Corbett says he will revise lottery contract to address AG's concerns

By Jessica M. Karmasek | Mar 21, 2013

HARRISBURG, Pa. (Legal Newsline) -- Pennsylvania Gov. Tom Corbett said last week he will revise a proposed lottery contract with Camelot Global Services, providing "clarification" to the state's newly-elected attorney general, Kathleen Kane.

Last month, Kane's office determined that the proposed contract violates the state constitution and is "not statutorily authorized."

Corbett, a Republican and former attorney general himself, said revising the contract is the "appropriate next step" in furthering the goal of growing and securing "predictable" lottery funding for senior programs.

The contract with Camelot is a vendor contract, under which the company will provide management and marketing services. The lottery will continue to be owned and operated by the state, the governor said in a statement Friday.

"This is about providing for and protecting seniors," Corbett said. "Our goal is to make sure that our dramatically growing senior population will continue to have access to crucial programs and services in the years to come."

Camelot has committed $3 billion to $4.5 billion of new funding for senior programs over 20 years, and if the profits fell short of that commitment Camelot would reimburse the state for the shortfall, up to 5 percent of profits.

Currently, the Pennsylvania Lottery has no such protection, Corbett noted.

It is anticipated that the state Department of Revenue will submit a revised contract in the upcoming months to the Attorney General's Office. The contract will be available online when it is finalized, the governor added.

"We believe that predictable and growing funding for senior programs is a vital concern for all Pennsylvanians, and we will work to provide more clarity to the attorney general in order to assist her review of the revised contract," Corbett said.

Camelot's bid has been extended through June 30, according to the Governor's Office.

Last month, Kane's office conducted what it called a "very thorough" review of the Professional Management Agreement, the state constitution, the State Lottery Act, the Gaming Act and applicable case authority, and determined that it cannot approve the contract to allow Camelot to operate and manage the Pennsylvania Lottery.

Under the state's Attorney's Act, the attorney general is to review contracts for "form and legality."

In a memorandum to David Kraus, chief counsel for the state Department of Revenue, the Attorney General's Office provided three reasons why the Professional Management Agreement, or PMA, failed the "form and legality" test.

Robert A. Mulle, chief deputy attorney general and head of the office's Legal Review Section, said, first, the Executive Branch -- i.e. Corbett -- exceeded its authority under the Pennsylvania Constitution by "unlawfully infringing" on the General Assembly's power to make basic policy choices regarding the management and operation of the lottery.

Second, Mulle said the development of monitor-based or other electronic games, such as KENO, is not authorized by the State Lottery Act and usurps the authority granted by the General Assembly to the Pennsylvania Gaming Control Board.

Lastly, allowing Camelot to be indemnified for "indirect expenses," as provided in the PMA, is an "unconstitutional waiver" of the doctrine of sovereign immunity as set forth in the state constitution.

"It is our duty to defend and protect the Constitution of our Commonwealth and that is what our office has done by declining this contract," Kane said in a statement last month.

"In the course of making this determination, I have taken the advice and counsel of the executive deputy attorney general in charge of the Civil Division and the chief deputy attorney general in charge of the Legal Review Section. Together, these attorneys have many years of experience reviewing Commonwealth contracts for 'form and legality.'"

The attorney general noted that these attorneys worked for Corbett when he was attorney general, as well as several attorneys general before him.

"Promising money to people in need based on a contract that is not legal and then blaming those entrusted to do their job correctly is both disingenuous and a perfect example of putting the cart before the horse," said Kane, the first woman ever elected to the position and the first Democrat to be elected since it became an elective office in 1980.

"It is important that my office perform its role in the system of checks and balances that our government desperately needs and that our citizens deserve."

Corbett, a Republican, initially said he was "deeply disappointed" with Kane's review.

"I don't agree with the attorney general's analysis and decision, and we will review our legal options," he said at the time.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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