and Massachusetts General Hospital, where he founded the cardiac-catheterization lab in 1962. Cardiac catheterization has become routine, but it was cutting-edge then: A physician makes an incision in the groin, then snakes a catheter through a blood vessel all the way into a patient’s heart. The catheter can be used to run tests, open blocked arteries and insert wire stents to keep them open.
You don’t unblock a coronary artery by whining about the injustice of a world where some skinny nibblers end up with bad tickers while some lard-laden gluttons don’t. You ream it out and move to the next one. So it is with Sanders’ view of the lottery. Like many of the state’s educated elite, he wanted to save the little people from themselves: He believes that lotteries too often prey on the poor, offering false hope of quick riches, and still doubts that it’s the best way to fund schools. But he doesn’t agonize over it. “I think it’s a regressive tax, and I’d just as soon not have it. But since we do, I want to make sure we do it the best way we can.”
In Boston, the cath lab’s success brought an invitation in 1972 from Mass General’s trustees for him to run the whole hospital. At 40, he was managing about 8,000 doctors, nurses and other staff. Over the next decade, he spearheaded the creation of an institute for licensing nurses, therapists and dieticians along with the fundraising to renovate the aging hospital. Next came a surprising move for a 20-year academic. He took a job as head of research for what is now Bristol-Myers Squibb, the New York based drug company. It meant not only giving up the prestige of Harvard but entering the corporate world. For the first time in his career, he felt serious pangs of self-doubt. “They weren’t interested in throwing rose petals at what I’d done at Mass General. They were interested in what I was going to do, and at Mass General we’d struggled just to break even. At first, I wasn’t sure I could really make it.”
He wagers on his golf game, has no appetite for poker – and has never bought a lottery ticket.
His days with a stethoscope slung around his neck ended, but one legacy of his time as a medical practitioner is his low-key reserve. “You don’t want to have a doctor running around the room waving his arms and saying, ‘Oh my God, I have no idea what’s wrong with you!’ In any situation, I ask myself, ‘What’s the worst thing that could happen here?’ In medicine, it’s death. In most everything else, it falls short of that.”
He stayed at Bristol-Myers eight years, then moved into the No. 2 job at what is now GlaxoSmithKline’s U.S. subsidiary, based in Research Triangle Park. Three years later, he became its chief executive. Glaxo was thriving, thanks to Zantac, its blockbuster anti-ulcer drug then available only by prescription. His major challenge was being a buffer and mediator between the British parent company’s prickly scientist-turned-chairman Richard Sykes and its American profit engine. “Richard was passionate and arbitrary,” Sanders recalls. “He left a lot of bruised feelings. He could be a pain in the neck, but he was smart as all get-out.”
With mandatory retirement age looming, Sanford decided to run for the Senate seat held by Republican Jesse Helms. He figured his views — he calls himself a fiscal conservative and social moderate — and mix of business and medical experience would appeal to voters. But newspapers around the state tarred him as a corporate carpetbagger, tweaking him for everything from his wealth to his brother’s unusual first name, a family one. In the 1996 Democratic primary, he faced former Charlotte Mayor Harvey Gantt, who had been the party’s candidate six years earlier. Few voted, and Gantt’s populist rhetoric appealed to the ardent liberals who were the most likely to go to the polls. He won, only to be beaten again by Helms.
Sanders settled into the typical life of a wealthy retired executive. When he ran, his financial disclosures listed his net worth as between $11 million and $22 million. He lives on a golf course in an upscale Durham neighborhood and summers at his cottage on Cape Cod. He serves on his boards, corporate and nonprofit, and plays as much golf as he can squeeze in. His golf game, he says, is the only thing he bets on, laying down $1 to $5 wagers with buddies. He has no taste for poker and never has bought a lottery ticket. “I’d rather put my money into something where there’s a greater chance of a return.”
He devotes much of his time to health care. Among the for-profit boards he’s on is that of California-based Genentech, a biotechnology company. “Science really drives the whole operation,” he says, his enthusiasm washing away his normal reserve. “Right now, the most productive part of the pharmaceutical industry is the biotech part. These companies are made up of very smart people who are dedicated, and you don’t have the bureaucracy that says you have to follow this particular path, which is what big pharma is burdened with.”
He has been on the board of Project Hope nearly 20 years, brought on by his friendship with the nonprofit’s founder. It trains health-care workers and equips hospitals in developing countries, plus operates the SS Hope hospital ship, which traveled to Indonesia after the December 2004 tsunami. As chairman, he listens carefully and remembers much of what he hears, seldom needing to write things down, says Dr. John Howe, the president and CEO. “He has a gifted way of bringing the board to consensus. As the discussions evolve, people have confidence he’ll bring out the best of ideas.”
Members of the Lottery Commission say he has shown the same skill there. Though he’s far from being a backslapping good old boy, his style belies the patrician label that newspapers tried to tag him with during his Senate campaign. “He doesn’t attempt to dominate the meetings,” says Jim Woodward, the retired chancellor of UNC Charlotte, who replaced Geddings. “He looks for a consensus of views.” Robert Farris, a Wilson lawyer, agrees. “For someone trained as a physician, he has an unusual ability to get along with people. Docs have to have huge egos to go busting open people’s chests and heads. But Charlie knows how to let other people talk.”
