Outcry over high salaries; Director defends

LITTLE ROCK, Ark. — Ernie Passailaigue, who started his job two weeks ago as executive director of the Arkansas Lottery Commission, has been steadily hiring employees to fill core management positions, while defending the high salaries he is giving the new staff.

Before the hiring commenced, a legislative committee signed off ealier this month on the newly hired lottery chief's plan to pay his top deputies more than $200,000 each.

Passailaigue asked legislators to ignore criticism in the news media and from constituents about high salaries and other lottery issues, such as whether Arkansas should allow keno.

"You cannot go back and talk to the average person about this [creating a state lottery] because they will not understand it," said Passailaigue, who started work June 29th.

The Arkansas Lottery Commission Legislative Oversight Committee approved Passailaigue's request for up to 75 positions at a cost of about $5.1 million to start up the lottery.

It was the first time Passailaigue formally addressed legislators, talking for a little more than an hour.

Some legislators applauded his efforts, agreeing that creating a lottery from scratch was a difficult subject for many people to grasp.

"No one understands what goes on internally to build a world-class lottery," said Sen. Terry Smith, D-Hot Springs.

One legislator on the 12-member committee, Sen. Johnny Key, R-Mountain Home, voted against Passailaigue's personnel plan.

Another legislator criticized the high salaries of some lottery officials.

Rep. Buddy Lovell, D-Marked Tree, said he'd already heard an earful from constituents complaining about the $324,000 salary paid to Passailaigue when the Arkansas Lottery Commission hired him last month.

"The constituents out there were already raising all types of Cain and ringing phones off the wall," said Lovell, who's not a committee member.

Lovell said constituents complained about Passailaigue's hope to bring to Arkansas two South Carolina lottery officials: Ernestine Middleton, director of internal operations and David Barden, director of marketing and product development. Passailaigue told reporters Wednesday of his plans to offer them the jobs.

Passailaigue served as South Carolina's lottery chief executive since 2001. Arkansas' Lottery Commission hired him June 5 and the legislative oversight committee later approved his salary.

Middleton has said she is paid $143,923 and Barden $133,038 for their positions in South Carolina. The jobs for which they're being considered in Arkansas will pay $225,000.

"News travels fast, especially when it's questionable news," Lovell said. "In the case of increasing the salary $95,000 and another one $85,000, that's a bunch of scholarship that kids could have had."

Passailaigue enjoys the third-largest compensation package for chief executives of the nation's 44 lotteries.

If hired at $225,000, Middleton and Barden would earn more than the chief executives of all but six lotteries: Tennessee, Georgia, Arkansas, North Carolina, South Carolina and Kentucky.

The choice for lawmakers, Passailaigue said, is to advise him to hire qualified, talented individuals he trusts like Middleton and Barden or push back the timetable for the lottery's debut so that he can train inexperienced hires.

Training new hires could cost the state up to $15 million in lost scholarships, he said, because if the start date was delayed two months to train new employees, it would cost the state $60 million.

Since scholarship expenses would account for about 25 percent of revenue, $15 million would be lost under that scenario, Passailaigue said.

Passailaigue said Wednesday that his plan was to create 88 positions but that's no longer the plan.

House Constituency Services Director Bill Stovall said that the committee approved authorizing up to 75 positions worth about $5.1 million.

Key said after the meeting that he wasn't comfortable with the discrepancies in requested initial positions for the lottery.

Those differences in the number and classifications of the jobs were described by Stovall as a "wrinkle" between South Carolina and Arkansas practices ironed out late Wednesday after the meeting's handouts had been prepared.

That didn't satisfy Key.

"If I take this paper home and try to explain it, I can't do that," Key said.

Middleton had helped prepare the document, Passailaigue said, adding that she hadn't been paid for her work and hadn't traveled to Arkansas to do it.

Passailaigue's advice to avoid conversations with constituents about creating a lottery also bothered Key.

"I have a little more faith in my constituents in that. I think they do understand it. ... I think the voters are smarter than that," Key told reporters.

House Speaker Robbie Wills, D-Conway, explained his desire to help average Arkansans understand the lottery through a college football analogy.

