LITTLE ROCK, Ark. — The incoming head of Arkansas' lottery, set to be one of the highest-paid lottery directors in the country, didn't take all the cash offered him.

Ernie Passailaigue's $324,000-a-year salary was just part of the deal when he was hired June 5. The Arkansas Lottery Commission chairman, Ray Thornton of Little Rock, also directed the state to pay $980 a month for a year — $11,760 total — for housing support for Passailaigue.

But Passailaigue turned it down. He said that during negotiations for the lottery job, he had made a request for possible temporary housing assistance, and that Thornton had misunderstood him.

"It was never meant to be any sort of reimbursement for housing," Passailaigue said. "It was meant that if I had to go into my pocket for a great deal of money, that they would help me with it."

Thornton said in a letter to the state's chief fiscal officer that the commission agreed to defray Passailaigue's housing expenses during his first 12 months.

But two other commissioners on Tuesday disputed that.

Also Tuesday, Family Council President Jerry Cox said the Legislature needs to tighten up the state's lottery law because it's now clear that the commission has the power to allow keno, roulette and other forms of gambling.

"I believe the way this statute was written, it pretty much gives the Lottery Commission a blank check," Cox said. "Keno requires a group of people to sit around and play, and creates a gambling-casino-type environment. It creates an atmosphere where other types of criminal activity can go."

Cox was reacting to Passailaigue saying he wants to offer keno as part of the Arkansas lottery and that the Bureau of Legislative Research told him Monday that the lottery law, Act 606 of 2009, supersedes another law that prohibits keno.

Passailaigue's $324,000 salary is the third-highest compensation package among the nation's 44 lottery directors.

Passailaigue (pronounced Pass-a-lay) officially starts the Arkansas job July 1.

The housing allowance offer came to light Tuesday in documents obtained through a Freedom of Information Act request by the Arkansas Democrat-Gazette to the Department of Finance and Administration.

According to a June 18 letter from Thornton to Department of Finance and Administration Director Richard Weiss, the lottery commissioners agreed to defray Passailaigue's housing expense for 12 months.

"In fulfillment of that pledge, agreed upon by a majority of the commissioners, I hereby request and authorize the Department of Finance and Administration to pay $980 per month toward an apartment in Mr. Passailaigue's name at the location listed below, through June 2010," Thornton wrote.

The letter said the first payment should be made "right away" to The Park at Riverdale apartment complex in Little Rock.

Thornton said Tuesday that he called Weiss on Monday and asked him to cancel the check because Passailaigue told him that he would pay his own rent.

"I am frankly very happy he turned it down," Thornton said. "I think it is the right thing to do. He was a gentleman, and we were ladies and gentlemen."

The state's accounting administrator, Paul Louthian, said he asked one of his staff members to void the check in the state's computerized accounting system Monday and to notify the state auditor to void the check on its system, too.

Thornton said before the newspaper obtained his letter to Weiss that the commissioners talked with Passailaigue about providing "temporary lodging support" for him during its June 5 executive session, but he doesn't believe the commission determined the period for that support.

Asked why the commission should provide free rent given Passailaigue's salary level, Thornton said, "I am just glad [the commission] was able to get him. It was a difficult decision for him to leave, and we recruited him and I am glad we did."

While the commissioners made no mention of temporary housing support for Passailaigue when they hired him, Thornton said later that they weren't trying to hide it.

"I thought we did say with 'normal arrangements,' which included buying a car," Thornton said.

Commissioners Joe White of Conway and Derrick Smith of Little Rock said they don't recall that the commissioners agreed to provide temporary housing support for Passailaigue.

"We said, 'We would investigate it and determine if we could,'" Smith said.

White said temporary housing support was discussed in negotiations with Passailaigue, "but no commitment was made except we would explore it."

