HARRISBURG — Pennsylvania Attorney General Kathleen Kane said Thursday that she has rejected a contract sought by Gov. Tom Corbett that would let a British firm manage the $3.5 billion Pennsylvania Lottery, saying it contravenes the state constitution.
Her decision came after Corbett undertook a nine-month process to hire a private company to replace state employees atop one of the nation's largest lotteries.
Corbett can challenge Kane's decision in court.
The rejection is likely to add animosity to the relationship between Corbett, a Republican, and Kane, a Democrat who has been in office barely four weeks. Kane ran on a pledge last year to be independent of Corbett and investigate how the attorney general's under Corbett in 2009-10 handled the molestation investigation into former Penn State assistant coach Jerry Sandusky.
Corbett, whose administration signed the agreement last month, has said he believes Camelot Global Services can produce higher and more stable lottery profits as the state tries to keep pace with rising demand for programs for the elderly that the lottery funds. Democratic lawmakers have criticized Corbett as simply diverting money from programs for the elderly to a foreign firm at a time when the state employees who run the lottery are achieving strong gains in profits and sales and keeping overhead low.
Camelot runs the United Kingdom's official lottery. The attorney general's office reviews state contracts for form and legality.
Corbett's agreement with Camelot was for 20 years. Camelot guaranteed at least $34 billion in profit to the state over that period and could earn another 10 years in extensions if it meets certain performance benchmarks. It was allowed to charge a management fee worth hundreds of millions of dollars over the life of the deal and receive cash incentives for exceeding its annual profit commitments. Those incentives were capped at 5 percent of annual profits.
But other challenges had awaited the deal.
Democratic lawmakers and the union that represents lottery employees have gone to court to try to scuttle it.
Treasurer Rob McCord, a Democrat, had warned that he may withhold payment to Camelot unless he was satisfied that the company's still-vague plans to expand the scope of lottery gambling were allowed by current law. Also, top Republican senators have said they will introduce legislation that prohibits the Pennsylvania Lottery from competing with casinos through online gambling.
Currently, the 41-year-old Pennsylvania Lottery is run by the Department of Revenue. Its profits benefit programs for the elderly, including transit, rent and property tax rebates, prescription drug assistance, senior centers and long-term care services.