Passailaigue resigns from lottery post

LITTLE ROCK — Ernie Passailaigue resigned Monday as Arkansas’ lottery director, effective Oct. 7.

For two and a quarter years, he has guided the development of the lottery, which raised about $190 million for college scholarships, but he also drew criticism for failing to abide by state travel regulations, for late lottery deposit of taxes on prizes and for other things.

After a 90-minute closed meeting, the nine-member Arkansas Lottery Commission voted to accept the resignation and appointed lottery spokesman Julie Baldridge as interim director.

Baldridge won’t get a raise from her $107,100-a-year salary and won’t be a candidate for the job of director, said the commission chairman, Dianne Lamberth of Batesville. Passailaigue doesn’t have a contract as the lottery director, so he won’t get severance pay, she said.

The commission’s personnel committee will develop qualifications for the director, and the commission can begin its search soon, she said.

In a letter dated Monday to Lamberth, Passailaigue said making his resignation effective Oct. 7 “should allow sufficient time to select a new director and get us past the launch of our new game, Arkansas 50/50 Raffle, on Oct. 1, 2011.

“It has been both a pleasure and a privilege to serve the Commission as the director since the start up of the United States newest lottery,” he wrote.

Passailaigue’s letter, which Lamberth said she received Friday, cited no reason for his departure. He could not be reached at the lottery office for comment after the meeting.

In September and December, Passailaigue, whose annual salary is $326,832 a year, survived attempts to fire him.

The commission didn’t seek Passailaigue’s resignation, Lamberth said.

Passailaigue “gave no other reason than he just appreciated the opportunity to be here,” Lamberth said. “That’s all he said.”

Lamberth said the commissioners “really want to thank Ernie for the leadership he has provided for the last two and a half years.”

The lottery “has surpassed even the most optimistic revenue predictions, so thousands of Arkansans could have the opportunity to receive a college education,” she said. More than 31,000 college students received lottery-financed scholarships last school year and figures for this fall semester won’t be available until mid-October, according to a spokesman for the state Department of Higher Education.

Passailaigue “leaves the Arkansas Scholarship Lottery in a sound and healthy condition, and has agreed to stay long enough for a smooth, seamless transition, and to be available to the new management team as he is needed at any point in the future,” Lamberth said. “We wish him well in all future endeavors.”

Lottery foe Jerry Cox, president of Family Council, described Passailaigue, a former director of the South Carolina lottery, as “a lightning rod” who “attracted a lot of attention.”

Cox said that fact played into Cox’s hands because it “made it easier for us to criticize the lottery because the director always was in the spotlight.”

Commissioner Ben Pickard of Searcy, who voted in September and December to fire Passailaigue, said it’s Passailaigue’s “choice to leave us at this time, and I do appreciate the work that he has done in setting up the lottery,” which began selling tickets on Sept. 28, 2009, just three months after Passailaigue was hired, a start-up in what he called world record time.

He said he doesn’t know why Passailaigue resigned.

Lamberth said she doesn’t think Passailaigue’s resignation “has a thing to do” with the late deposit of federal taxes.

Several weeks ago, Passailaigue informed the commission that he had just been told by the lottery’s then-departing chief fiscal officer, Philip Miley, that the lottery had been assessed nearly $100,000 in penalties and interest by the IRS for late deposit of taxes on prizes won by lottery players.

The commission decided to hire a tax attorney to help appeal the assessment against the lottery.

Commissioner Steve Faris of Central said “a lot of people had thought” that Passailaigue might resign “but no one really knew for sure.

“But I think it is important that we focus from this point forward on the future of the lottery and taking our time to hire someone who is professional and someone who is focused and can come over here and continue to move the lottery in the proper direction.”

That direction “is a good, fiscally transparent agency that provides the most money possible for scholarships for Arkansas children,” said Faris, a former state senator.

Gov. Mike Beebe, who sometimes criticized Passailaigue while stopping short of calling for his resignation, said he had heard “the rumor” last week about Passailaigue’s resignation.

“To some extent, I am not surprised,” he said. He said Passailaigue “had been traveling quite a bit back and forth to South Carolina, according to my information, so I guess that is where he intends to stay.”

Beebe said he doesn’t disagree with Passailaigue resigning.

Passailaigue “deserved a lot of credit and has gotten a lot of credit for getting [the lottery] up and getting it started,” the governor said. “But there have been all these issues surrounding operations after the startup, and to the extent that this causes a change in leadership to try to see if some of those problems can be addressed, [the resignation is] probably a good deal for everybody. But that’s his choice.”

Sen. Jonathan Dismang, RSearcy, said it’s probably best for the lottery that Passailaigue resigned.

“This will give us a new fresh start,” he said. “The integrity of the lottery is critically important, and this fresh start will help assure that the integrity is maintained.”

Sen. Johnny Key, R-Mountain Home, co-chairman of the Legislature’s lottery oversight committee, added, “Given where we are and what has happened over the last several months, [Passailaigue] did what we brought him in for, and I think a change is going to be a positive thing.”

Beebe said he isn’t suggesting anybody for the commission to consider in hiring a director.

But he said, “I think there were people that were seriously interested” in state Department of Finance and Administration Director Richard Weiss being the lottery director.

“I said, ‘No, absolutely not. You can’t have Richard,’” Beebe said.

Beebe said the Lottery Commission should hire the best candidate, regardless of where the person resides, but he hopes the next director is paid a lower salary than Passailaigue, who had one of the nation’s top lottery salaries.

Key said the commission should be “very cautious” not to seek someone “who would demand a huge salary.

“I think that got us into trouble the first time,” he said.

Pickard said the commission needs “to take a long hard look at what we offer the next director.

“At this time, we need someone who has a better understanding of dealing with the people and the Legislature in the state of Arkansas,” he said.

Before Passailaigue’s hiring in June 2009, University of Central Arkansas interim President Tom Courtway withdrew his application because he said he wanted to remain at UCA and doubted that he would have been up to the task of running the lottery.

Courtway is a lawyer and former state lawmaker generally well respected by legislators, a fact that led some others to speculate that Courtway might have an inside track for the job in 2009, thanks in part to the lawmakers who were the architects of the lottery legislation the General Assembly enacted that year.

Courtway said Monday that he doesn’t intend to apply or pursue the job.

“I hadn’t thought about it since the day I withdrew,” he said.

House Chief of Staff Bill Stovall, a former House speaker who has aided lawmakers in drafting lottery legislation, said he would give “serious consideration” to seeking the job after talking to House Speaker Robert S. Moore Jr. about it if the commission is “interested in my candidacy.”

Lt. Gov. Bill Halter, who helped persuade Arkansas voters to approve a constitutional amendment in 2008 to clear the way for the General Assembly to adopt legislation to create the lottery, said the commission should find “the best professional they can find with the experience to manage a $500 million-a-year operation” in order to raise at least $100 million a year for college scholarships.

“It is certainly not the place for political cronyism or anything along that line,” he said.

Rep. Barry Hyde, D-North Little Rock, said he prefers that the lottery hire a permanent director with good lottery experience and that the salary be commensurate with the director’s experience.

Baldridge said she’ll miss Passailaigue, who “has been remarkable to work with” and is “very, very knowledgeable.”

The commission “is going to have to look hard and long to find someone who can show as much excellence as he does in the areas of lottery management and the understanding of the odd and unique creature that this lottery is,” she said.