The Tennessee Lottery has incurred out-of-control legal expenses that stem from needless and insignficant legal activities, according to recent reports
The state lottery became embroiled in more controversy yesterday with the disclosure that the Tennessee Education Lottery Corp., which oversees all lottery operations, has been billed for more than $1 million in legal fees since it began work last August.
Lottery CEO Rebecca Paul told the legislature's Lottery Oversight Committee that the corporation had paid only about half of what it had been billed and the other half is under review by Gov. Phil Bredesen's office and State Attorney General Paul Summers.
Sen. Steve Cohen, D-Memphis, said he was "appalled" at some of the bills from the consortium led by Waller Lansden Dortch and Davis of Nashville, which he said billed $250 an hour for such things as listening to tapes of board meetings and making telephone calls.
"One of the calls was to people about the legality of video lotteries in other states something which is illegal in our state," Cohen said. "I could have told them that."
Cohen also said he went to one board meeting where four attorneys for Waller Lansden were present.
"That is a thousand dollars an hour for them to sit there. They were there about three hours. They did things a paralegal could have done," Cohen said.
Paul responded that only one of the attorneys at that meeting was being paid.
James Weaver, the partner at Waller Lansden responsible for the lottery account, said he shared Cohen's desire to make sure legal services his firm provided to the lottery are necessary.
Weaver said the fees should be considered in context.
"Basically what you had is a great (lottery) statute and the well-wishes of 58% of the population of Tennessee (who voted for a lottery), and a great board that was appointed and said, 'Do this and do it as fast as humanly possible,' " Weaver said.
The controversy boiled to the surface at the Lottery Oversight Committee's first meeting as committee members began sorting through more than 150 bills dealing with the lottery, which began selling instant game tickets last month and plans to have on-line terminals operating by next month. On-line terminals allow players to pick numbers at a terminal connected to the lottery databank and find out when the winning numbers are drawn if they have won anything.
The committee and the Fiscal Review Committee plan to review the legal services bills and pass them along to the legislature's standing committee.
Earlier, there had been outcries from state lawmakers over the salaries paid to Paul and her executive team. She stands to receive a salary of $752,000 in base and incentive pay if all incentives are met.
There was also controversy when Bredesen initially picked the Nashville firm Bass, Berry & Sims as the board's legal counsel. He backed out of that arrangement the next day, saying he had made a mistake because of his close political ties with the firm. But the prestigious firm subsequently received $85,000 for its services before the other lawyers came on board.
Former state Treasurer Steve Adams, an executive of the lottery corporation, explained to the committee that the law allows the governor and the state attorney general to employ outside legal counsel for the state. The final compensation decision will be made by those two, he said.