Passailaigue, executive director of the South Carolina Education Lottery since 2001, said his request was for "a temporary housing provision if I need it," and commissioners replied that "they would help and they understood. I didn't know how long it would take for me to find a place to stay whether it be rental or a permanent home."

Passailaigue said his having to look for an apartment could have delayed the start of the lottery, and that would have cost the state $1 million a day in lottery sales.

In requesting help with living expenses, he said, his thinking was: "Arkansas has to make a decision. Do they want me out looking for an apartment or do they want me concentrating on starting a lottery? I can't do both things at the same time."

The Lottery Commission on Friday signaled that it intends for scratch-off ticket sales to start before or on Oct. 29.

Passailaigue said his aide, Julie Baldridge, found "an extended stay" place for him about 14 miles from Little Rock early last week and then later found an apartment that he thought would be suitable for him for the next six months.

He said he sent a personal check for the $500 deposit for the apartment and a $50 application fee late last week.

Passailaigue said Thornton "went ahead with processing the monthly rent, and I just told Miss Baldridge it wasn't necessary and I had found suitable quarters and that's the end of it as far as I know."

He said Baldridge informed Thornton about that Monday.

"I think [Thornton] thought they were obligated to help me with the rent," he said. "Obviously he didn't understand what I was talking about when he did this."

Passailaigue said he's signed a lease for his apartment at 2200 Riverfront Drive, and the lease is in his name. "I hope to move in on the 29th," he said.

Keno

Passailaigue said Monday that the commission should seek guidance from legislative leaders and from Gov. Mike Beebe about a section of Act 606 that he says clearly allows keno.

Passailaigue said he envisions keno being a game played in bars and restaurants with winning numbers produced on monitors every five minutes.

Confusion arose with Passailaigue, who said legislative attorneys told him that Act 606 allows the Lottery Commission to authorize keno games but that an assistant attorney general, Bishop Woosley, told him that Arkansas Code Annotated 5-66-110 bans keno.

Gabe Holmstrom, a spokesman for Attorney General Dustin McDaniel, said that Woosley made no such statement to Passailaigue and that if Passailaigue thought he did there "must have been confusion on the part of one or both" of them.

Cox, with the Family Council, said he long feared that the amendment voters adopted in November to authorize Arkansas lotteries would lead to expanded gambling.

"We're going in the direction of having mini casinos in convenience stores all over the state," he said.

House Speaker Robbie Wills, D-Conway, said Monday that drafters of the lottery law meant to allow keno.

But Cox said he doubted that many legislators outside the "inner circle" drafting the lottery law understood that.

He said Arkansas has the potential to have the "worst lottery law in the nation" depending on how far the commission takes gambling.

The law that is superseded by Act 606 also bans gambling houses, roulette, boat gambling, "bingo-type" pinball machines, betting on card games, betting on games of "hazard or skill," transmitting information for the use of betting on sports, bribing participants in sports games, betting on horse races, selling lottery tickets and promoting lotteries.

Cox said the lottery law is "so vague as to mean what anybody wants it to mean" and that those other forms of gambling are possible under Act 606.

Cox said he also opposes Passailaigue's ideas to have a lottery prize be a $10,000 buy-in to a poker tournament out-of-state.

"It's going outside the boundaries of what sensible people see the lottery as being," Cox said.

Beebe said Tuesday that he doesn't have any thoughts on keno but probably will think about it later.

Temporary Office

In another development, Arkansas Building Authority Director Anne Laidlaw said the Lottery Commission will begin to occupy its temporary office in downtown Little Rock next week.

Laidlaw said the office will be in the Museum Center at 500 President Clinton Ave., Suite 215. It's owned by the Arkansas Democrat-Gazette, Inc., said John Martin, a broker with Moses Tucker Real Estate. Arkansas Democrat-Gazette, Inc. publishes the Arkansas Democrat-Gazette.

The commission will pay $6,445 a month for 5,156 square feet for 60 days while it searches for a permanent headquarters, Laidlaw said.