Vendors; disclosure and contract requirements.

(1) The department may enter into contracts for the purchase, lease, or lease-purchase of such goods or services as are necessary for effectuating the purposes of this act. The department may not contract with any person or entity for the total operation and administration of the state lottery established by this act but may make procurements which integrate functions such as lottery game design, supply of goods and services, and advertising. In all procurement decisions, the department shall take into account the particularly sensitive nature of the state lottery and shall consider the competence, quality of product, experience, and timely performance of the vendors in order to promote and ensure security, honesty, fairness, and integrity in the operation and administration of the lottery and the objective of raising net revenues for the benefit of the public purpose described in this act.

(2) The department shall investigate the financial responsibility, security, and integrity of each vendor with which it intends to negotiate a contract for major procurement. Such investigation may include an investigation of the financial responsibility, security, and integrity of any or all persons whose names and addresses are required to be disclosed pursuant to paragraph (a). Any person who submits a bid, proposal, or offer as part of a major procurement must, at the time of submitting such bid, proposal, or offer, provide the following:

(a) A disclosure of the vendor’s name and address and, as applicable, the name and address and any additional disclosures necessary for an investigation of the financial responsibility, security, and integrity of the following:

1. If the vendor is a corporation, the officers, directors, and each stockholder in such corporation; except that, in the case of owners of equity securities of a publicly traded corporation, only the names and addresses of those known to the corporation to own beneficially 5 percent or more of such securities need be disclosed.

2. If the vendor is a trust, the trustee and all persons entitled to receive income or benefit from the trust.

3. If the vendor is an association, the members, officers, and directors.

4. If the vendor is a partnership or joint venture, all of the general partners, limited partners, or joint venturers.

If the vendor subcontracts any substantial portion of the work to be performed to a subcontractor, the vendor shall disclose all of the information required by this paragraph for the subcontractor as if the subcontractor were itself a vendor.

(b) A disclosure of all the states and jurisdictions in which the vendor does business and of the nature of that business for each such state or jurisdiction.

(c) A disclosure of all the states and jurisdictions in which the vendor has contracts to supply gaming goods or services, including, but not limited to, lottery goods and services, and of the nature of the goods or services involved for each such state or jurisdiction.

(d) A disclosure of all the states and jurisdictions in which the vendor has applied for, has sought renewal of, has received, has been denied, has pending, or has had revoked a gaming license or contract of any kind and of the disposition of such in each such state or jurisdiction. If any gaming license or contract has been revoked or has not been renewed or any gaming license or contract application has been either denied or is pending and has remained pending for more than 6 months, all of the facts and circumstances underlying this failure to receive such a license must be disclosed.

(e) A disclosure of the details of any conviction or judgment of a state or federal court of the vendor of any felony or any other criminal offense other than a traffic violation.

(f) A disclosure of the details of any bankruptcy, insolvency, reorganization, or any pending litigation of the vendor.

(g) Such additional disclosures and information as the department may determine to be appropriate for the procurement involved.

(h) The department shall lease all vending machines that dispense online lottery tickets, instant lottery tickets, or both online and instant lottery tickets.

(i) The department will require a performance bond for the duration of the contract.

The department shall not contract with any vendor who fails to make the disclosures required by this subsection, and any contract with a vendor who has failed to make the required disclosures shall be unenforceable. Any contract with any vendor who does not comply with such requirements for periodically updating such disclosures during the tenure of such contract as may be specified in such contract may be terminated by the department. This subsection shall be construed broadly and liberally to achieve the ends of full disclosure of all information necessary to allow for a full and complete evaluation by the department of the competence, integrity, background, and character of vendors for major procurements.

(3) The department may require disclosure of the information required by subsection (2) from any vendor if the department finds that such disclosure is necessary to protect the dignity and integrity of the lottery and in the best interests of the state.

(4) No contract for a major procurement with any vendor shall be entered into if that vendor, or any of the vendor’s officers, directors, trustees, partners, or joint venturers whose names and addresses are required to be disclosed pursuant to paragraph (2)(a), has been convicted of, or entered a plea of guilty or nolo contendere to, a felony committed in the preceding 10 years, regardless of adjudication, unless the department determines that:

(a) The vendor or such individual has been pardoned or the vendor’s or such individual’s civil rights have been restored;

(b) Subsequent to such conviction or entry of plea the vendor or such individual has engaged in the kind of law-abiding commerce and good citizenship that would reflect well upon the integrity of the lottery; or

(c) If the vendor is not an individual, such vendor has terminated its relationship with the individual whose actions directly contributed to the vendor’s conviction or entry of plea.

(5) Each vendor in a major procurement in excess of $25,000, and any other vendor if the department deems it necessary to protect the state’s financial interest, shall, at the time of executing the contract with the department, post an appropriate bond with the department in an amount determined by the department to be adequate to protect the state’s interests, but not higher than the full amount estimated to be paid annually to the vendor under the contract. In lieu of the bond, a vendor may, to assure the faithful performance of its obligations, file with the department an irrevocable letter of credit acceptable to the department in an amount determined by the department to be adequate to protect the state’s interests or deposit and maintain with the Chief Financial Officer securities that are interest bearing or accruing and that, with the exception of those specified in paragraphs (a) and (b), are rated in one of the four highest classifications by an established nationally recognized investment rating service. Securities eligible under this subsection shall be limited to:

(a) Certificates of deposit issued by solvent banks or savings associations organized and existing under the laws of this state or under the laws of the United States and having their principal place of business in this state.

(b) United States bonds, notes, and bills for which the full faith and credit of the government of the United States is pledged for the payment of principal and interest.

(c) General obligation bonds and notes of any political subdivision of the state.

(d) Corporate bonds of any corporation that is not an affiliate or subsidiary of the depositor.

Such securities shall be held in trust and shall have at all times a market value at least equal to an amount determined by the department to be adequate to protect the state’s interests, which amount shall not be set higher than the full amount estimated to be paid annually to the vendor under contract.

(6) Every contract in excess of $25,000 entered into by the department pursuant to this section shall contain a provision for payment of liquidated damages to the department for any breach of contract by the vendor. The department may require a liquidated damages provision in any contract if the department deems it necessary to protect the state’s financial interest.

(7) Each vendor shall be qualified to do business in this state and shall file appropriate tax returns as provided by the laws of this state, and all contracts shall be governed by the laws of this state.