Lottery agency's close ties to retailers 'fatal flaw': report

The organization that runs Ontario's lottery system is fixated on profits rather than customer service and needs an independent regulator,the province's ombudsman said Monday.

André Marin spoke at a Toronto news conference to announce the results of an investigation into the Ontario Lottery and Gaming Corp., which has also been ordered to turn over all relevant files to the Ontario Provincial Police so the force can determine whether to launch a criminal investigation.

"The OLG is fixated on profits rather than customer service. It's lost sight that it is supposed to be the guardian of public trust," Marin said.

Thegovernment-owned corporation is "too cozy" with its retailers and paid out $100 million to "lottery insiders" from 1999 to 2006, he said.

"It's true that it has takenimportant measures to improvesecurity, but the fact thatit's so close to its ticketsellers is a fatal flaw, and it prevents it from beingeffective."

"The OLG has turned a blind eye to allegations of crime for many years. There's likely in the area of tens of millions of dollars that have been paid to unscrupulous retailers."

Marin said the corporation's measures to guard against retailer fraud were "woefully inadequate."

"When investigations were done, they were more friendly than purposeful with officials dropping hints to help insiders prove their case rather than subjecting them to serious questioning."

Marin launched the probe last October after the CBC's Fifth Estate aired an investigative report suggesting a disproportionate number of lottery retailers won large prizes in the past seven years.

Former CEO had message for concerned officials

Marin said lottery officials who raised concerns about suspect claims by retailers in 2003 and 2004— including one $12.5 million prize— were told by former corporation CEODuncan Brown: "Sometimes you hold your nose."

Brown was forced to resign on Friday and will receive a severance package worth $720,000, the OLG announced. Opposition critics have suggested he was a scapegoat.

Marin said within 90 days, his office identified five cases where retailers lied about ticket claims.

"That represents about $15 million of money paid to internal fraudsters," he said.

Marin noted that customers who complained were rarely taken seriously and that the consumers complaints department was "rude and inept."

"Without the trust that whoever has lady luck on their side will actually pocket the jackpot, confidence in our lottery is shattered."

Province accepts recommendations

Public Infrastructure Renewal Minister David Caplan said the government has accepted the recommendations, including transferring the regulation of lottery tickets to the Alcohol and Gaming Commission of Ontario.

"The one thing that binds all these efforts together is a renewed commitment to customer service," Caplan said.

Caplan also asked police to investigate, butOpposition Leader John Tory andNDP Leader Howard Hampton said calling in police would allow the government to delay any further action or investigations into the lottery corporation for months, probably until after voters in Ontario go to the polls in October.

In a news release, OLG board chair Michael Gough said most of the recommendations would be in place within months.

"OLG has learned a great deal from the Ombudsman's report. It is fair, comprehensive and thoughtful," Gough said.

Among his 23 recommendations in the report, called A Game of Trust, Marin says the OLG should:

• Conduct criminal and background checks on retailers.
• Send "mystery shoppers" to test the integrity of retailers.
• Establish and enforce a code of conduct for retailers.
• Establish a process for investigation and adjudication of suspicious claims.

The report also outlined the gaming corporation's ugly fight with Bob Edmonds, a 78-year-old Coboconk man who was the owner of a $250,000winning Lotto Super 7 ticketthat a dishoneststore owner cashed in 2001.

The corporation spent several years and $429,600 fighting Edmonds in court. But in 2005, OLGpaid $200,000 to settle the matter with Edmonds, who also got a $150,000 settlementfrom the retailer in a separate lawsuit.

The ombudsman's report also said the Ontario government has become "addicted to gambling revenues" of $6 billion a year, including the $2.3 billion generated annually by lotteries alone.