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Diegnan Urges U.S. Department of Justice to Review Lottery Privatization Plan to Ensure Legal Compliance

State announced plans last week to award contract to privatize state lottery to sole bidder

(TRENTON) – Following news that the Christie administration will award a 15-year contract to private company North Star New Jersey to run parts of the state lottery, Assemblyman Patrick J. Diegnan, Jr. (D-Middlesex) today commended New Jersey’s Democratic congressional delegation for echoing the mandate of a measure he sponsored and calling on the U.S. Department of Justice (DOJ) to review the plan to ensure legal compliance and spare taxpayers from potential legal challenges.

“I commend our Democratic delegation for their leadership on this issue and putting the interests of New Jerseyans first,” said Diegnan. “Now that privatization of the state lottery seems imminent, I appeal to the U.S. Department of Justice, as I did in the resolution I sponsored, to expedite a review of the administration’s privatization plan to ensure our contract does not run afoul of the department’s interpretation of law and result in costly lawsuits to the state as a consequence.”

Diegnan’s resolution (AR130) urges the governor to seek legal advice from the DOJ before contracting with a private sector manager to operate the state lottery to ensure the contract is not inconsistent with the requirements of federal law. The resolution contends that the authority given to the lottery manager and the compensation proposed under the contract raises serious concerns as to whether the lottery would continue to operate in a manner consistent with federal law. The failure to comply could have severe consequences for the state, and the constitutionally-dedicated funding that the state lottery provides for state institutions and state aid for education, according to the resolution.

Representatives Donald Payne, Jr., Rush Holt, Robert Andrews, William Pascrell, Jr., Frank Pallone, Jr. and Albio Sires have written a letter to U.S. Attorney General Eric Holder, Jr. asking him to conduct an expedited review of the state’s privatization plan to ensure legal compliance. In the letter, they reference an opinion issued in 2008 by the U.S. Department of Justice which stated that, in order to prevent corruption or the appearance of corruption, a state should not receive any upfront payment from a lottery manager. According to a media report, North Star New Jersey will pay the state $120 million upfront to oversee sakes and marketing for the lottery. The letter states in part, “some have alleged that this arrangement appears to fall short of the test for compliance with the Department’s interpretation of the law. We ask you to provide guidance on the legality of this arrangement in order to avoid costly legal challenges should it deemed unlawful in the future.”

“It is troubling enough that we are giving away one of our largest sources of revenue, but to think that we could be breaking the law and further saddling the state financially is especially disconcerting,” said Diegnan. “The problems with the Illinois lottery contract continue to bedevil Illinois taxpayers and show the follies of privatization of a well-run state program. A bidding process that results in one bidder does not pass the smell test. There are too many similarities to AshBritt. It is pressing that the Justice Department look into this plan before it is too late.”