LITTLE ROCK — Gov. Mike Beebe said Wednesday that he would favor the ouster of lottery head Ernie Passailaigue if financial problems at the Arkansas Lottery Commission aren’t corrected.
Beebe said he has been concerned about hundreds of hours of compensatory time that Passailaigue, the lottery’s executive director, granted himself and top managers even though they have big salaries.
The governor said he is also bothered that an audit this month showed numerous examples of lax financial oversight at the Lottery Commission.
Passailaigue is a former legislator and lottery director in South Carolina.
“I don’t know how it works in South Carolina,” Beebe said. “You would think that somebody who has been in the public eye, who is subject to public scrutiny, would be knowledgeable about things like documenting travel and about ensuring that there are no questions in terms of expenditures. I don’t know how they got off on this comp time for somebody with that kind of salary. Granting comp time for himself and other executives was very inappropriate.
You’d think with his background he would know that.”
Beebe said that if followup audits, due every 60 days, don’t show that problems have been resolved, then Passailaigue should be fired. He said he had no “timetable” on how long Passailaigue should be given to fix things. Some problems cited in the audit have been reported as already fixed.
While speaking with the Arkansas Democrat-Gazette about Passailaigue at the first floor entrance of the Capitol, Beebe turned his head to notice a man walking in through the door. It was Passailaigue.
“We were just talking about you,” Beebe said as he cordially greeted Passailaigue.
Passailaigue softly said hello to the governor and walked by into the rotunda.
Beebe said he had no appointment with Passailaigue and didn’t know why the lottery director had stopped by the Capitol. The lottery’s office is in downtown Little Rock. Beebe then returned to the governor’s office on the Capitol’s second floor.
Passailaigue walked up to Lt. Gov. Bill Halter’s office. Before entering, Passailaigue told a reporter that Halter “wanted to chat with me. I don’t know [why]. He didn’t say.”
Regarding Beebe’s criticism, Passailaigue said, “The only thing I can tell you is I respect his comments. Every jurisdiction is different as to what they require in terms of policies and procedures.We’ve been through a learning curve, and we intend to adhere to it.”
After about a 20-minute meeting with Halter, Passailaigue said the lieutenant governor was simply interested in estimates on lottery proceeds that will be available for scholarships.
“I told him $105 million this fiscal year and $110 million next fiscal year,” he said.
Additionally, Passailaigue said, he briefed Halter on the audit findings and said he has attended to some concerns and plans to attend to the rest. He said Halter offered no criticism.
Passailaigue said he’s not resigning but doesn’t know how long he’ll stick around.
When he was hired last year, lottery officials said he planned to stay for five years.
“I’ve got a heart murmur that will probably require a heart-valve replacement maybe next year,” Passailaigue said. “My ticker is more of a concern than anything else in my life right now.”
Regarding his time heading the lottery, he said, “We produced by all accounts more than double the expectations. We’ve got 30,000 Arkansans in school with [Academic] Challenge scholarships. I’m proud of that. Hopefully, we can keep that up.”
Beebe’s comments Wednesday expanded on criticism of Passailaigue made during the governor’s call-in television show Tuesday evening on the Arkansas Educational Television Network.
Beebe said he had no problems with the results the lottery has produced.
“You have to give him credit for starting up a lottery and starting it up faster and apparently having success,” the governor said.
The governor doesn’t have control over the lottery. The nine-member Lottery Commission is made up of three members appointed by the governor, three appointed by the House speaker, and three by the Senate president pro tempore.
In June 2009, the commission voted to hire Passailaigue and pay him $324,000 a year. Commissioners said they were impressed by how Passailaigue had started up a lottery in South Carolina.
Passailaigue later hired two top lottery managers who worked with him in South Carolina: David Barden and Ernestine Middleton. The commission agreed to pay them $225,000 each.
Passailaigue later granted himself, Barden and Middleton 200 hours each of compensation time.
The commission in October voted to allow 80 hours of comp time to employees who worked long hours during the lottery’s start-up but not to penalize employees who have already taken more than 80.
Passailaigue used 16 hours, Middleton used 178.5 and Barden used 134.5, according to commission records.
“I would not have allowed any comp time for those type management folks,” Beebe said.
A legislative audit released Nov. 12 said the lottery failed to follow state travel rules and regulations for reimbursements for several employees, including its director, and failed to seek a legislative committee’s review for certain contract matters.
Auditors found about a dozen deficiencies at the lottery, including it being unable to provide year-end financial statements in accordance with generally accepted accounting principles, not completing employee background checks before hiring as required by state law, and failing to provide documentation for excessive lodging costs.
Passailaigue told legislators Nov. 12 that he regretted not spending more time working on the administrative side of the lottery.
Lottery Commission Chairman Dianne Lamberth of Batesville, a Beebe appointee, said she respects Beebe’s criticism.
“This audit can’t happen again,” she said. “We can attribute most of the findings to starting up. But if other things show up, if the audit isn’t corrected in a timely manner, you can’t blame it on start-up. The lottery has a short time to prove it can have effective management.”
She said at the Dec. 9 commission meeting that she plans to propose timetables of varying lengths for each of the issues in the audit to be corrected. She said she has no timetable for evaluating Passailaigue
Commissioner Joe White of Conway, appointed by House Speaker Robbie Wills, was one of two commissioners, along with Ben Pickard of Searcy, appointed by Beebe, who voted to fire Passailaigue in September over the comp-time issue. The rest of the commission members supported keeping him.
White said he hasn’t changed his position.
“The commission at some point has got to say it’s our responsibility and we’ve got to deal with it,” White said. “I personally get along well with Ernie Passailaigue, but his administrative style leaves a lot to be desired. We have been assured on many occasions by senior lottery managers that we were following state law. Clearly, that’s not the case. He’s not had the regard for state policies and procedures that we should have. It’s insensitive. Very insensitive.”
Sen. David Johnson, D-Little Rock, co-chairman of the Legislative Lottery Commission Oversight Committee, said he has been “very troubled” by the comp time and the audit.
“I think the commission must get it’s financial house in order, and if the commission fails to do that, then I believe a very wise decision would be to change management of the lottery,” Johnson said.
Halter, who led the successful drive to pass Amendment 87 of the constitution to allow a state lottery for scholarships, declined to comment about Passailaigue. He said he has tried not to interfere in the personnel decisions of the commission.
He said he called Passailaigue on Wednesday morning to ask for a meeting. He said he didn’t do that in response to Beebe’s comments because he had not heard what Beebe said the previous evening.
“Every three months I just have a conversation with Ernie to get his impression on [lottery] revenue,” Halter said.
“I wanted to wish him a happy Thanksgiving.”
Front Section, Pages 1 on 11/25/2010