Brazilian scandal hurts Gtech profit

Wednesday, June 30, 2004 | 9:10 a.m.

BLOOMBERG NEWS

WEST GREENWICH, R.I. -- Gtech Holdings Corp., the world's biggest supplier of online lottery systems, cut its forecasts for the second quarter and fiscal year 2005 because of a Brazilian federal injunction stemming from a corruption inquiry of a former aide to Cabinet Chief Jose Dirceu.

Gtech said in a statement it expects to earn 70 cents to 75 cents a share in the second quarter, down from its previous forecast of 75 cents to 80 cents. The company said it expects to earn $2.85 to $2.95 a share for the year ending Feb. 26, down from its forecast of $3.05 to $3.15 a share.

The Brazilian government ordered that 30 percent of payments due to Gtech Brazil from bank Caixa Economica Federal be deposited into a Federal Court-governed escrow account, Gtech said in a statement.

In March, the Brazilian government said in a report that it had "strong evidence" that former Dirceu aide Waldomiro Diniz, may have helped Gtech extend contracts in the country. Brazil's President Luiz Inacio Lula da Silva fired Diniz in February after allegations that he'd accepted campaign money for Lula's Workers' Party from an illegal gambling ring in 2002.

Gtech is not being investigated and couldn't be charged under Brazilian law, the company said.