Pennsylvania returns $50 million lottery payment to British firm

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HARRISBURG -- The Corbett administration on Tuesday cited the potential for a prolonged appeal of the attorney general's rejection of a lottery management contract as it returned a $50 million security payment to a British company.

Revenue Secretary Dan Meuser said the money was returned to Camelot Global Services because the administration does not expect to execute a private management agreement in the near future.

Camelot, which manages the United Kingdom lottery, had pledged to generate $34 billion in lottery profits over 20 years, a commitment that Gov. Tom Corbett said would allow the state to support a growing population of seniors. Seniors benefit from the lottery through programs such as property-tax rebates and discounts on prescription drugs.

But the plan was sidelined last week when state Attorney General Kathleen Kane said her office had determined the contract violates state law. Mr. Corbett, a former attorney general, has said he strongly disagrees and is considering how to respond.

The law allows an appeal of the attorney general's determination to Commonwealth Court, and on Tuesday Mr. Meuser said such an appeal "probably has to happen as well as anything else."

He said he believes procurement rules do not allow the administration to alter the contract to satisfy the attorney general, although a spokeswoman for the Department of Revenue said attorneys are reviewing that question.

"If an appeal or whatever decision is made to try to continue to pursue something that we think is a very positive thing for the commonwealth, it's going to take a while," Mr. Meuser said. "So the idea of holding that $50 million and replacing it with a promissory note is certainly reasonable."

Ms. Kane, a Democrat who took office in January, said the contract infringes on the Legislature's authority to make policy and that state law governing the lottery does not allow development of monitor-based and other electronic games, such as keno. The introduction of keno would account for about half the growth Camelot promised over 10 years, Mr. Meuser said.

The bid by Camelot was set to expire Feb. 16, but the administration said that day the bid had been extended until Friday. A spokesman for Camelot declined to comment on the return of the security or the company's willingness to keep the bid alive through an appeals process.

"Camelot's hopeful that a plan can be pieced together in the shorter term, perhaps the longer term, but certainly they're not going to invest their resources without a light at the end of the tunnel," Mr. Meuser said. "So a lot has to be decided over the next few days."

If Mr. Corbett does appeal the determination, the court would consider his argument and the determination by Ms. Kane with equal weight, said Bruce Ledewitz, a professor at Duquesne University School of Law.

"If we have a dispute here within the executive branch, there's no particular reason why the governor's view should be presumed incorrect vis-a-vis the attorney general," he said.

The legal question could be resolved fairly quickly, Mr. Ledewitz said, if Mr. Corbett asks the Supreme Court to take the case directly.

"In my view, there's not much point in having such an important legal question decided by Commonwealth Court," he said. "I think this is a case that has to end up in Pennsylvania Supreme Court. It might as well go there right away."

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Karen Langley: or 717-787-2141. First Published February 20, 2013 5:00 AM


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