Court Rules Gtech Can Compete With Banks in Welfare Contracts
April 27, 2011
WASHINGTON -- The U.S. Court of Appeals ruled in Gtech Corp.'s favor in a decision that the company says will allow it to compete with banks for government contracts to run debit-card programs for welfare recipients. Gtech, a West Greenwich, R.I., lottery company that has been trying to expand into other areas, sued the Department of the Treasury last year after the agency refused to accept applications from nonbanks to run a pilot program involving electronic distribution of welfare benefits. But the appeals court, overturning a lower-court ruling, found that the Treasury was ``arbitrary'' in its decision to allow only banks to bid on a pilot program by eight Southern states. The states hope to cut welfare fraud by distributing benefits electronically. Instead of checks or food stamps, recipients would get personal debit cards, which could be used to get cash or buy food. The U.S. District Court here ruled in favor of the Treasury in September, and the agency awarded the contract to Citicorp's Citibank unit. Gtech says the Treasury -- now in early stages of implementing the new program -- must go out to bid again. ``We are very gratified by the decision,'' said Marcelino Vanlandingham, a spokesman for Gtech's Transactive unit in Austin, Texas. Citibank spokeswoman Ana Dexter said the company was ``disappointed'' by the decision, because banks can best provide the ``fiduciary responsibility and reliability that benefit recipients deserve.'' The Treasury, which has the right to request a further hearing by the U.S. Court of Appeals, declined to comment. In New York Stock Exchange composite trading Wednesday, Gtech shares closed at $25.875, up 12.5 cents.
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