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Democratic legislative leaders ask attorney general to reject lottery contract

| Thursday, Jan. 17, 2013, 11:58 a.m.

HARRISBURG — House and Senate Democratic leaders on Thursday asked state Attorney General Kathleen Kane to reject the contract between a British-based company and the Corbett administration to privatize management of the 38-year-old Pennsylvania Lottery.

The contract allows a “dramatic expansion of gaming” by allowing keno, a fast-paced video terminal game, without the Legislature's approval, said Senate Minority Leader Jay Costa, D-Forest Hills, and House Minority Leader Frank Dermody, D-Oakmont.

This “overstepped and usurped the authority of the Pennsylvania Legislature,” they said.

Kane, a Democrat, took office on Tuesday and got the contract on Wednesday. She has 30 days to review its “form and legality” and gave no hint as to what she might decide.

Republican Gov. Tom Corbett, a former attorney general, expressed confidence that the review, typically a formality, would result in approval.

“My legal counsel advises me we have the authority to do this,” Corbett said.

Under the contract, Camelot Global Services guarantees the state $34 billion over 20 years. The company would put up $200 million, which the state could use if the company fails in any year to hit a revenue projection. Camelot would replenish the fund after any withdrawals.

Lottery money pays for Pennsylvania's senior citizen programs, such as rebates on property tax and rent, and low-cost prescription drugs.

The contract to privatize the lottery immediately provides $50 million for senior programs in the 2013-14 budget, Corbett said.

The money would go toward in-home services for low-income people older than 60. It would decrease the waiting list of people needing home support and personal care, increase investments in Area Agencies on Aging, and make improvements to senior centers.

Under the contract, Camelot would expand games such as keno to taverns and clubs in order to boost lottery revenue.

A legal issue posed to Kane is whether the contract violates federal law by relinquishing too much state control.

“They can only give away so much,” Costa said.

The attorney general's review “is sort of a ministerial function, for the most part,” said Walter Cohen, a former acting attorney general. “There are about 25,000 contracts signed by departments each year.”

Kane “would have to determine there is a regulation or legislation to allow the state to enter into the contract,” Cohen said, but would not decide whether it's a good or bad idea to privatize the lottery.

A review by the attorney general typically looks at whether a contract is “legal and in the right form, with the right people and the right signatures,” said LeRoy Zimmerman, another former attorney general. It ensures “the I's are dotted and T's are crossed.”

Whether Kane could deny the contract because of the addition of keno is not clear, Zimmerman said.

“I don't think there have been a lot of cases litigated” on attorney generals' reviews, he said.

Corbett said that as attorney general, he typically worked out contract issues with the governor's office. But Democratic leaders put forth a challenge larger than a disagreement over paragraphs.

If Kane rejects the contract, a remedy is available through Commonwealth Court, said former Attorney General Ernie Preate, who resigned in 1995 and served a year in federal prison on a felony mail fraud conviction. He now practices law in Scranton.

Camelot could ask the court to reverse the decision, Cohen said, adding that “can take months.”

Corbett has said that boosting lottery revenue, as the deal is designed to do, is vital to ensure programs are protected for the state's growing senior population. The lottery is the only one in the nation that devotes all revenue to senior programs.

The American Federation of State, County and Municipal Employees, which represents about 170 lottery employees, filed a lawsuit in Commonwealth Court to block the plan.

The Department of Revenue says Camelot intends to employ as many lottery employees as possible, but they no longer would be unionized. They could attempt to organize, said Revenue spokeswoman Elizabeth Brassell.

Costa said Democratic leaders will join the union's lawsuit.

Brad Bumsted is state Capitolreporter for Trib Total Media.He can be reached at 717-787-1405or

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