Arkansas is a state with an average household income of about $40,000, he noted. But, he said, many of those "folks" had no problem with the University of Arkansas at Fayetteville paying a $2.5 million salary to head football coach Bobby Petrino.

Wills has said the lottery's purpose is to help make college more affordable for Arkansans.

Every day that the lottery misses its targeted Oct. 29 debut is $1 million lost, said Passailaigue, noting that that is what he thinks about every night when he goes to bed.

Lottery Commission Chairman Ray Thornton, a former state Supreme Court Chief justice and congressman, said Passailaigue, saved the state up to $700,000 in consultants' fees by performing services himself.

Thornton also credited Passailaigue, a fellow Southerner, as knowing "how to talk our language."

Passailaigue began his remarks by saying, "God talks like we do."

At several points during the meeting, Passailaigue pointed to the media as unfairly critical of the lottery.

(Click for full-size; opens in new window)Arkansas Lottery Director Ernie Passailaigue (left), along with Paul Lothian of the state Department of Finance and Administration, answers budget questions at a meeting of the Arkansas Lottery Commission's Legislative Oversight Committee at the Capitol on July 2.

After the meeting, Passailaigue didn't give details about which media he was criticizing.

He said he didn't have a problem with the local media but was puzzled about its interest in what he characterized as unimportant trivia, mentioning, for example, recent stories about keno — a game of chance often played in bars and restaurants by people watching monitors for winning numbers that pop up every five minutes.

Passailaigue's stated desire for keno games two weeks ago led to criticism from politicians and from the Family Council.

Gov. Mike Beebe has said he opposes keno and has questioned whether there was any substantive discussion of keno during the legislative session, telling reporters Wednesday that he didn't remember any.

Family Council President Jerry Cox and Attorney General Dustin McDaniel have said keno would lead to mini-casinos.

Beebe has also questioned whether Passailaigue's salary is too high.

Passailaigue has since said the keno is a low priority for him.

Some have questioned Thornton's offer to give a year-long housing allowance to Passailaigue and whether that was legal. Passailaigue later turned that down.

At the end of the meeting, Passailaigue offered to meet with lawmakers individually and attend meetings of their local chamber of commerce or civic organizations to help educate Arkansans about the lottery.

He said the average person who reads "the newspaper or watches a ... thirty-second news clip" doesn't have all the "facts."

He didn't say what else about the lottery needed to be reported.

He then stood by the committee room door and shook the hands of many of the lawmakers as they left, giving them his cell phone number and learning their names.

Director of Information Technology hired

A woman who previously worked for International Game Technology in Reno, Nev., has been hired as the Arkansas lottery's director of information technology infrastructure, a lottery spokesman said Tuesday.

Mary VanLeer, who was paid $135,000 a year as director of engineering operations for IGT, will work for the lottery for $105,000 a year, Julie Baldridge said.

IGT is a manufacturer of gambling machines and systems, including slot machines, a spokesman for the company said.

VanLeer and her husband own a home in Garfield and live there, Baldridge said.

VanLeer also has worked as director for software engineering for Sun Microsystems in Broomfield, Colo., and manager of product engineering for Storage Tek in Louisville, Colo., Baldridge said.

Head of gambling operations previously worked for Passailaigue

David Barden, director of marketing and product development for the South Carolina lottery, arrive in Little Rock on Sunday to begin work after driving from South Carolina.

Barden was a former colleague of Passailaigue's in South Carolina, and accepted his offer to be vice president of gambling operations in Arkansas at an annual salary of $225,000.

"I'm excited obviously," said Passailaigue, who was the South Carolina lottery's executive director from 2001 through July of this year when he officially became director of the Arkansas lottery.

Ernestine Middleton, formerly the director of internal operations for the South Carolina lottery, started work Thursday in her $225,000-a-year job as vice president of administration for Arkansas' lottery after accepting that job, also offered by Passailaigue.

A month ago, Arkansas Lottery Commission Chairman Ray Thornton of Little Rock told the Legislature's lottery oversight committee that he expected Passailaigue to bring Middleton to Arkansas and that he might bring Barden, too.

Barden was one of the four finalists for the Arkansas lottery director job before the commission hired Passailaigue at an annual salary of $324,000, the third largest compensation package among the nation's 44 lottery directors.

