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A Whole New Game

A Whole New Game. The impact of the Ontario Ombudsman’s lottery investigation: “A Game of Trust”. The scandal breaks: Oct. 25/06. CBC News reports on fifth estate documentary showing evidence of disproportionate “insider” wins in Ontario lottery system

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A Whole New Game

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  1. A Whole New Game The impact of the Ontario Ombudsman’s lottery investigation:“A Game of Trust”

  2. The scandal breaks: Oct. 25/06 • CBC News reports on fifth estate documentary showing evidence of disproportionate “insider” wins in Ontario lottery system • Bob Edmonds, 71, cheated out of $250,000 jackpot by retailer who checked his ticket, is profiled • Statistician tells CBC odds of so many retailer wins occurring naturally are “one in a trillion, trillion, trillion.”

  3. The fallout • All parties in the Legislature question the security and credibility of the lottery system • Calls for a public inquiry • Credibility of government-run lottery at stake • Public projects funded by lottery revenues – charities, hospitals, etc. – could be threatened

  4. “Own motion” • Ombudsman can launch investigation on “own motion” into matters of urgent public interest • After investigation announced, received more than 400 complaints from the public • Pledged to complete investigation within 90 days

  5. The investigation • Complaints received: 456 • In-depth complainant interviews: 26 • OLG staff interviews: 35 • Others: Former OLG staff, retailers, Ont. Convenience Store Association, other provinces and countries • Retained statistician from University of Western Ontario • Reviewed 53 bankers’ boxes full of documents

  6. About OLG • Established 1975, merged with Ont. Casino Corp. in 2000 to become Ontario Lottery and Gaming Corporation (“C” dropped in recent rebranding exercise) • Crown agency with part-time board of 5 • Reports to Minister of Public Infrastructure and Renewal • Responsible for lotteries, casinos (charity, aboriginal and commercial) and racetrack slot machines

  7. Lotteries = Big business Revenue from lotteries: • 2004/05 - $2.3 billion • 2005/06 - $2.4 billion Games: • 10 online lotteries, 20 instant “scratch” games • 6/49 and Super 7: by Interprovincial Lottery Corp – revenues returned to provinces Employees: • 8,000 staff; 12,000 indirectly employed through casinos, about 11,000 independent lottery retailers

  8. “Insider” rules – pre 10/25 • Prize claimants must be “lawful bearers” of tickets • Prizes up to $990 may be redeemed at retailer; up to $50,000 by mail; over $50,000 must be claimed in person • “Insider” wins trigger an investigation only if they are more than $50,000 • Asked “are you affiliated with the OLG?”

  9. Retailers: Front-line sales force • Earn commissions and bonuses on sales and validations of lottery tickets • Total commissions in 2005/06: $165 million • Visited weekly by OLG’s 80-person sales team Pre “10/25”: • No background checks, no credit or criminal record checks; contracted on “good faith” • No clear stats on exact number of retailers

  10. Ombudsman’s findings Bob Edmonds was not alone Rutherford case: 1993 • Man sued over ticket shared with retailer who claimed $400,000 jackpot • Court found OLG was negligent in protecting Mr. Rutherford from retailer theft and fraud • OLG ignored ruling that it had “duty of care” to public OLG lost sight of the fact it is a public servant

  11. Mr. Edmonds’ story • Bought ticket July 2001, using his usual numbers • Store clerk told him he wasn’t a winner; claimed $250,000 prize herself • Clerk couldn’t tell OLG investigators where she bought ticket or what numbers she played; OLG gave her extra time to think • Clerk asked Mr. Edmonds to bring old tickets to the store; next day, produced them for investigators as proof of “her” numbers

  12. The Edmonds saga, cont’d • OLG decision: “We cannot prove with certainty that [she] is not the legitimate owner of the ticket” • Clerk appeared in paper with prize • Edmonds called OLG, got nowhere • Went to court 2002; settled in 2005 for $200,000 plus $150,000 from retailer • Retailer’s charges stayed • OLG’s court costs to fight Mr. Edmonds: $429,000

  13. Other suspicious cases • Evidence of five suspicious cases 2003-2004 totalling $14 million; only one not paid Most shocking: • Burlington $12.5-million winner • Sister of retailer • Denied her family in retail business • OLG had record of concerns about retailer, but paid out prize anyway

