Atlantic Lottery Corp. asked questions about failed GeoSweep

There were questions on Thursday about whether the Atlantic Lottery Corporation withheld bad news from the New Brunswick public last summer, on the eve of the province's election campaign.

Last week, Prince Edward Island revealed that ALC had discovered some bad news about its investment of New Brunswick and P.E.I. money in the company behind the failed GeoSweep game last spring. It was news ALC decided not to disclose.

GeoSweep was an online game launched by ALC in 2012, with a massive $2 million promotion.

It never caught on and was cancelled a year later. It was a problem because ALC also invested nearly $9 million in the company that invented GeoSweep, half of that from New Brunswick taxpayers.

When Atlantic Lottery released its latest audited financial statements in July, it was just as New Brunswick political leaders began preparations for a summer election. At the time, ALC gave no hint that its investment in the company behind the failed and politically sensitive game GeoSweep was struggling.

During appearances in both Fredericton and Charlottetown in the fall of 2013, ALC executives Patrick Daigle and Brent Scrimshaw said not to worry, that the investments in GeoSweep's parent company were still safe.

ALC's chief financial officer, Patrick Daigle, says although the corporation's internal evaluation of the Geonomics investment showed it to have lost money, ALC was not obliged to disclose that on its financial statements.

"The fiscal size of the two organizations (ALC and PEI Lotteries Commission) is substantially different," said Daigle. 

"Atlantic Lottery had revenues last year of over $1 billion whereas the P.E.I. Lotteries Commission had under $20 million. With that as the basis for financial analysis, there exists a natural difference in what constitutes a material financial matter between the two organizations. On an $8 million investment assessed at different times, Atlantic Lottery and PEI Lotteries Commission could reach differing impairment decisions."

Daigle said ALC was also hopeful Geonomics might have a better year this year, making a write down unnecessary, although that has not happened  Meanwhile other investors in Geonomics have been writing down their holdings without hesitation.

Zeal, a European lottery company that owns 21.85 per cent of Geonomics, has devalued its shares by three million euros (about $4.2 million) over the last two years, even as ALC has reported no decline in the value of its 8.5 per cent holding.

Daigle hinted two weeks ago that ALC may finally declare a loss on the Geonomics investment later this year, but Coon still wants to know why it didn't happen last year when ALC' s own internal evaluation showed enough problems to force P.E.I. to declare a loss.

New Brunswick's position remains unclear.  The New Brunswick Lotteries and Gaming Corporation, the agency responsible for New Brunswick's Geonomics investment, says it is months behind in its bookkeeping and has not even gotten to the issue of whether to devalue the asset on last year's financial statements or not

In January New Brunswick Auditor General Kim MacPherson had harsh words for the corporation for taking far too long to report on its finances.

"Producing audited financial statements 18 months or more after the fiscal year end holds much less value to the public and other users of this information," she said. 

New Brunswick Green party Leader David Coon says he wants an explanation why ALC didn't report on the loss of value in its GeoSweep investment in its financial statements in July 2014.

"That's why we have a Public Accounts committee or Crown Corporations committee in this case to ask those questions," he said. "To find out what's going on, why they made those decisions, and get to the bottom of it and if necessary bring the auditor general in to really drill down into it."

GeoSweep has been a politically charged issue for years in New Brunswick and knowledge that the investments were losing money likely would have become an election issue last summer.

ALC still hasn't disclosed the information in its financial statements. On Thursday, it would not say what last year's losses were according to internal evaluations.