Ont. retailers cashed $100 million in fraudulent lottery claims: ombudsman

TORONTO (CP) - "Unscrupulous" lottery-ticket retailers in Ontario have collected at least $100 million in fraudulent claims since 1999, thanks in large part to a "hopelessly conflicted" provincial agency that allowed the practice to persist, a government watchdog said Monday. In an investigation of jackpot wins by so-called lottery insiders, ombudsman Andre Marin showed no quarter to the Ontario Lottery and Gaming Corporation, which he said ignored allegations of fraud because it was "fixated on profit rather than public service."

"The OLG's oversight of retailers is non-existent," Marin told a news conference.

"The OLG has turned a blind eye to allegations of crime for many years. The OLG's scant documentation . . . reveals that $100 million were pocketed by insiders between 1999 and 2006."

Marin stopped short of calling for a ban on retailers buying lottery tickets, but said the government-owned corporation has too cozy a relationship with the thousands of men and women who sell its products - and are also some of its best customers.

"It has lost sight of the fact that it is supposed to be the guardian of the trust of the public," he said. "Without the trust that whoever has lady luck on their side will actually pocket the jackpot, confidence in our lottery is shattered."

Marin criticized the corporation for failing to keep track of how many retailers it has and how many have claimed jackpots, and called the OLG's "coddling" of retailers its "fatal flaw."

Customers who complained were rarely taken seriously, said Marin, who called the corporation's customer complaints department "rude and inept" when dealing with them.

"The problem with how the OLG dealt with allegations (of fraud by insiders) is that there was way too much hanky panky between retailers and the OLG," he said.

The government hailed the ombudsman's report as "incisive" and "well-balanced" and promised to implement its recommendations, including a proposal to give responsibility for regulating lottery tickets to the province's Alcohol and Gaming Commission.

"A new regulatory framework will provide the proper checks and balances to ensure that dishonest behaviour is identified, and appropriately dealt with," said David Caplan, the minister responsible for the OLG.

OLG's chief executive, Duncan Brown, resigned suddenly late last week, but the opposition parties suggested he was simply a scapegoat and called for Caplan's resignation.

"You cannot have people buying lottery tickets being ripped off . . .while the minister says 'I didn't know anything, I didn't hear anything,"' said NDP Leader Howard Hampton.

"Mr. Caplan has to go. He has no credibility."

Opposition Leader John Tory called the OLG an organization "that is out of control," and said pushing Brown out wasn't good enough.

"The integrity of Ontario's lottery system is in shambles, and (Premier) Dalton McGuinty has let that happen," said Tory.

"Getting rid of the head of OLG . . . is little more than scapegoating."

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 Brown: "Sometimes you hold your nose."

"The message has to be given from the top, and the message from the top of 'holding your nose' is not the message that you want to see," said Marin.

"This problem is deep within the bowels of the OLG."

OLG chairman Michael Gough said Monday that Brown would be paid $720,000 in severance, calling his resignation a "mutual" decision between Brown and the board.

Gough said the insider jackpot scandal hasn't hurt the lottery corporation's bottom line since it broke last October with the case of Bob Edmonds, a 78-year-old who was cheated out of his winnings by a lottery retailer.

"The fact is lottery ticket sales are in fact up," he said. "That's a . . .reflection of Ontarians' basic trust in this corporation."

Caplan said the government and OLG would try to find people who had their legitimate lottery winnings stolen by someone else and pay them the jackpot they were entitled to have.

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.

Ontario's embattled lottery corporation isn't the only one dogged by problems.

New Brunswick's ombudsman is looking into whether he can launch a probe into Atlantic Lottery Corp. following an internal report showing retailers won a disproportionate number of prizes exceeding $25,000 over a six-year period.

Another investigation was launched in British Columbia after the province's lottery corporation found retailers were winning six times more than the general public.

© The Canadian Press, 2007