June 02, 2004
How cozy is that?

Remember when it was revealed that the state government threw a quarter million bucks at a Las Vegas consulting firm so it could draw up some custom slot machine legislation? Turns out that the point man for that firm is good buddies with a top legislator, and that he was hired at the recommendation of Governor Perry's chief of staff.

Lottery Executive Director Reagan Greer said during testimony to a House committee Tuesday that he instructed the Las Vegas law firm of Lionel, Sawyer and Collins to hire gaming industry expert William Watson as a subcontractor.

Greer was called before a House committee that is critical of the lottery commission's decision to hire an out-of-state law firm with ties to the gambling industry to draft proposed gambling laws for Texas.


Greer said during the three-hour hearing that he told the firm to hire Watson after receiving a telephone call from Perry's chief of staff, Mike Toomey. Toomey received Watson's name from House Public Education Committee Chairman Kent Grusendorf, R-Arlington, who is a personal friend of Watson.

"It was a suggestion to move forward with, and I did," Greer said. "He (Toomey) said he (Watson) had a high level of expertise."

Perry spokeswoman Kathy Walt said Toomey did nothing more than pass a name along.

"Mike Toomey passed Mr. Watson's name on to the lottery commission, to Reagan Greer, as an FYI from Grusendorf as someone with expertise on the subject," Walt said. "That was the extent of Toomey's involvement in that."

Neither Grusendorf nor Watson could be reached for comment.

Watson is a former senior vice president with Alliance Gaming's Bally Gaming and Systems division, a casino technology company.

Watson billed the law firm $27,200 for two weeks of work in February testing assumptions of how much money would be generated for the state by the legalization of video lottery terminals.

The law firm has billed the state $176,743 for its work, including that done by Watson. The state has not yet paid the bill.

A proposed state constitutional amendment to legalize video lottery failed in the Texas House in the recent special legislative session. But Perry and Lt. Gov. David Dewhurst have indicated they would like to revive the issue if there is another special session on school finance.

Both Democratic and Republican legislators have been critical of the lottery for hiring an out-of-state law firm to write video lottery legislation under a $250,000 contract.

Members of the House Licensing and Administrative Procedures Committee on Tuesday grilled Greer, lottery staff, commission members and First Assistant Attorney General Barry McBee about how the Lionel, Sawyer and Collins firm was hired and paid for.

Isn't that special? Underneath the More link is a recapitulation of the testimony as complied by Telicon and provided to me by The Princess, whose company subscribes to their services. (Thanks, Princess!)

Almost uncharacteristically, the Chron nearly gets indignant about the whole affair (though the role that Mike Toomey and Kent Gruesendorf played in it goes unmentioned).

The Lottery Commission operates on the sale of lottery tickets. If the commission has a spare quarter of a million dollars to pay Las Vegas lawyers to write gambling legislation for Texas, it has too much money it's not passing on to the state for education.

The law firm, Lionel, Sawyer and Collins, represents some of the nation's largest makers of video lottery machines. It stands to benefit if Texas law one day allows the law firm's clients to sell tens of thousands of VLTs here. The firm should register as a lobbyist and provide its expertise at no cost to taxpayers.

If the gambling industry won't offer free advice, then racetrack owners, who make up the narrow special interest that would receive the video lottery profits after the state's cut, ought to foot the bill.

Not too bad. Now that they've broken the story, let's see them keep up with it.

Original Chron link via YDB.

AUSTIN (6/1/2004, 10 AM, E2.026)

The House Licensing & Administrative Procedures Committee met this morning under the direction of Chairman Flores. Rep. Van Arsdale, not a member of the committee, was also present.

Chairman Flores opened the meeting by saying he hoped to find out why it was necessary to hire outside counsel to draft proposed VLT language. Flores said he hoped those responsible could demonstrate why, despite the great resources available in Texas, a law firm from Nevada was hired. Flores said the state would have had to pay for representatives from the law firm to attend the meeting, and he didn't want to spend any more of the taxpayers' money than has already been spent.

Reagan Greer, Executive Director of the Texas Lottery Commission, agreed with Chairman Flores that the issue of outside counsel was not brought up at a meeting on Dec. 12 between staff members from the Governor's office, OAG , Lottery Commission, and lawyers representing the Indian tribes, in which Flores was also present.

Barry McBee, Office of the Attorney General, said the Nevada firm was hired because he did not feel the expertise was available in the state. McBee said that spoke to the complexity of VLTs and Indian gaming issues. Chairman Flores said that shows there was a lack of confidence.

Rep. Delwin Jones, reminding the witnesses that they were under oath, asked if prior to the 12/12 meeting, did anyone at OAG talk to the Nevada law firm. McBee said no. McBee also said a contract went into effect with the law firm on 12/16 after negotiations that went through the weekend, but he was not sure when it was signed.

Rep. Jones said his "country-bumpkin" mind didn't believe the schedule laid out by the witnesses, in regards to when the law firm was first contacted and when the contract went into effect. This took place over 4 days.

