Pa. lottery deal could yield big payout to firms
HARRISBURG – Consultants to Gov. Tom Corbett’s move to privatize the management of the $3.5 billion Pennsylvania Lottery could make tens of millions of dollars if the deal goes through.
Officials at the state Department of Revenue, which currently runs the lottery, have repeatedly refused to estimate the potential contract value to New York-based investment bank Greenhill & Co. until a contract with Britain-based Camelot Global Services is finalized, if that happens.
On Wednesday, the House Democratic Appropriations Committee staff published an estimate that a successful deal with Camelot, the only bidder for the contract, could boost Greenhill’s compensation to between $30 million and $50 million. That prompted a Revenue Department response Thursday that the compensation for Greenhill and all other consultants on the deal is capped at $30 million.
The revelation was the first time that staff aides to House and Senate Democrats said they had heard of the cap, even after meetings with Corbett administration officials when they said they raised questions about the Greenhill contract. Democrats have already repeatedly criticized what they call a veil of secrecy around the bidding process for a lottery contract.
“As days go by, new issues continue to come up, and this is one of them,” said Auditor General Jack Wagner, a Democrat who is critical of the Republican governor’s move to consider awarding such a large lottery management contract to Camelot without competitive bidding.
On Wednesday, the state treasurer, Rob McCord, said he may not release payments to Camelot, should it get the contract, unless he is satisfied that its plans to expand lottery gambling are clearly legal under state law.
The Pennsylvania Lottery is one of the nation’s biggest, and Corbett has said he is exploring privatization of its management to see if a company can do a better job ensuring that lottery profits keep pace with demand for programs that benefit the state’s growing elderly population.
Democrats, however, have questioned why he would make changes to the management of a lottery that they said is a consistent national leader in sales and keeping operating costs low.
The Revenue Department could not immediately point to contract provisions that cap the compensation for the consultants, which include Greenhill, law firm DLA Piper and risk analysis firm Kroll Advisory Solutions. It said the consultants would be paid out of $50 million put up by Camelot that the state will keep if it decides to award the private management agreement to Camelot.
The Greenhill managing director who signed the contract, Robert Collins, did not return a telephone message left at his Chicago office Thursday.
Republicans, who control the state Legislature, have remained publicly quiet the about the matter. On Thursday, Appropriations Committee Chairman William Adolph, R-Delaware, said he had not been briefed by his staff on their latest meetings with Corbett administration officials and was not prepared to comment.
Only a couple of states have handed management of their lotteries to private companies.