Lottery privatization plan's rejection sets off political fireworks

Pa. Attorney General Kathleen Kane said the plan usurped lawmakers.
Pa. Attorney General Kathleen Kane said the plan usurped lawmakers. (SEAN SIMMERS / Harrisburg Patriot-News)
Posted: February 16, 2013

HARRISBURG - The words that the state attorney general read aloud from a yellow legal pad Thursday were about the lottery, the law, and the language of the state constitution.

But they may as well have been a declaration of political war.

Attorney General Kathleen Kane told reporters that she was rejecting Gov. Corbett's bid to privatize the Pennsylvania Lottery because the deal usurps the legislature's powers and runs afoul of state gaming regulations. She called the administration's contract with a British lottery firm illegal.

In announcing her decision to upend one of the Republican governor's policy cornerstones, Kane stressed that she was not passing judgment on the wisdom of privatizing the lottery, but simply on the legality of the state's contract with Camelot Global Services.

Under that contract, Camelot would manage the lottery, which last fiscal year recorded more than $3.5 billion in sales and more than $1 billion in profit that went toward programs that benefit senior citizens.

But lest there was any doubt that Kane, a Democrat, was keenly aware of the possible political fallout from her decision, she made this appeal to the public:

"Be wary of politicians and attempts to blame the lawyers who reviewed the contract for the loss of any money for seniors. . . . We did not write the contract, we did not negotiate the deal. . . . 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 contract was legal, then blaming the messenger when it is deemed illegal."

With that, Kane, whose office reviews all state contracts for form and legality, left the news conference. She did not take questions from reporters.

Her decision set off a scramble by the administration to find ways to salvage its first major attempt at privatizing state services. It also offered a glimpse of what life for Corbett could be like for much of the next two years, as he seeks to bolster his public image and prove his leadership mettle, reverse sagging poll numbers and seek reelection in 2014.

Kane was elected last year on a pledge to investigate how then-Attorney General Corbett handled the child sexual-abuse investigation of former Pennsylvania State University assistant football coach Jerry Sandusky. One of her first moves was appointing a former federal prosecutor, H. Geoffrey Moulton Jr., to head that probe.

Corbett, in a statement Thursday, said he was "deeply disappointed" by Kane's lottery decision and was reviewing his options, which include challenging the decision in court. He reiterated that he believed Camelot, which runs Britain's national lottery, could produce higher and more consistent lottery profits as the state tries to keep pace with rising demand for senior programs the lottery funds.

Still, at a press event in Pittsburgh later in the day, the often-laconic governor went out of his way to offer one observation - that when he was attorney general, he never held a news conference, as Kane did Thursday, to announce his office's rejection of a state contract.

Asked whether he thought Kane's decision was political, Corbett said, "I'll let you decide that."

The fate of the effort to sign Camelot was not immediately clear. The company, in a statement, expressed disappointment but gave no hint whether it was willing to renegotiate.

Kane cited three reasons for rejecting the contract, among them that it usurped the legislature's authority to make decisions on the lottery's management and operations. She also said that by allowing the lottery to add electronic games such as keno, the contract would exceed what is authorized by the state Lottery Act and preempt the Gaming Control Board's authority.

In an online statement about the decision, Kane said the review had been conducted by lawyers on her staff with "many years of 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."

Recent polls have found most voters skeptical of privatizing the lottery. Democratic officeholders, who have criticized the deal from the start, could barely contain their glee Thursday, sending out a barrage of statements on why they believed the decision was right for Pennsylvania.

"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," said Treasurer Rob McCord, one of a number of Democrats who are considering challenging Corbett in 2014. "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, another Democrat, said Kane "and her team of lawyers made the right decision after identifying the legal flaws in the contract that would have led to an unprecedented expansion of gambling without legislative and public input."

While the state GOP branded the decision "blatantly political," Republicans who control the legislature were more circumspect - perhaps not surprising given that the administration negotiated the deal with little if any input from them.

Senate Majority Leader Dominic Pileggi (R., Delaware) said he was "surprised" by the decision, while saying that it highlighted a need to clarify how the state lottery law intersects with gambling regulations. House Majority Leader Mike Turzai (R., Allegheny) and House Speaker Sam Smith (R., Jefferson) went a step further, saying the legislative branch should decide if the governor has too much say or is usurping authority.

"Consequently," the two leaders said in a joint statement, "we expect that the legislature will be reviewing the attorney general's determination with great interest."


Contact Angela Couloumbis at 717-787-5934 or acouloumbis@phillynews.com, or follow on Twitter @AngelasInk.

Inquirer staff writer Amy Worden and Pittsburgh Post-Gazette staff writer Jim O'Toole contributed to this article.

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