Did the Florida Lottery break the law when it agreed to spend $16.9 million on a 14-year contract to lease thousands of lottery ticket vending machines from a politically connected company without the Legislature’s approval?
That was the question before a Leon County Circuit Court Judge Karen Gievers on Monday in another high-stakes legal battle started by House Speaker Richard Corcoran, R-Land O’Lakes.
Last month, Corcoran and the Florida House sued Lottery Secretary Tom Delacenserie and his agency, which is under Gov. Rick Scott, alleging they overstepped their authority when Delacenserie signed a contract with IGT Global Solutions Corp. in an attempt to get around the Legislature’s refusal to authorize more full-service vending machines.
The fight, however, is more than a dispute over a contract. It goes to the heart of the budgetary power that Corcoran claims has been abused and corrupted in Florida, in part because state agencies and lawmakers have let special interests reign.
Corcoran in January also sued Visit Florida for refusing to disclose its $1 million contract with rapper Pitbull but withdrew the lawsuit when the agency agreed to make the deal public.
This time, House general counsel Adam Tanenbaum argued that by entering into the new contract that increased the number of self-service vending machines from 500 to 5,000 across the state and agreeing to pay for those machines through a percentage of ticket sales, it obligated the state to pay $12.9 million more than the Legislature authorized in the 2016-17 budget. He asked the court to invalidate the contract and tell the Lottery Department to try again.
“After asking for an increase in the number of machines and having those requests rejected ... the Florida Lottery drew an item and ultimately signed a contract that blew up that whole structure,” Tanenbaum said.
But the agency would not back down. It hired lawyer Barry Richard, the Greenberg Traurig lawyer who represented former President George W. Bush in Bush v. Gore, to argue its case. Richard said Corcoran’s criticism is not only off-target but unprecedented.
He quoted state law that requires the Department of the Lottery to “maximize revenues” by operating as an “entrepreneurial enterprise” and said the House’s objection is an illegal attempt to “micromanage an individual contract.”
Richard said the lawsuit raises questions about the Legislature’s overstepping its separation of powers, whose function is to make law and appropriate state funds.
“It is widely accepted in this state and others that the contracting power is a quintessential power of the executive branch,” he said. “Entering into long-term contracts provides the state with the best benefit and a maximization of its revenue ... They may have violated a process” that the House and Corcoran think they should have followed “but it does not violate the law.”
Mike Manley, Lottery’s deputy chief of staff and legislative affairs director, testified that five times since 2003 the lottery made more money than expected from its ticket machines, and therefore had to pay the vendor more than the Legislature authorized. Each time, the Legislature agreed.
Tanenbaum countered that this time the agency acted first and planned to get permission later. He said state law prohibits an agency from both soliciting and signing a contract that exceeds the amount of money authorized by the Legislature.
The contract, which was signed in September 2016 to run until 2028, changed the way the state pays for leasing the ticket sales machines by giving the company a fixed percentage of sales from each machine, rather than pay them with a flat $500 per machine fee.
Summer Silvestri, Lottery’s procurement director, testified that by agreeing to extend the contract to 2031, the agency was able to negotiate a lower percentage fee, saving the state an estimated $18 million over the life of the contract.
House Appropriations Committee deputy staff director Bruce Topp testified that the contract is “a departure from the way we’ve operated for many years.”
IGT’s lobbyists and principles have been long-time contributors to Scott and his Republican predecessors. The company’s predecessor, G-TECH gave $25,000 to Scott’s reelection campaign in 2014.