Attorney General Kane rejects Pennsylvania lottery contract



HARRISBURG -- Attorney General Kathleen Kane announced today she has rejected a contract for the private management of the Pennsylvania Lottery.

The attorney general described the conclusions of her office that the 20-year management agreement with Camelot Global Services PA LLC is an "unlawful extension of executive authority" that infringes on the power of the General Assembly to make basic policy decisions.

She said also state law governing the lottery does not authorize the development of monitor-based games, such as keno. And she said a provision for the compensation of indirect expenses by Camelot is too open and undefined to be allowed under the state Constitution.

Gov. Corbett reacts to rejection of lottery contract

Gov. Tom Corbett reacts to Attorney General Kathleen Kane's rejection of the Pennsylvania lottery contract. (Video by Nate Guidry; 2/14/2013)

Camelot, which operates the United Kingdom lottery, pledged to bring in more than $34 billion in profits over a 20-year management contract, in part by introducing online ticket sales and keno.

Proceeds from the lottery are used to benefit older Pennsylvanians through programs including property-tax rebates and discounts on prescription drugs.

Gov. Tom Corbett has argued for the management agreement as a way to ensure a larger and more reliable stream of funding for a growing population of seniors. His budget proposal for the fiscal year beginning July 1 relies on the management agreement to provide an additional $50 million for programs for seniors.

Speaking at an event this afternoon in Pittsburgh, Mr. Corbett said he disagrees with the decision and is deeply disappointed. He said his office is reviewing the determination and considering possible responses.

Camelot issued the following statement: "We are disappointed with Attorney General Kane's decision to reject the private management contract. We guarantee our proposal will produce unprecedented profits for senior programs and we have backed our investment in Pennsylvania with $200 million -- transferring all risk from state taxpayers. Camelot has indicated it would headquarter in Pennsylvania, pay all taxes required of any commonwealth business, and keep all lottery jobs in the state. We have also publicly stated we would not oppose union organization by our employees."

Ms. Kane, a Democrat, was elected in November after promising to review how the attorney general's office, while under the direction of Mr. Corbett as attorney general, handled the investigation of former Penn State assistant football coach Jerry Sandusky that led to convictions of child sexual abuse.

Speaking to reporters this afternoon, Ms. Kane said her office made its lottery determination based only on the legality of the contract, not the wisdom of privatizing lottery management. Her remarks anticipated being faulted for denying seniors increases in state funding.

"Be wary of information by politicians that attempts to blame the lawyers who reviewed the contract for the loss of any monies to seniors," she said.

"It is disingenuous to put the cart before the horse by promising money to people in need, based upon a contract, before making sure that that contract was legal, and then blaming the messenger when it is deemed illegal," she continued.

In a release on her website, she pointed out that the attorneys who reviewed the contract have "many years experience reviewing Commonwealth contracts for 'form and legality.' It should be noted that these attorneys worked for the Governor when he was Attorney General, as well as several Attorneys General before him."

State Treasurer Rob McCord commended the decision.

"The administration was repeatedly warned, as early as last year, that the proposed contract would permit new forms of gambling not currently authorized by the Legislature and not regulated by the Gaming Control Board," he said in a statement. "Expanding the Lottery is a policy decision that should include the General Assembly, not be done through a closed-door contracting process."

Auditor General Eugene DePasquale also issued a statement saying he approved of the decision, adding, "I hope Gov. Corbett will carefully weigh the cost to taxpayers before he decides to pursue this matter further."

Democrats in the Legislature were quick to applaud the announcement.

House Minority Leader Frank Dermody, D-Oakmont, said he would push for even greater increases in the upcoming budget for programs benefiting seniors.

Senate Minority Leader Jay Costa, D-Forest Hills, said the lottery could be changed to generate more revenue while remaining under state management.

"Pennsylvania seniors and all Pennsylvania residents can rest easy now that the attorney general took this action and put a stop to the expansion of gaming without proper authorization," Mr. Costa said in a statement.

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James O'Toole contributed. Karen Langley: klangley@post-gazette.com or 717-787-2141. First Published February 14, 2013 5:45 AM


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