Saturday, October 10, 2015

Surprise: Lottery consultant to get fat contract

Posted By on Sat, Oct 10, 2015 at 7:50 AM

WHAT ARE FRIENDS FOR: Republican Sen. Jimmy HIckey has pushed from the beginning for ever-improving terms for a lottery consultant represented by Republican lobbyists.
  • WHAT ARE FRIENDS FOR: Republican Sen. Jimmy HIckey has pushed from the beginning for ever-improving terms for a lottery consultant represented by Republican lobbyists.
It is not exactly shocking that a consultant group that's had the inside track all along to realize profits from the Arkansas Lottery appears to be getting a better deal than originally described. 

Michael Wickline reports that de facto lottery boss Republican Sen. Jimmy Hickey of Texarkana has drawn up a revised deal for Camelot Global Services to consult on lottery matters: Base compensation $650,000 every year through 2020, plus $100,000 in expenses per year. THEN it would get an override of 12.5 to 15 percent of lottery earnings above benchmarks, the lowest percentage take on amounts made in excess of the lottery's current net of about $72.8 million and $80 million, or up to $900,000 of a rise of $7.2 million.

Net, by the way, will NOT factor in some overhead expenses — related expenses to the Higher Education Department, which doles out lottery scholarships; the state's auditor; legal and professional services, and depreciation. Does your business get to exclude legal, professional, audit and related-party services before paying out profits to shareholders? I bet not. 

This deal has been wired for years. "Loaded dice," I called it more than a year ago. Hickey has long had designs to take the lottery under his wing and the Republican majority has done so. It abolished the lottery commission. It put it in the governor's finance department. Camelot? They were represented by Republican lobbyists Bill Vickery and Mitchell Lowe. When Camelot missed a deadline to bid on a consulting contract, Hickey fixed things by arranging a no-bid $149,500 contract (plus expenses) for them at the Legislative Council. (That bid was about five times the low bidder in the lottery's own process.) And wouldn't you know it?  After consulting the Camelot consultants produced an idea on rehabbing the declining lottery fortune that resulted in, shazam, Camelot getting the consulting work. Seven come 11.

When this latest deal was first mentioned in August, the Democrat-Gazette report didn't mention a base payment of $650,000 to Camelot. At that time, the Democrat-Gazette reported it was an "incentives-based" deal: "Camelot Global Services' expenses would be paid with part of the lottery's savings from renegotiations of the lottery's other vendor contracts." It would get half the savings, the article said, but no mention was made of a $650,000 base pay plus expenses. But its real take would be the percentage take on increased winnings.

When questioned about this deal by Sen. Joyce Elliott in August (she asked whether it was normal), Lottery Director Bishop Woosley (who continues to hold his job at the sufferance of Hickey) said it was the "new norm" in the industry.

I'm afraid this is a very good picture of the "new norm" in Arkansas politics. You know. Victors. Spoils.

The lottery — to which Arkansas came too late with unrealistic expectations — may be revived by the consultant and scholarship money will grow while the consultants prosper. Win/win (though certainly not enough in scholarship net to offset skyrocketing college cost increases). But the consultants'  hands were tied to a degree earlier by Hickey who put the legislative kibosh on lottery expansion into video terminal gambling, used in other states to keep revenues coming after the initial allure of scratch tickets wore off. Maybe another new norm is in the offing.

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