Lottery commission delays action on vendor contract | Arkansas Blog

Tuesday, March 27, 2012

Lottery commission delays action on vendor contract

Posted By on Tue, Mar 27, 2012 at 6:32 PM

After a three hour Arkansas Lottery Commission, which I had to leave early to come back here and write a quick column before our print deadline: a few quick takeaways.

*The Arkansas Lottery Commission desperately needs to retain outside counsel to review its contract with the instant-ticket vendor Scientific Games (SGI). As we've previously reported and as he detailed at the meeting today, Internal Auditor Michael Hyde believes the contract is invalid and has cost the lottery $7.5 million dollars. Director Bishop Woosley said today that he disagrees with Hyde's understanding of the SGI contract. Invalidating the contract would open the lottery up to a multimillion dollar lawsuit from SGI, he said. Pressed by Commissioner Bruce Engstrom on whether the deal had been good for the lottery, Woosley would only say that a valid deal does not equal a good deal.

*Scientific Games vice president and legal counsel Phil Bauer read a prepared statement at the end of the meeting, citing the more than $176 million dollars it helped the lottery generate. "We take our reputation for high integrity very seriously, and compliance with all applicable laws, rules and regulations in our business operations is of the highest priority to Scientific Games," he said. And later, "While we understand the role of the internal auditor and welcome and support transparency in government, we cannot continue to stand by as our reputation suffers damages by these repeated and unjustified attacks." He then asked the commission to formally reaffirm its contract with SGI.

The commission declined. I left before I could get comment from anyone, but I'm told the commission has not scheduled its next meeting.

Here's a bit of my column sub for Max for this week's issue. I'll try to add to this post later tonight if I can get time.

It wasn't hard to explain Ernie Passailaigue's decision to resign as director of the Arkansas Lottery last September. He'd faced two firing attempts, two scolding legislative audits and was facing harsh criticism over a $100,000 fine levied by the IRS on the lottery for late payment of taxes withheld from lottery winners. But notes the Arkansas Times obtained via a Freedom of Information request from a meeting between Passailaigue, the lottery's internal auditor and other lottery officials held the day before Passailaigue tendered his resignation suggest another reason for his departure: Internal Auditor Michael Hyde's investigation into the validity and benefits of a contract with instant-win vendor Scientific Games International (SGI).

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