  14. OLG’s internal debate • Some wanted to get tougher on retailers, intensify investigations • Management considered a more relaxed “bearer holder” policy – no questions asked • Email from one manager to CEO about the $12.5-million case: “It still rots my socks”

  15. CEO’s response “I used to have to issue gaming licenses to companies or individuals that I just knew with absolute certainty were dirty. I just couldn’t prove it… “Sometimes you hold your nose…”

  16. Other Ombudsman findings • OLG and retailers had a fundamental conflict of interest • No reliable record of retailers or stats on how often they were winning (even our statistician couldn’t determine this) • Complaints were brushed off – “That’s between you and the retailer” • Investigations were lax and leading Report release, March 26/07

  17. OLG’s initial response • Hired KPMG consultants 4 days after 10/25 (total cost: $644,000) • Apologized to consumers and Mr. Edmonds • Downplayed and disputed CBC statistics, saying retailers win more because they play more – but couldn’t verify number of retailers • Issued “Seven-Point Plan” for reform

  18. The Seven-Point Plan • Ticket-checking machines (cost: $10 million) • Retailers to check tickets only if signed • Customer-facing video screens on terminals • Public education campaign • Toll-free line for customer complaints • Enlist professional investigators to probe all insider wins over $10,000 (down from $50,000) • Enhance complaints process

  19. Ombudsman recommendations • OLG needs fundamental culture change • Independent oversight: Give regulatory function to third party, e.g. Alcohol and Gaming Commission (regulates casinos) • Retailer registration, background checks • Regular integrity tests by “secret shoppers” • Advertise “insider wins” and establish adjudicative process for disputed claims • Improve statistical records • Improve customer complaints process

  20. Excuses from OLG: Before report CEO’s objections: • Lotteries not like casinos, don’t need same kind of regulation • Criminal and background checks “no guarantee” of honesty; too hard to do because of staff turnover • Resistant to regulations already in place in Manitoba, Alberta and B.C.

  21. After report: Sweeping change • OLG CEO fired (Friday before report released) • Government and OLG immediately accepted all recommendations • Report discussed in Legislature for 30 straight days • Media coverage across Canada and worldwide: Aggregate audience reach of 23 million in first week

  22. One year later • All recommendations have been addressed • OLG and government committed to Ombudsman’s changes and even beyond • Lottery regulation now under Alcohol and Gaming Commission; registration completed • All lottery tickets must be signed • Ticket-checkers in every outlet in the province • “Secret shoppers” started in January • Public campaigns: “Sign your ticket” and “It’s not just a game to us” • Continuing to work with OPP on “older lottery prize claims of interest” (retailer charged in December in $15-million case)

  23. Other changes • Customer complaints now being tracked • Tickets bought by retailers clearly marked “retailer” • Info on “insider win” claims released through Canada NewsWire and claimant’s name, etc., is posted on website for 30 days, in case others come forward (no issues so far) • Winners advised process now takes longer

  24. Perceptions of OLG OLG’s own polling numbers: • 63% of Ontarians believe OLG “can be trusted to be honest” (unchanged since June ’07) • 65% believe OLG lotteries are run “openly and honestly” (up from 57% in June ’07) • 75% believe OLG is “adequately addressing” the situation • 72% believe OLG is doing “everything possible” to make lottery system safe and secure

  25. Reporting back to Ombudsman • Quarterly reports since March 2007 • Met with new OLG CEO and Board of Directors in January; also met with Minister • Ombudsman asked for list of of “lessons learned” in final report • Focus on changed culture and duty as a public servant – OLG now asks: “Is this in the public interest? “Can we demonstrate the highest possible levels of honesty and integrity in and through our actions?”

  26. More “lessons learned” OLG final report to Ombudsman: “In hindsight, the ‘shock’ of the Ombudsman’s report brought about deep and systemic change within the Corporation in very short order. It is unlikely that this could have been achieved through more conventional or traditional means of organizational reform… “The report swept aside any potential inertia or opposition to needed change”

  27. “Lessons,” cont’d “The most noteworthy change is a shift in culture; a shift that has moved OLG away from an organization driven by profits only…” “The lottery program has been strengthened through awareness that many of our policies, procedures [etc.] are subject to AGCO approval and ongoing periodic review”

  28. Last words? “The Ombudsman has reinforced for us that our obligation to the citizens of Ontario to preserve and protect the public interest at all times is the foundation of everything that we do” – OLG final report to Ombudsman, March 28, 2008

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