The Hoosier Lottery has agreed to pay $2.75 million to settle a lawsuit filed by eight black former employees who claim
racial discrimination motivated their firing four years ago.
Six of the employees had worked for the lottery since its inception in 1989, and the two others were hired in 1997. They were all fired between January and August 2005 while Esther Schneider—Republican Gov. Mitch Daniels' first appointee to the position—was the lottery's executive director.
After recording individual complaints with the U.S. Equal Employment Opportunity Commission, they filed federal suit together, alleging civil rights violations under Title VII of the Civil Rights Act of 1964.
Schneider stepped down in December 2006, less than two years after she took the job. On May 1 of this year, her successor, Kathryn Densborn, signed the settlement. IBJ obtained a copy through a public records request. In it, the lottery admits no guilt.
"The Lottery denies any liability for the matters alleged in the lawsuit and contends that the plaintiffs' terminations of employment were lawful in all respects," it reads. "The plaintiffs and Lottery now desire to compromise and settle the lawsuit in its entirety."
The case had been scheduled for a July jury trial. Court records show that the lottery had planned to argue it had been overstaffed and had legitimate, nondiscriminatory reasons for firing the eight black employees, in addition to 26 white employees. The lottery now employs 186.
The lawsuit provides few details surrounding the firings of the black employees, beyond asserting they were based on racial discrimination.
In her EEOC complaint, former Community Affairs Manager Donna Southers, one of the lottery's original employees, wrote that Schneider called her into her office and terminated her "without notice, without foreknowledge and without cause."
"During my employment I had never received so much as a warning let alone any other form of discipline," she wrote. "It should be noted that the [Lottery] Commission has terminated an extremely large number of African Americans and since August of 2005 replaced them with Caucasians."
Local law firm Macey Swanson & Allman, which represented the former employees, will receive $841,318 as its share of the settlement; the individual plaintiffs will each receive from $166,893 to $304,079.
Schneider, who was not a defendant, told IBJ she had not been aware of the settlement and was "stunned" by the size of the payment. She denied discrimination was the basis for any firing, and questioned the plaintiffs' capacity to show proof.
"The decision for a settlement and to pay usually overrides principles for business," said Schneider, who now works as a consultant. "It's not the decision I would have made had I still been the director, but it's not my job anymore."
None of the parties to the settlement would comment because the agreement specifically prohibits doing so. It includes a "confidentiality and non-publicity" clause restricting disclosure.
"The parties understand and agree that the Lottery is subject to the Access to Public Records Act ... and that this agreement may qualify as a public record," the settlement reads. "The parties nevertheless agree that they shall not directly or indirectly publicize, reveal, or in any other manner draw attention to the settlement or this agreement.
"In the event of media inquiries concerning the settlement or this agreement," it continues, "the parties will limit their response to a statement that the case was resolved to the mutual satisfaction of the parties."
That's the answer both lottery spokesman Andrew Reed and plaintiffs' attorney Kimberly Jeselskis gave, verbatim, to IBJ's questions. Daniels' spokeswoman Jane Jankowski also declined to comment.
Calls to other parties involved in the suit were not returned.
Schneider was one of Daniels' highest-profile early appointees, with a reputation as a reformer. She had been a director of advertising for a Las Vegas casino before coming to Indiana, where she became a GOP fund-raiser.
While serving as executive director of the Indiana Senate Majority Campaign Committee in 2003, she questioned the accounting of her predecessor, spawning a criminal investigation.
A year after becoming lottery director, Schneider found herself under scrutiny. An anonymous, 10-page letter received by Indiana's inspector general alleged cronyism and improper expenditures. The letter claimed she had awarded contracts to benefit friends and had assistants perform personal tasks for her.
In August 2007, the inspector general ruled Schneider had committed no ethics violations, other than spending $10,000 in lottery money on a luncheon for Republican women.
By that time, the dispute over the firing of the black employees had been quietly simmering for more than two years.
In 2005, the EEOC had dismissed the individual charges of racism against the lottery, citing insufficient information.
"Based upon its investigation, the EEOC is unable to conclude the information obtained establishes violations of the statutes. ... This does not certify that the respondent is in compliance with the statutes."
The former employees then banded together to file the federal lawsuit. The lottery did its best to quash the case. It initially argued entitlement to sovereign immunity as a state agency, which would have required dismissal. U.S. District Court Judge Sarah Evans Barker rejected that line of reasoning. The lottery appealed, but last October, the U.S. Court of Appeals affirmed Barker's opinion.
Court documents suggest the case could have become politically ugly if it had gone to trial.
Among the 44 questions for potential jurors proposed by the lottery's counsel:
• "Have you developed any opinion of [Gov.] Mitch Daniels or his administration that would affect your view of the evidence in this case?"
• "Have you visited the Web site www. takingdownwords.com or other Web logs ("blogs") critical of the management of the Lottery during the administration of Mitch Daniels?"
• "What magazines, journals or newspapers do you regularly read?"
In their 26 proposed juror questions, the plaintiffs' attorneys also inquire about political leanings: "Have you had any bumper stickers on your car at any time during the last five years? If so, what did they say?"
Court records say the lottery had planned to argue that the plaintiffs had poor performance records; checkered credit histories; negative, insubordinate attitudes; and bad driving records.
This is the second discrimination lawsuit the lottery has settled stemming from Schneider's reign.
In April 2008, it agreed to pay $225,000 to settle a lawsuit filed by former General Counsel Janna Shisler alleging violations of the Americans with Disabilities Act.
Court documents say Shisler, who is quadriplegic, was hired in 1992 and consistently received excellent performance appraisals. She supplied her own accessible desk, adaptive typing device and other equipment to facilitate her work. A longtime executive assistant helped her with retrieving, moving and carrying documents, as well as other office tasks Shisler couldn't perform.
Shisler's lawsuit charged that Schneider had a pattern of criticizing Shisler in front of other staff members. It also charged Schneider habitually yelled at Shisler over speaker phone; and on one occasion thrust a multi-page document in her face, demanding that she locate information, despite her inability to hold it or turn its pages.
The complaint describes escalating hostility and verbal attacks, culminating in a September 2005 incident in which Schneider ripped up a document and threw the pieces at Shisler.
That settlement was first reported by the Fort Wayne Journal Gazette last year. Like the settlement with black employees, it contains a confidentiality clause that prevents parties from calling attention to the matter.
Turae Dabney, executive director of the Indianapolis Black Chamber of Commerce, said she hopes the settlements inspire others to speak up when they think they have encountered discrimination.
With President Obama holding the nation's highest office, she said, it's easy to assume racial prejudice is no longer a problem. But she said it lingers on.
"We still have a far way to go, and that's a little scary," Dabney said. "We can have a black president, and still have all these underlying issues."