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Pa. lottery deal could yield big payout to firms

Marc Levy, Associated Press

HARRISBURG, Pa. (AP) -- Consultants to Gov. Tom Corbett's move to privatize the management of the $3.5 billion Pennsylvania Lottery could make tens of millions of dollars if the deal goes through.

Before Thursday, officials at the state Department of Revenue, which currently runs the lottery, had repeatedly refused to estimate the potential contract value to New York-based investment bank Greenhill & Co. until a contract with Britain-based Camelot Global Services is finalized, if that happens.

That changed after Wednesday, when the House Democratic Appropriations Committee staff published an estimate that a successful deal with Camelot, the only bidder for the contract, could boost Greenhill's compensation to between $30 million and $50 million. In response, the Revenue Department said the compensation for Greenhill and all other consultants on the deal is capped at $30 million and cited a document it had previously kept confidential.

"It was just determined that the bid document identifying the $30 million expense cap could be released without violating procurement integrity," a department spokeswoman said in an email Thursday night.

The revelation came amid criticism from Democratic lawmakers of the Corbett administration's veil of secrecy around a bidding process to privatize management of one of the nation's biggest lotteries.

It also was the first time that staff aides to House and Senate Democrats said they had heard of the cap, even after meetings with Corbett administration officials when they said they raised questions about the Greenhill contract.

"As days go by, new issues continue to come up, and this is one of them," said Auditor General Jack Wagner, a Democrat who is critical of the Republican governor's move to consider awarding such a large lottery management contract to Camelot without competitive bidding.

On Wednesday, the state treasurer, Rob McCord, also a Democrat, said he may not release payments to Camelot, should it get the contract, unless he is satisfied that its plans to expand lottery gambling are clearly legal under state law.

Corbett has said he is exploring privatization of its management to see if a company can do a better job ensuring that lottery profits keep pace with demand for programs that benefit the state's growing elderly population.

Democrats, however, have questioned why he would make changes to the management of a lottery that they said is a consistent national leader in sales and keeping operating costs low. Only a couple of states have handed management of their lotteries to private companies.

Republican lawmakers, who control the state Legislature, have remained publicly quiet the about the matter. On Thursday, Appropriations Committee Chairman William Adolph, R-Delaware, said he had not been briefed by his staff on their latest meetings with Corbett administration officials and was not prepared to comment.

The consultants include Greenhill, law firm DLA Piper and risk analysis firm Kroll Advisory Solutions and are to be paid out of $50 million put up by Camelot that the state will keep if it decides to award the private management agreement to Camelot, according to the Revenue Department.

The Greenhill managing director who signed the contract, Robert Collins, did not return a telephone message left at his Chicago office Thursday.