Governor Tom Corbett today announced that contracting private management of the Pennsylvania Lottery with Camelot Global Services PA LLC is clearly in the best interest of Pennsylvania’s seniors.

This partnership will maximize Lottery profit to ensure secure, predictable funding for programs benefitting a dramatically growing senior population.

The decision came following nine months of due diligence and deliberative evaluation to ensure maximum growth while protecting the integrity of the lottery fund.

“Our state’s fast-growing population of seniors demands that we act now to ensure the continued strength and viability of programs supporting older Pennsylvanians,” Corbett said.  “This is about providing for and protecting seniors, and nothing else.  Today in Pennsylvania there are nearly 2.7 million individuals age 60 and older, and that number will grow to 3.6 million by 2030.  We have the fourth largest population of older adults in the country, and with that comes significant and costly obligations.”

“This partnership will allow us to add an additional $50 million in the upcoming budget to preserve and improve the system for seniors,” Corbett said. “We will use this new money to address the need and demand for our programs, specifically, I propose to use it for home and community-based services so that older adults may continue to live in their homes.” 

The additional $50 million in the upcoming budget proposal will include:

·         $21 million for the Aging Waiver:  The Aging Waiver Program provides in-homes service to 28,000 seniors over age 60 who are clinically and financially vulnerable.

·         $20 million for the OPTIONS Program:  OPTIONS provides care management, home-delivered meals, protective services and in-home services for individuals age 60 and older.  Additional increases in revenue would help decrease the waiting list of 5,400 older adults who are waiting for home support and personal care services to keep them in their homes.

·         $5 million for Increased Investment in Area Agencies on Aging (AAAs):  Pennsylvania’s 52 AAAs cover all 67 counties and serve as the front door for the Department of Aging services at the local level. The AAAs serve 600,000 people.

·         $2 million for Senior Center Modernization: This investment will help senior centers prepare for the changing demographics and make them attractive to a younger, aging population.

Combining Forces for Record Profits

Under the contract, Camelot’s annual profit commitments will provide 9.5 percent compounded annual growth over the first five years of the contract and 6.1 percent compounded annual growth over the first 10 years of the contract.  Comparative fiscal analysis against projected Lottery performance shows incremental profit growth of at least $460 million over the first five years of the contract and at least $1.3 billion over the first 10 years of the contract.

Camelot is obligated to provide a minimum of $34.6 billion in profit over 20 years, which is at least $3 to $4.5 billion more than Lottery’s sales projections and its historic performance suggest it could generate over the same time period and under the same conditions as set forth in the PMA. 

Since the contract can be renegotiated at year 10 to ensure maximum responsible Lottery growth, these impressive incremental gains may likely be significantly higher over the 20- to 30-year contract term.

“An apples to apples comparison, taking into account Lottery’s own projections for Keno and Internet products, clearly demonstrates that private industry investment and expertise will grow Lottery profits to support a growing senior population,” Corbett said.

Camelot plans to achieve the higher profit levels by expanding the player base in Pennsylvania through marketing changes, retail expansion, enhancement of the retail experience and exploration of a rebalanced Lottery game product portfolio. 

“The Pennsylvania Lottery is one of the best Lotteries in the country, without a doubt,” Corbett said.  “We’ve come up with a win-win scenario where we combine one of the nation’s best lotteries with one of the best private-sector lottery industry experts in the world to grow and protect Lottery profits for decades to come.”

While the commonwealth plans to retain about 70 employees under the PMA, Camelot intends to retain and hire under its management all current employees who are committed to working toward increased sales and profits.  Throughout the PMA process Camelot has acknowledged the tremendous asset the Lottery workforce is to its success, and the private manager intends to expand Lottery employment in Pennsylvania over time.

Additionally, the commonwealth has committed to identifying opportunities for employees who do not transition to Camelot to remain state employees, so that not a single employee is left without a job.

Camelot’s Experience

Camelot has managed the United Kingdom National Lottery for the past 18 years, succeeding in attracting more than 50 percent of U.K. adults to play the National Lottery on a weekly basis, compared to 29 percent of Pennsylvanians who currently play the Pennsylvania Lottery on a weekly basis.  That 50 percent demonstrates a greater reach than any other fast-moving consumer goods brand in the U.K. 

Beyond the U.K., Camelot was a founding shareholder of the South African National Lottery and has advised the Interprovincial Lottery Corp of Canada, the California Lottery, and the Massachusetts Lottery in North America.

In California, Camelot provided consulting services to help it to increase sales and returns to the state education system.  Camelot reviewed the lottery's retailer and sales support services, as well as consulted on advertising, promotions and corporate social responsibility. Camelot’s expertise on business planning, as well as sales and marketing support, helped put the California Lottery in a position where per capita sales have increased by over 40 percent and it now expects to generate an additional $2.25 billion in incremental sales, and $780 million more in profit over the next two years.

