Pa. ends pursuit of hiring British lottery firm

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HARRISBURG – After nearly a year of trying to keep it alive, Gov. Tom Corbett said Monday that he is ending his pursuit of hiring the British national lottery operator to run the Pennsylvania Lottery in a privatization deal that promised the state $34 billion in profits over 20 years.


The length of time it took for Corbett to decide to drop his effort to hire Camelot Global Services was more of a surprise than the administration’s ultimate conclusion – that the concept faced too many challenges and had too few supporters.


Primarily, Corbett, a Republican, could not overcome a Valentine’s Day decision by Attorney General Kathleen Kane that the contract violated both the state constitution and state laws. His administration could not make enough changes in the Camelot agreement or persuade leery lawmakers to pass legislation to effectively resolve Kane’s objections.


Corbett’s administration, however, did not rule out another attempt to bid a lottery management contract in the future as it pledged to find other ways to meet the growing cost of programs that help Pennsylvania’s senior citizens.


Press secretary Jay Pagni said it made sense to move on now because Pennsylvania’s political, legislative and competitive landscape has changed since Camelot submitted its bid.


“Camelot’s bid was based on a certain landscape a year ago,” Pagni said. “It’s fair for all parties that, because of the additional risk or uncertainty of the management’s ability to meet those profit commitments, we let the bid expire.”


Hiring a private lottery contractor in return for set payments remains relatively rare: Just Indiana, Illinois and New Jersey have done so.


Camelot’s strategy essentially rested on getting people to gamble more and expanding lottery gambling, and Corbett had maintained that Camelot would be able to deliver higher and more stable profits than the current state employees who run it. At $3.7 billion in sales in its last fiscal year, it is one of the nation’s biggest lotteries and delivered more than $1 billion in proceeds for programs for the elderly.


Democrats applauded Monday’s decision, but also redoubled their criticism. It was “wasteful, secretive and ill-conceived,” House Democratic leaders said in a statement. Consultants to the Camelot deal have been paid $3.4 million, with more invoices pending, state officials say.


Efforts to accelerate lottery profits could include overhauling the advertising strategy, rolling out new games such as keno or expanding online access to lottery gambling, Department of Revenue spokeswoman Elizabeth Brassell said.


“These sort of big picture things need to be discussed,” Brassell said.


The deal had been worth hundreds of millions of dollars in management fees and performance incentives to Camelot, and would have given the company its biggest footprint yet in the United States. In a statement, Alex Kovach, Camelot’s management director, said the firm remains on good terms with Pennsylvania and is open to future opportunities.


Hiring a private lottery manager had been a crucial test for Corbett, who promised when he ran for governor that he would look to privatize state services wherever he could.


But it faced hurdles from the beginning.


Critics called the bid process too secretive and questioned why it resulted in one bidder, Camelot. Democrats pummeled it as a giveaway to a foreign company at the expense of programs for the elderly. Treasurer Rob McCord threatened to block payments to Camelot unless he was satisfied that its plan to expand gambling was legal.


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