SOURCE: Pennsylvania Treasury

Pennsylvania Treasury

October 28, 2013 12:26 ET

Treasurer McCord: Gov. Corbett Has Now Paid Lottery Privatization Consultants, Law Firms More Than $3.4 Million

McCord Calls on Gov. Corbett to End Flawed and Wasteful Privatization Effort

PHILADELPHIA, PA--(Marketwired - October 28, 2013) - State Treasurer Rob McCord today revealed that Gov. Corbett has so far diverted more than $3.4 million from the state Lottery Fund -- dollars that should have been used to help senior citizens -- to pay consultants and law firms for his misguided attempt to privatize the Pennsylvania Lottery.

"If that $3.4 million were a stack of $1 bills, it would be taller than the Comcast Building -- the tallest building in Pennsylvania," said McCord. "That towering stack of money is Lottery Fund money -- money that could and should have been used to help our seniors. Instead, Gov. Corbett's team poured that $3.4 million into the governor's misguided ideological pursuit of a privatization plan that is both unwise and unauthorized by law."

McCord pointed out that $3 million of the total amount wasted on privatization advisors could have provided:

  • The 52 Pennsylvania Area Agencies on Aging and senior centers with 428,571 more meals for seniors, or;
  • 151,975 more prescriptions for PA seniors through PACE and PACENET, or;
  • 714,285 more free transit or reduced-share rides for seniors, or;
  • Property Tax and Rent Rebates to 6,380 more senior households.

"This is real money that should have been used to help our senior citizens," McCord said. "Instead, it has lined the pockets of consultants who are pursuing an ill-advised plan to privatize our efficient and well-administered Lottery.

"There is no need to divert Lottery profits to a British company. Gov. Corbett should see that. Instead, he seems inclined to either sign a contract or extend yet again the bid to reach such an agreement.

"So, today, I call on Gov. Corbett to put this failed and costly experiment to an end. Do not to extend this bid again. Do not divert more money from our seniors."

Tomorrow is the deadline for the latest bid extension granted to Camelot Global Services, Inc., the sole company to bid on the private management agreement.

Of the $3.4 million the Corbett Administration has paid in pursuit of this agreement, $2.36 million has gone to the consultant DLA Piper. Another privatization consultant, Greenhill and Co. LLC, previously received $1 million, and the law firm of Blank Rome has received more than $116,000 defending the governor's plan against litigation.

Treasurer McCord was the first statewide official to express grave concerns about the proposed arrangement.

In December 2012, McCord informed the administration that he might not be able to disburse commonwealth funds to Camelot if the company, as proposed in a draft plan, introduced types of gaming not authorized by the Lottery law, or types that could conflict with the 2004 state law that legalized slot machine gambling exclusively at licensed casinos.

Then, in February 2013, Attorney General Kathleen Kane disapproved the contract, citing legal problems. The Corbett Administration has since extended Camelot's bid while claiming it is trying to address the attorney general's objections. The most recent extension is set to expire tomorrow. In total, the administration has extended the bid agreement at least eight times, according to reports, since it was originally scheduled to expire on Dec. 31, 2012.

McCord said the governor should let the deadline pass -- and not attempt to execute the agreement or waste more money on consultants.

"From the beginning, the governor's plan has been driven by blind ideology and a myopic desire to privatize a government function at all costs," McCord said. "We should always examine the Lottery to look for innovative opportunities to generate additional revenue for senior citizen programs. Sometimes, privatization may make sense, but this is not one of those cases. The Lottery is operating with demonstrable efficiency and generating strong results. Virtually the only Pennsylvanian clamoring for its privatization is Gov. Corbett."

"The longer this drags on, the higher the consulting bills will be, and the fewer services we will be able to provide Pennsylvania seniors. There should not be another extension of this misguided contract. Terminating it is long overdue."

Under the state Fiscal Code, the treasurer is required to provide pre-transaction audits or "fiscal review." Therefore, the Treasurer's Office independently audits all requests for payments from commonwealth funds to make sure they are lawful and correct. The payments to the consultants met that minimum legal standard.

"I consider the administration's Lottery consulting contracts to be a gross waste of money. But they are not illegal," McCord concluded. "Unfortunately, the Fiscal Code does not allow me to block foolish payments, only unlawful ones," McCord said.

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