What Does Not Change Under the PMA

“While this is an exciting time of change that will reap tremendous rewards for seniors in the immediate and long-term future, it’s also worth noting what will not change as a result of this private management agreement,” Corbett said.

“The Pennsylvania Lottery will remain the Pennsylvania Lottery – an institution of tremendous integrity and character – and its important mission to fund vital services for older Pennsylvanians will not change.

“Pennsylvania Lottery players will eventually see new games and other exciting changes to the Lottery product line, but the games they know and love will continue to be available to them for the immediate future.

“The Pennsylvania Lottery’s more than 9,100 retailers will continue to receive unparalleled support as our valued business partners and key contributors to the Lottery’s continued success.

“And finally, the commonwealth will continue to own and control all aspects of the Lottery, ensuring social responsibility, quality and integrity of games and the public’s absolute trust in Lottery’s business practices.”

The Process

The notice of contract award was issued Friday to Camelot, completing a procurement process that began last April, allowing the Corbett administration the opportunity to disclose contractual and procurement details of the PMA at the Senate Finance Committee Hearing on Jan. 14. 

Last spring, the commonwealth assembled a team comprised of individuals from various agencies including the departments of Aging, Revenue and General Services, the Pennsylvania Lottery, the Governor’s Budget Office, the Governor’s Policy Office and the Governor’s Office of General Counsel, to explore the feasibility of a Lottery PMA.

The procurement was conducted in phases.  The first phase was a Request for

Qualifications (RFQ), which initially qualified Camelot, GTECH Corporation and Tatts Group Limited to participate in the process based on financial capability, social responsibility and technical capability and suitability. 

Once a pool of qualified bidders was established, the Commonwealth began a multistep sealed bidding process, also known as an Invitation for Bid (IFB). The first step of the IFB was a due diligence process with the qualified bidders, in which the

Commonwealth explored the various ways to maximize revenue; conducted initial probity investigations into each bidder’s character, fitness and suitability for such a transaction; and developed a private management agreement that preserves and sustains the established integrity, value, and tremendous success of the Lottery while maximizing revenues for the benefit of senior programs.

Tatts withdrew from the procurement in August 2012 to pursue other U.S. PMA opportunities it believed to be more commercially attractive.

In the second step of the IFB process, bidders were invited to submit priced bids in the form of binding APCs for the initial 20-year term of the PMA.

GTECH withdrew from the procurement in November 2012, just before final business plans were due, citing a one-sided PMA in the commonwealth’s favor as its top reason for not submitting a priced bid.

Camelot’s priced bid was received on Nov. 16, 2012.  Multiple bid extensions were negotiated to accommodate completion of a probity investigation into Camelot’s integrity and allow additional time for receipt and review of a counterproposal from the union representing Lottery employees.

Risk mitigation firm Kroll Advisory Solutions conducted onsite investigations in all jurisdictions in which Camelot has operated and where individuals proposed to influence Pennsylvania operations have lived and worked. Kroll’s investigation encompassed work in Canada, South Africa, the U.K. and the U.S.  Kroll interviewed more than four dozen individuals, including current and former government officials, U.S. and international regulators, former colleagues and business partners, as well as other individuals with knowledge of Camelot and the individuals.  Kroll did not identify any material misstatements or omissions, criminal litigation or other issues that reflect negatively on Camelot’s or the individuals’ backgrounds or business practices.

After careful review and consideration of the union counterproposal, the commonwealth determined the alternative plan to be lacking in a number of key areas, most notably: a lack of new money as security comparable to the $200 million in security provided for in the PMA; a lack of industry experience in building and balancing a product portfolio to maximize profit, rather than maximize profit margin; and lack of detail regarding plans for expanding the player base, growing the retail network and increasing demand for terminal-based games.

At the conclusion of the nine-month meticulous and judicious process, the commonwealth determined Camelot’s bid was responsive, conforms in all material respects to the requirements of the IFB and proposes the highest responsible commitments for maximizing revenues to support senior programs.

Corbett thanked Rep. Tim Hennessey, Chester County; Rep. Seth Grove, York County; Sen. Bob Mensch, Montgomery County; Sen. Mike Brubaker, Lancaster County; Sen. Pat Browne, Lehigh County; Rep. Stephen Bloom, Cumberland County; Rep. Mauree Gingrich, Lebanon County; and Rep. Kerry Benninghoff, Centre County; along with all the Republican leaders who support additional funding for senior citizens.

