News

Ontario government officials initially became aware of questions about retailers winning a disproportionate share of jackpots six months before the scandal at its lottery corporation became public last October, according to documents obtained by The Globe and Mail.

But the government did not act until the provincial Ombudsman launched a probe.

David Caplan, the minister responsible for the Ontario Lottery and Gaming Corp., said Monday after Ombudsman André Marin released his report on the allegations of lottery fraud that he will ask the police to review the suspicious prizes.

"I want the Ontario Provincial Police to have a completely free hand to go over any information that they feel would be relevant," he said.

Mr. Caplan made the pledge after a raucous Question Period in which the opposition accused him of doing nothing while unscrupulous retailers collected at least $100-million in fraudulent prizes since 1999. "His incompetence is overwhelming," Progressive Conservative Leader John Tory told reporters. "He's clearly been asleep at the switch."

New Democratic Party Leader Howard Hampton called for the minister to step down. "David Caplan was a bump on a log while hard-working people got fleeced out of millions of dollars," he said.

Mr. Caplan was repeatedly asked by the opposition and by reporters when he first learned about the problems at the lottery corporation. He said they first came to his attention about 10 days before the CBC-TV program the fifth estate alleged last October that more than 200 ticket retailers or clerks won prizes of more than $50,000 in the past seven years.

However, three officials in Mr. Caplan's office were informed by the lottery corporation in April, six months earlier, that CBC was probing the case of Bob Edmonds, an 82-year-old who was cheated out of his lottery winnings by a retailer. The CBC was also seeking statistics on the number of retailers and other insiders who had won lottery prizes since 1995, according to a series of internal e-mails obtained by The Globe.

In an April 11, 2006, e-mail sent to two senior officials in Mr. Caplan's ministry and Wilson Lee, communications director at the time, the lottery corporation asked for their input on what information should be released.

A month later, the lottery corporation informed the ministry of what it would release. "No issues," Mike McRae, a policy adviser in the ministry, responded in an e-mail sent May 11, 2006. "Do you have a status update on these that I can provide to those interested?" he added.

The government was told by the lottery corporation last spring that the CBC was investigating insider wins, but were assured that the fraud against Mr. Edmonds was an isolated case, Mr. Lee said Monday.

"They were steadfast that the insider policy was sound and there were no other problems," Mr. Lee said. "We now know in hindsight there were significant concerns. I was not aware of that at that time."

The government was told by the lottery corporation last spring that the CBC was investigating insider wins, but were assured that the fraud against Mr. Edmonds was an isolated case, Mr. Lee said. "They were steadfast that the insider policy was sound and there were no other problems," he said.

In his report, Mr. Marin calls for an independent regulator to oversee the lottery corporation. He says there is an inherent conflict in having the corporation oversee and discipline the retailers it depends on for its profits.

"OLG has turned a blind eye to crime for many years," Mr. Marin said at a news conference. His probe concluded that about $15-million in lottery winnings was paid to "internal fraudsters."

In 2003 and 2004 alone, the lottery corporation identified five major suspicious wins by insiders but turned down only one.

Mr. Marin said the lottery corporation has introduced some measures to protect consumers better. But his report says the lottery corporation's efforts to crack down on illegal activity are hampered by a corporate culture that places profits before responsibility. This culture is best summed up by an internal e-mail written by former chief executive officer Duncan Brown in response to concerns about suspicious wins by retailers and quoted in the report. "Sometimes you hold your nose," it says.

Mr. Brown was forced to resign last Friday after three years.

The Ombudsman's report, entitled A Game of Trust, makes 23 recommendations, including requiring retailers to face criminal background checks when they apply for lottery terminals, and setting up an adjudicative process to deal with disputed prize claims.

Mr. Caplan said the government will adopt all of the Ombudsman's recommendations, including having the Alcohol and Gaming Commission regulate lotteries. The commission already oversees the lottery corporation's casino and racetrack operations.