Magness Lake, in Heber Springs, is a magnet for swans
In September 2011, Arkansas Lottery Internal Auditor Michael Hyde told Lottery Commissioner Bruce Engstrom and Lottery Director Bishop Woosley, who at the time served as legal counsel, that he had uncovered some inconsistencies in a deal with the lottery's largest vendor, which could cost the lottery $20 million and possibly much more. According to Engstrom, when Hyde began discussing looking further into how the contract was awarded and if it should have gone to another vendor Woosley said, "If this gets out, we're all going to lose our jobs." (Woosley has said he doesn't remember saying that, but if he did, the context was, if an inaccurate report gets out, people could lose their jobs.)
Shortly thereafter, Hyde and Woosley met with former Lottery Director Ernie Passailaigue to discuss the contract and why a week after it was signed Passailaigue amended it to make the terms more favorable to the vendor. The day after the meeting, Passailaigue tendered his resignation.
For more than a year, whether Passailaigue adhered to the law when he amended the contract was a matter of fierce debate between lottery staff, the state legislative oversight committee of the lottery and the division of legislative audit. Ultimately, the three settled the matter by agreeing that the lottery would operate differently in the future. Hyde's investigation, which became public last month following a Freedom of Information request from the Arkansas Times, rehashed that argument but also considered a more salient question: Why did Passailaigue sign off on a contract that gained the lottery nothing and cost it millions?
It's a question no one has been able to answer satisfactorily, including Passailaigue. Reached at his home in Isle of Palms, S.C., last week, Passailaigue wouldn't discuss why he altered the contract. "If it comes to a court of law, I will set the record straight," he said. Pressed on why it would come to a court, he said, "Contracts are subject to dispute or misinterpretation."
"It doesn't take any legal analysis to see that what he did was wrong," Gov. Mike Beebe said of Passailaigue on the March 30 edition of "Arkansans Ask: Governor Mike Beebe" on AETN. "It was wrong for him to do that. That in and of itself would have amounted to a firing offense. Does that render the contract as changed illegal? I don't know the answer."
Pressed by host Steve Barnes as to his sense of the deal, Beebe said, "My initial sense is that if it was wrong to do it, then it's illegal."
Weeks later, after asking his in-house counsel to review the contract, Beebe said the contract is legal, but "not right." Like the speaker of the House and the Senate pro tempore, Beebe controls three appointments to the commission, but otherwise has no authority over the lottery.
On April 11, Hyde made his official recommendation to the lottery commission: seek outside legal counsel to determine the validity of the contract and, should it be deemed invalid, seek financial redress. Seven commissioners, including two appointed by Beebe — Chair Dianne Lamberth and Secretary Treasurer Ben Pickard — voted to ignore the auditor's advice and reaffirm their commitment to the vendor, Scientific Games International (SGI). Engstrom and George Hammons, another Beebe appointee, voted against reaffirming the deal. After the vote, the commission went into executive session for almost an hour to evaluate Woosley and Hyde. It reconvened without taking any formal action, promising to pick up the evaluation in May. Engstrom said after the meeting he feared the commission might vote to fire Hyde. "I've always thought his job is in jeopardy and there's nothing that happened today that changed that," he said.
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