Illinois Lottery selects UK firm for $2.2B private management contract

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Camelot CEO Nigel Railton speaks during a public hearing, Monday, Aug. 14, 2017, in Chicago. Camelot presented an overview of its plan to increase sales and put more money in state coffers for schools and other programs. | AP Photo/G-Jun Yam

The Illinois Lottery has awarded a $2.2 billion private contract to a British gambling firm, paving the way for new management at the state’s maligned moneymaking venture.

A 14-day “protest period” required under state procurement rules began on Friday, meaning that if no challenges are submitted, state lottery officials will execute the 10-year contract with Camelot Illinois, according to a statement from the Illinois Lottery.

“Camelot has shown more than a decade of success in managing lotteries throughout the world,” acting lottery director Greg Smith said in a statement. “The Lottery and Camelot Illinois have common goals to responsibly grow the Lottery’s player base, align incentives, eliminate conflicts of interest, introduce new technology and innovation, and ensure responsiveness to public needs and concerns.”

Camelot Illinois’ sister company, Camelot Global, runs the United Kingdom’s national lottery and has worked with lotteries in four states and a handful of other countries.

The company, which lost out to Northstar Lottery Group when Illinois became the first state to privatize its lottery in 2009, set up shop at a Loop office in October 2016, according to state licensing records.

Camelot Illinois, which was the only bidder for the contract, stands to make $2.2 billion under the proposed 10-year deal, Illinois Lottery spokesman Jason Schaumburg told the Chicago Sun-Times.

Lottery officials said the contract is based on “a revised structure that aligns financial incentives and includes new permanent point-of-sale at retailers, new games, and a next-generation iLottery platform that supports omni-channel lottery participation.”

Officials say the contract also “mandates transparency and regular audits,” a clear nod at the state’s first and current private manager Northstar, which has come under fire from the state in recent years.

Northstar took over management from the Department of Revenue in 2011, and after reporting early record sales, the company fell short of its goals. Sales have remained mostly flat.

Then-Gov. Pat Quinn first tried to fire Northstar Lottery Group in 2014. But Attorney General Lisa Madigan blocked that move in 2015.

Later that year Gov. Bruce Rauner announced a new termination agreement, which stated Northstar should be replaced by Jan. 1, 2017. The state extended Northstar’s contract after missing that deadline.

Under the termination agreement inked with Rauner’s office, Northstar is eligible to receive up to $17 million per year in “disentanglement fees” and up to $14 million in annual management fees. Those payments must reflect actual costs determined by a third-party auditor.

After paying a final $10 million for missing revenue expectations, Northstar no longer has to pay additional penalties as it did under its original contract.

Last month, Camelot showcased its plan to increase sales and put more money in state coffers for schools and other programs. It includes new, more prominent displays for retail sales and increased marketing of online sales, with better technology such as a mobile app.

“We have an ambitious plan but the plan’s also proven,” CEO Nigel Railton said during a public hearing in Chicago.

State records indicate several well-connected Illinois Republicans have helped in the push to secure Camelot’s state contract.

Among Camelot’s registered lobbyists are James Montana, a former assistant U.S. Attorney and counsel to former Gov. Jim Edgar; Nancy Kimme, a Rauner ally and former top aide to the late state Comptroller Judy Baar Topinka; and Eric Elk, chief of staff to Mark Kirk during his stints in the U.S. House of Representatives and the Senate.

Also registered as a Camelot lobbyist is Eric Madiar, former legal counsel to state Democrats Michael Madigan and John Cullerton.

The lobbyists could not immediately be reached for comment Friday night.

Northstar “will continue to provide management services to the Lottery until a successful transition is complete,” lottery officials said on Friday.

The procurement file on Camelot’s contract will be available for public inspection on Sept. 29. To access the file, contact helen.kim@illinois.gov.

Contributing: Associated Press

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