Barden told the commission in a letter dated May 31 that he "played an integral role in the creation of two 'startup' agencies in South Carolina," the lottery and the Department of Public Safety, where he was assistant director from 1993 to 1996.

Barden's South Carolina salary is $133,038 a year. Middleton's was $143,923.

Barden said he must borrow money to pay about $148,000 in the next few weeks to fully vest for retirement benefits in South Carolina. He said he's 52 years old and he has yet to calculate the annual retirement benefits that he would receive when he retires.

He said he views working for the Arkansas lottery as "an unique opportunity" and "a great place to be."

Among other things, Passailaigue said he's anxious for Barden to start work to help in drafting a request for proposals for advertising and marketing vendors. In that way, Barden can help the lottery save money, he said.

Passailaigue has said that Barden and Middleton will help him start the lottery's ticket sales sooner than originally expected, and the ticket sales and scholarship funds raised from the sales will more than justify their salaries. He's said he expects scratchoff ticket sales will start on or before Oct. 29, after most state officials said they had expected ticket sales to begin by the end of this year.

He has often said that each day that the lottery isn't operating costs the state about $1 million in lottery ticket sales and about $250,000 in scholarship funds. A mature lottery could sell as much as $1.5 million in tickets a day, he said.

But Rep. Buddy Lovell (D, Marked Tree) said Thursday he worries "the exorbitant salaries" for the three top lottery officials ultimately will reduce the money available for scholarships.

"I think the [Legislature's] lottery oversight committee has its head in the sand and just rubberstamped what [the lottery commission] wants to do," he said. The committee signed off last week on Passailaigue's plan for two $225,000-a-year vice presidents.

Lovell added: "I hope I am dead wrong and everything works out beautifully."

Sen. David Johnson, co-chairman of the committee, said Lovell "may assume we can get anyone from anywhere for as little as $150,000-a-year. [But] if we want experience, we have to pay for it.

"I think experience will pay big dividends in the coming months when we see a well-run lottery coming together, and I predict that will happen," said Johnson, D-Little Rock. "If the Legislature's expectations are not met, I expect that the Legislature will revisit the issue of compensation."

Sen. Jimmy Jeffress, chairman of the Senate Education Committee, said lottery officials "may very well" recoup the salaries of their top three officials "almost overnight."

"I know we have to pay for what we get, but I wonder if what we are getting is more than what we actually need," said Jeffress, a Democrat from Crossett.

Tim Madden, chairman of the South Carolina Education Lottery Commission, said the South Carolina commissioners "are certainly sad to see [Middleton and Barden] go, as we were with Ernie, but we wish them well.

"I think when you start up, you have to pay a little more," to hire top lottery officials, he said.

"With Ernestine and David, you are going to have to pay a significant amount of money [for them] to move across the country," Madden said. "I can promise you this, Ernie is going to get the most bang for the buck. He isn't going to waste any money."

If the lottery sells $1 million in tickets each day and raises $250,000 a day for college scholarships, that would mean $365 million in annual ticket sales and about $91 million for college scholarships each year after prizes and expenses are paid.

The state Department of Finance and Administration has estimated net lottery proceeds at about $55 million a year.

Two attorneys hired

An assistant attorney general and an attorney for the state House of Representatives have been hired for $105,000-a-year jobs.

Assistant attorney general W. Bishop Woosley will be the lottery's procurement director and contract administrator. House counsel Bridgette M. Frazier will be the lottery's staff attorney, said Ernie Passailaigue, executive director of the state lottery commission.

They were hired after he interviewed eight to 10 lawyers, he said.

He said he considered whether any of them were well-versed in state procurement and contract law, and Woosley, who has been advising the lottery commission for the attorney general's office, "fit the bill."

"I had to make a decision to hire the best possible person I could hire, and I doubt I would change my mind no matter who walked in the door because I think I have already found that person," he said.

Woosley has worked for the attorney general's office since 2007, according to his resume. He owned a law firm from 2001-07 in Stuttgart when he also was a deputy prosecuting attorney in Arkansas County. He worked for a Stuttgart law firm from 1999-2001.