Chairman Flores questioned a phone call billed by the Nevada firm to the Lottery Commission on 12/12. The commission's deputy general counsel, Ridgely Bennett, requested to know the time of the phone call, and also said it was probably placed after the meeting.

The Nevada law firm, Lionel Sawyer & Collins (www.lionelsawyer.com), is the largest firm in the state and is an expert on gambling and tribal gaming.

The committee was told that Kim Kiplin, General Counsel for the Lottery Commission, contacted the firm on the afternoon of 12/12.

Chairman Flores commented that right after the 12/12 meeting, the commission had phone #s, etc. of the law firm, but they have said they didn't have contact with the firm prior to the meeting. "Somebody help me out, somebody help me out," said Flores.

Texas Lottery Commissioner Jim Cox said he recalled having a conversation with Kim Kiplin about the Nevada firm, telling her it would be a good place to start. Cox talked to a partner on the phone that day, and later that afternoon the firm called Kiplin. Cox also mentioned Nelson Rose, Professor at the Whittier College School of Law, to Kiplin.

Chairman Flores asked who contacted Professor Rose. The witnesses said they didn't know. "Here we go again: don't know, don't remember, don't recollect," said Flores.

Rep. Delwin Jones asked Flores if the committee had the power of subpoena; Flores said yes. Jones said the committee needed to hear from Kiplin. Jones asked why Kiplin was not available to testify. The committee was told she is on a pre-planned vacation.

Chairman Flores sited the comptroller requirement of a state agency to receive prior approval from the OAG to consult with an outside law firm. Flores said they needed to get a definition of the word 'prior'.

McBee said due to the urgency of the matter, a request was made orally by the Lottery Commission. Flores responded by saying "what urgency?" Flores said everyone knew nobody wanted gambling.

McBee said a meeting with the Indian tribes on 12/19 made the request urgent. The committee was told no one at the 12/12 meeting was aware of the request.

McBee said the tribal gaming issue was the main reason the Nevada firm was hired.

Rep. Van Arsdale asked if any D.C. firms were contacted; he was told no.

Chairman Flores was told e-mails between the Lottery Commission and OAG were made on 12/12 initiating the process. The e-mails were not made available to the committee due to issues of privilege. Flores said he has been involved in government for over 20 years and that's the first he's heard of it.

Rep. Van Arsdale asked why there were no dates alongside the signatures on the contract with the Nevada firm. Van Arsdale said since the dates were left off, there was no way to really know.

Chairman Flores said getting a contract done in 36 hours is unheard of, particularly when government is frequently criticized for being too slow to get things done.

Commissioner Cox said he had a personal relationship with the Nevada law firm.

Rep. Raymond asked if conflict of interest issues were considered before hiring the firm, due to Commissioner Cox's relationship. Raymond said he didn't have a lot of confidence that the firm would steer itself clear of conflicts of interest. Raymond said the firm basically said they know they represent clients who have an interest in any proposed legislation, but the firm will not have a conflict.

Rep. Homer said he was still trying to grasp how the contract was put together so quickly.

Director Greer said former Lottery Commission staff member T.C. Mallett was one of the subcontractors used by the Nevada firm. Chairman Flores requested the dates when Mallett worked for the commission.

Chairman Flores said 18 other states operate under class 3 gaming, and none of them hired outside counsel.

Rep. Goolsby asked how the $250,000 fee was agreed to with the firm. $175,000 has been paid so far.

McBee said at the end of the last special session, the OAG informed the firm their services would no longer be needed. Ridgely Bennett said they would still need outside assistance in the future.

Rep. Goolsby said there was a rumor running around the capitol that since the Nevada firm was brought in, there would be a push for full- blown casinos in the state. Chairman Flores said the rumor is not true. The proposed VLT language's intent was not to expand the footprint of gambling in Texas.

Rep. Goolsby said he did not mean to imply the commission spent too much money on the firm, he assumes they will be conservative in their spending much like the legislature.

Chairman Flores asked where the money came from that paid the firm. Bennett said it came from line item A.1.5. Flores corrected him, saying it came from account # ending in 5025. "You need to be careful with your answers; we know the answers and half of yours have been wrong," said Flores.

Flores said payment from the account is not allowed. "You went out and did what you cannot do," said Flores.

The committee was told that nobody from the Speaker, Lt. Governor, or Governor's Office spoke about the Nevada law firm.

Rep. Goolsby said he did not believe the Speaker's office assisted in hiring the firm.

Rep. Van Arsdale asked if the firm disclosed which of their clients would be affected by the legislation. Van Arsdale was told the firm did not, and the OAG did not ask for a list of clients.

The firm gave the state a government discount of $60,000.

Chairman Flores asked why wasn't the Governor's office billed instead of the Lottery Commission.

Chairman Flores told the panel "I'm having a hard time believing your justification." "You're bordering on lying, I think." Flores later said "I used the word lying, and that may have been too harsh."

Flores said the committee needed to get Kim Kiplin in for questioning, as well as have the current panel back for additional testimony. Until then, the committee would have an opportunity to review the testimony and come up with more questions.

Posted by Charles Kuffner on June 02, 2004 to Scandalized! | TrackBack