CWA To Appeal Christie Scheme To Illegally Award Lottery Functions To Politically-Connected, Foreign-Owned Firm

For Immediate Release:

Ignores Clear Legal Guidance from DOJ & NJ Constitution - Invites Lawsuit by Pushing Aside Objections

(TRENTON, NJ) “ Late yesterday, the Christie Administration brushed aside a challenge by the Communications Workers of America (CWA) that would have stopped the State from awarding control of sales and marketing of the New Jersey State Lottery to a politically-connected, foreign-owned, private firm. For months, Christie has consistently stonewalled the public regarding lottery monetization - which could cause at least 7,000 New Jersey jobs to be lost and ship a billion dollars of lottery revenue out of state and abroad. As such, the CWA and small businesses are left with no other alternative other than to oppose this illegal privatization scheme in court.

"Despite all his bluster about putting New Jersey first, Governor Christie is handing over the keys of a valuable taxpayer-owned asset to a foreign company with a clear history of fraud and abuse," said Seth Hahn, Legislative and Political Director for CWA. "Christie can claim it's a mere coincidence that the sole bidder hired his campaign manager and his campaign's lawyer as lobbyists last year - but New Jerseyans know better. Rather than working to make our award-winning lottery even stronger, Christie instead went out of his way to ignore clear legal guidance that every other state pursuing lottery privatization has followed. Christie stacked the deck against small business owners and taxpayers with this illegal scheme, ensuring that the matter will now be settled in the courts."

Last night, the Christie Administration announced via email that it was pushing aside the CWA protest of the intent to award the contract. The Department of Treasury can now move forward with awarding the contract - which could take a couple of days to finalize. This means it will be a few days before the public will even have access to the details about what is in the contract. This is simply the Christie Administration's latest move to keep things secretive. Throughout the process, the only information made available on the privatization scheme has been the result of heavily-redacted records obtained through Open Public Records Requests.

For the nearly eight months, the Christie Administration has steadfastly refused to answer basic questions about the monetization of the state's fourth-most valuable asset. The administration has ducked questions at hearings, press conferences and at every other turn. They announced the contract on Friday, April 12th at 4 pm in a continued bid to minimize public knowledge about the deal. Then, recently, a small hearing was held on the CWA's protest of the award - mostly out of the public's eye, again on a Friday afternoon and only allowing two people from CWA to attend.

The contract between the State and Northstar New Jersey Lottery Group violates the original intent and meaning of the New Jersey Constitution, as well as state law - which specifically called for establishing a lottery to be operated by the state. In other words, the constitution requires the lottery be operated publicly so private enterprises cannot damage the public's trust through even the faintest whispers of corruption. Yet, this deal allows a private company to have the lion's share of operational control over what was always intended to be a state-run lottery.

Last month, six members of New Jersey's Congressional delegation sent a letter to U.S. Attorney General Eric Holder asking the Department of Justice to review the contract. These House members are worried the contract runs counter to a 2008 DOJ opinion which advised that such payments have a corrupting nature and run contrary to the public interest, and therefore likely run afoul of longstanding Federal law. Every state that has moved to privatize portions of its state lottery up to this point has followed the recommendations in the memo. Christie will be the first governor to ignore the guidance of the DOJ.

The Northstar partnership consists of three groups. One is Italian-owned, one's Canadian, and the other hails from Georgia. This partnership includes GTECH,  which has a checkered history of fraud, bribery and corruption stretching from Texas to Rhode Island to New Jersey. In fact, Lieutenant Governor Kim Guadagno prosecuted GTECH's national sales director for a kickback scheme in New Jersey in the 1990s when she was in the U.S. Attorney's Office. In her prosecution, Guadagno argued the firm's corruption was so rampant that the state needed to throw the book at the GTECH official. Guadagno felt so strongly that she released sealed grand jury testimony to the media - a highly unusual step for which she was reprimanded by the New Jersey District Court.

Last year, Christie conducted a study about how to make New Jersey's lottery even better. It showed our award-winning system was one of America's best-run public lotteries - ranking 5th in per capita sales. Growth in online, instant and total sales all far exceeded the national average. In 2010, it had the highest net income margin, making New Jersey our nation's most efficient lottery. Looking at all this information, Christie made the shocking decision to turn sales and marketing functions over to a foreign private corporation. Even worse, despite a 42% growth in sales in the last decade, Northstar will get a cut of profits, up to 5% - if they increase sales just 9% over the next 15 years.

Northstar New Jersey Lottery Group is nearly identical to the firm running the show in Illinois. Following that takeover's first year, they admitted being over $100 million short of revenue projections. The firm then entered into a legal process with the State of Illinois claiming taxpayers owed them $230 million. In just the first half-decade of the contract, they now estimate being $250 million short of revenue estimates.

Aside from being illegal, this scheme is simply bad policy. With nearly one in ten New Jerseyans already out-of-work, lottery privatization is a bad deal - which would make foreign corporations rich while making things worse for taxpayers and small businesses. The Asian American Retailers Association estimates Christie's privatization deal could result in 7,000 jobs lost and that's their conservative estimate. Also, the Christie administration says Northstar New Jersey Lottery Group could earn $1 billion over the life of the contract - meaning a large chunk of lottery profits will be shipped out-of-state and overseas, instead of staying here at home. Moreover, as part of the deal, the state will receive a one-shot, upfront $120 million payment from Northstar. This gimmick has already been taken into account along with other rosy revenue projections for the latest Christie budget proposal.

With all these damning facts coming to light, it's no surprise the Christie Administration has consistently ducked questions and released precious little information on lottery privatization from throughout this process. CWA knows it is clear from what scant details do exist that the contract is illegal, and, as such, will be going to court to appeal.