He is paid $92,500 a year as an assistant attorney general, according to the attorney general's office.

Passailaigue said he hired Frazier because she had "the most outstanding credentials" to be the lottery's staff attorney, who must understand the process of promulgating rules and advise about administrative procedures.

Frazier has worked for the House since 1999, according to her resume. Among other things, she worked for Ray Thornton's office when he was a U.S. House member from 1992-94 and then from 1994-95, her resume said.

She worked for his campaign in 1994.

Her salary was $81,449 as of July 1, said Buddy Johnson, coordinator of legislative services for the state House of Representatives.

Passailaigue said the fact that Frazier once worked for Thornton, chairman of the lottery commission, didn't factor into his decision. "The fact that she is a great Arkansan did," he said.

Frazier is the second former Thornton employee that Passailaigue has hired.

He's also hired Julie Baldridge as his executive assistant, public relations director and legislative and lottery commission liaison at an annual salary of $105,000. Baldridge also is a former aide to Senate President Pro Tempore Bob Johnson, D-Bigelow, and Bill Clinton when he was governor.

Baldridge's salary was $73,519 a year in her previous job as assistant dean for external relations at the University of Arkansas at Little Rock law school, said UALR spokesman Joan Duffy.

Passailaigue plans to have two vice presidents under his organizational structure and have several officials serve under them.

New head of security pulls down 6-figure salary

Grant County Sheriff Lance Huey has been hired as the security director of the Arkansas lottery at an annual salary of $115,644.

Huey, 45, of Sheridan said he is paid about $46,300 a year as sheriff, a post he has held since January of 2007. As sheriff, he also serves as tax collector. He will begin work for the lottery on July 21, after tendering his resignation as sheriff on July 20, he said.

Huey's salary will exceed the pay of Arkansas State Police Director Winford Phillips, whose salary is $108,082 a year, according to Kay Terry, the state's personnel administrator.

Passailaigue hired Huey after interviewing 10 or so former and current state troopers and federal law enforcement officials, he said.

Huey served in the U.S. Marine Corps from 1984-90, worked his way up the ranks of the Arkansas State Police (1991-2006), and served the past 2½ years as sheriff, Passailaigue noted.

At the state police, Huey supervised eight troopers in Grant, Hot Spring and Clark counties, according to his resume. He also served on the Grant County Quorum Court from 2003-07.

Passailaigue said he's confident that Huey will work diligently with the state police to avoid a potential bottleneck with the background checks of lottery retailers. Those checks need to be done before the lottery begins selling tickets on or before Oct. 29.

As for the $115,644 salary, Passailaigue said he paid the South Carolina lottery's security director about the same amount.

As the lottery's security director, Huey must assure the integrity of the lottery, which will be a business of more than $400 million a year, Passailaigue said.

"If I have a problem with security, I don't have a lottery," he said.

Along with four or five other employees, including two parttime draw managers, Huey will be responsible for policing roughly 2,800 lottery retailers and a number of lottery players who will attempt to scam and defraud the lottery, Passailaigue said.

"You are putting a tremendous burden on one person or a small group of people to do the job," he said. He is also asking Huey to take six months of his life for the startup of the lottery "with a tremendous personal toll," he said.

Passailaigue said several managers also will be paid $100,000-plus salaries. He noted that the Arkansas Lottery Commission and Legislature's lottery oversight committee have signed off on the salaries for these positions.

A county sheriff has dozens of deputies to carry out the office's duties and the state police director has "enormous responsibilities" to the state with many troopers to carry them out, he said.

"I don't think it is an apples to apples comparison," he said of comparisons between the jobs of the lottery's security director and state police director.

Passailaigue said he believes that all law enforcement, firefighters and emergency medical service employees "are underpaid."

Huey accepted Passailaigue's job offer on Sunday.

"This is Arkansas history," he said, referring to the startup of the lottery, which voters authorized to raise money for college scholarships, "and I have two small kids that this will affect."

Huey took about a $6,000-ayear pay cut to be Grant County sheriff, he said. He is receiving "a pay boost" to be the lottery's security director, he said, and accepted the job because he believes that he can make a difference. He believes he can help resolve problems working with local and state law enforcement officials when they arise with the lottery, he said.