As nonexecutive chairman, Sanders’ main duty is running the commission meetings. He sees the board’s role as setting policy and making sure the executive director and his staff meet its goals. He’s not a micromanager. “I give people a lot of authority because I think that’s how you get the best results. You hire good people and make it clear what you expect and pay them well. If they don’t produce, you tell them what they can do better. If they don’t do it, they’re gone.”
He admits he has one quirk: “I don’t like surprises.”
The first resignation came in October when Malachi Greene, a Charlotte businessman and former City Council member, decided he was too busy to serve on the commission. Geddings quit Nov. 1, sending his letter of resignation to the governor. It arrived just days after New York-based Scientific Games revealed in a filing that it had been paying him consulting fees, including a payment the day after he joined the commission. Two weeks later, Gordon Myers left, voicing concerns about conflicts of interest. A former executive with Asheville-based Ingles Markets, he still holds stock in the grocery chain, which likely will sell lottery tickets.
Reached by e-mail, Geddings says, “I am sorry Dr. Sanders feels that I lied to him. That was certainly not my intention. Although I openly admitted to him and the general public my company’s previous work for lottery vendor companies, I should have been more forthcoming about the details of those business relationships given the high profile and very political nature of the lottery.”
Sanders says Geddings’ PR expertise and his experience — he was the only commissioner who had been involved in a lottery startup — could have been very beneficial. “Kevin is very articulate,” he says, “very convincing.” Disclosure of its dealings with Geddings, whom Black had appointed, and Meredith Norris, a former member of the speaker’s staff and later his unpaid political director, didn’t disqualify Scientific Games as a potential vendor because it and West Greenwich, R.I.-based GTECH Holdings Corp. dominate the industry. “We can’t do it without them,” Sanders admitted in January, referring to the bidding process.
Against this backdrop, Sanders and the rest of the commission, bolstered by replacements for those who had resigned, soldiered on. In November, the commission had hired Tom Shaheen, who had been chief executive of New Mexico’s lottery, as its executive director. He had worked for state lotteries in Florida, Texas and Georgia before New Mexico recruited him to turn around its sputtering games. In addition to his $235,000 salary, he’ll get a $50,000 bonus if the games begin on time.
Hiring someone with Shaheen’s experience was critical for a successful startup, Sanders says. Operational blunders could blacken the lottery’s reputation far worse that what has happened in Raleigh. “This has an instant market. We’ve got to start with 4,000 retailers on Day One. Getting them online and equipped and trained, that’s an enormous task. I wouldn’t have the foggiest notion of how to do that, but Shaheen does.” When it reaches full staff, probably sometime late next year, the lottery will employ 200 to 250 people, including six deputy executive directors and 12 departmental directors. Sanders says he confers with Shaheen, sometimes several times a day, by phone or e-mail. “I check in with him to see how he is doing, not to get into operations but simply to show support by asking.” Otherwise, Shaheen runs day-to-day operations as he sees fit.
There is no room for blunders. "This has an instant market. We've got to start with 4,000 retailers on Day One."
In January, the commission accepted bids from Scientific Games and GTECH. That, too, turned into a minor brouhaha. Sanders insisted on keeping bids secret during negotiations to get a better deal, saying the commission would lose leverage if each company knew what the other had bid. In an editorial Jan. 19, The News & Observer accused him of reneging on his vow to keep commission dealings transparent. It called his reasoning preposterous and blasted his stance as “an outrageous and unacceptable repudiation” of his promise.
“I’ve had one sleepless night since becoming chairman,” Sanders admits, “and it was over that editorial. I thought it was blatantly unfair and showed a complete lack of understanding of the bidding process. I try to adhere to the highest ethical standards. To be taken to task by someone who clearly didn’t understand the bidding process really ticked me off. If these people had bothered to do their home-work, they would’ve come to a different conclusion.”
Otherwise, he says the controversies surrounding the lottery haven’t bothered him much. The ability to insulate himself from turmoil seems a holdover from his days as a physician: Involve yourself emotionally with every patient, you’re sure to burn out.
On Jan. 30, the commission awarded contracts for both the instant-win tickets and lotto-style games to GTECH. Its fee: 1.6% of sales, estimated to earn it $19.2 million in the first full year alone. Shaheen managed to wring out concessions that he says could bring the state $30 million or more than projected and moved up launch dates to March 30 for instant tickets and May 30 for the drawing. “By keeping the bid submissions confidential until now,” Sanders says, “the bargaining position that the [commission] had with the vendors was enhanced and we ultimately got the best deal for the state.” The doctor might not be much of a bettor, but he would probably make a pretty good poker player.
When arguing for the lottery’s benefits — he says that, as chairman, it’s part of his job — he exhibits neither a politician’s wordiness nor an executive’s willfulness. He doesn’t try to coax or cajole but calmly outlines the pros and cons and stresses that he’ll make sure advertising underscores the long odds of winning. “If you’re luring people in with the expectation that they’re going to develop a retirement out of this, that’s deceiving. If you’re showing what the benefits are in terms of educational results, that’s fair.”
Won’t making the odds clear undercut people’s willingness to play and thus the lottery’s ability to generate money for schools? “There’s a balance, and I think we can strike it. Shaheen has done it well in New Mexico in terms of this is an education lottery, the odds of winning aren’t great.”
But when asked again about that clinging scent of scandal, his answer sounds like that of the lottery opponent he only recently was. “Why it happened is pure and simple. It’s money, which brings out the worst behavior in everybody. Where there’s a lot of money, there’s a lot of temptation. And it perverts normal human behavior.”