The Pennsylvania Lottery was created in 1971 to generate funds for programs benefitting older adults.  Since 1972, when its first game went on sale, the Pennsylvania Lottery has contributed nearly $22.6 billion to programs that include property tax and rent rebates; free transit and reduced-fare shared rides; the low-cost prescription drug programs PACE and PACENET; long-term living services; and the 52 Area Agencies on Aging, including hundreds of full- and part-time senior centers throughout the state.  The Pennsylvania Lottery remains the only U.S. Lottery that exclusively designates all proceeds to programs benefitting older residents. Learn more at www.palottery.com.

Producer Edward R. Pressman confirms Brian De Palma will direct "Happy Valley," the tentative title of the film, based on Joe Posnanski's best-seller "Paterno."

"'Happy Valley' reunites the 'Scarface' and 'Carlito's Way' team of De Palma and Pacino for the third time and I can't think of a better duo to tell this story of a complex, intensely righteous man who was brought down by his own tragic flaw," Pressman said in a statement. No start or release dates were given for the film.

While Pressman said the plot remains "under wraps," Posnanski's book followed Paterno's final years, as the winningest coach in college football history saw his career end in disgrace in 2011 with the sex abuse scandal involving assistant Jerry Sandusky.

(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

While the IRS stopped the vast majority of fraudulent refunds from actually getting into the hands of prisoners, $35 million still slipped through the cracks.

"There is no limit to what the criminal mind is capable of," said Thomas Cooke, professor of accounting and business law at Georgetown University. "Identity theft is all too common today and filing a return with fraudulent data is all too easy."

The number of fraudulent prisoner tax returns continued to increase in2011 and 2012, although the IRS has yet to put a number on bogus refunds.

Little to lose: Filing fake tax returns is a tempting way for prisoners to get some easy cash -- especially when they see how lucrative it has been for other inmates.

"The information is easily available to these individuals, [and] the crime can be committed with limited materials," said Raul Vargas, fraud operations manager at IDentity Theft 911.

Some prisoners use stolen identities, often from other inmates. Others use their own information but inflate their income and claim large amounts of tax withheld to cash in on big refunds.

Related: Victim of ID theft? Expect a long wait for your tax refund

Since most prisons monitor inmate correspondences and flag outgoing prisoner tax documents for the IRS, inmates often get help from the outside -- presumably by offering a cut of whatever refund is received, according to an IRS presentation for the American Correctional Association Conference.

Missouri inmate Kevin Dunham pleaded guilty last year to claiming $139,644 in fraudulent refunds for himself and his fellow prisoners -- $54,814 of which was received. Dunham prepared false tax returns for inmates using a typewriter and sent the returns to the inmates' families, who then mailed them to the IRS. Refunds were shared between those involved, and the roughly $200 to $300 cut Dunham received from each return was paid to his mother, who deposited some of it in his prison account.

Another inmate pleaded guilty this week to filing seven fraudulent tax returns, claiming refunds totaling $3.5 million. He falsely reported that he had earned significant wages and had tax withheld from a nonexistent company called Safety Shoes & More, Inc. He received nearly $3 million from the IRS due to the scheme.

Related: Scam targets seniors' Social Security benefits

Larry Levine, who served more than 10 yearsat a number of different federal prisons for charges that include securities fraud and narcotics trafficking, said inmates found annual reports in the library from big corporations that listed federal tax identification numbers and claimed they worked for them on 1040 forms. They picked companies big enough that they figured it would take the IRS a long time to verify their claims. The forms were then mailed to family members and forwarded along to the IRS, said Levine, who now provides litigation support to federal inmates through his company, Wall Street Prison Consultants.

Other prisoners have claimed wages from companies that recently filed for bankruptcy, since these wages can be harder for the IRS to confirm, according to the Treasury inspector general. Some prisoner tax fraud has also been linked to organized crime rings that likely teach the prisoners how to commit these crimes before they're incarcerated, said Vargas.

Stopping the fraud: One of the biggestchallenges of stopping fraudis that not all prisoner refund claims can be automatically denied. Inmates who work within the prison, are on a work release program, earn investment income or worked for part of the year before being incarcerated are often legitimately owed refunds.

To ensure that refunds aren't ending up in the wrong hands, TIGTA has previously suggested that the IRS wait to issue refunds until it receives third-party confirmation like W2s.

TIGTA said the IRS could also stop more fraud by Improving the accuracy of its Prisoner File -- which contains information like inmate names, wages and Social Security numbers that it collects from prisons. The inspector general found that about 500,000 of these files, or 18%, are potentially inaccurate or missing information.

Related: Buy a dead person's identity from Social Security for $10

Not all prisons reported prisoners, some inmates were listed under prisons that have been closed, and other facilities reported having only one prisoner, TIGTA reported. The Federal Bureau of Prisons, however, said it regularly provides inmate data to the IRS to help it prevent fraud.

The IRS said collecting accurate data has been a challenge, but new laws are likely to help.