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Michael Graydon of Paragon Gaming is pictured on the site where the company plans to build an urban resort featuring a casino next to B.C. Place in Vancouver, Feb 12, 2014.

Michael Graydon's move from the BC Lottery Corporation to head a company developing a casino as part of a new "urban resort" in Vancouver has sparked a provincial government investigation into the circumstances of his departure.

The probe by the Ministry of Finance is taking place amid growing questions about why Mr. Graydon got a severance package worth $86,000, why he was allowed to go almost immediately to a job with a gaming company – and whether his new posting is acceptable, given all the inside government information he had access to.

Mr. Graydon's last day as CEO of the BC Lottery Corp. was Feb. 4, and on Feb. 11 he started work as president of PV Hospitality ULC, a partnership formed by Paragon Gaming Inc. and 360 VOX Corporation.

His main task is to develop hotels, a conference centre, restaurants and a spa around a revamped Edgewater Casino at BC Place.

The resort project emerged after an earlier failed attempt by Paragon to build a major new casino at the site.

Under the new plan, the existing Edgewater Casino would be a component of the resort, with the same number of slot machines and gaming tables it already has. But critics fear Paragon's plan is to expand the casino, using Mr. Graydon's expertise.

"There isn't one thing about the departure [of Mr. Graydon] and the hiring at Paragon that is appropriate," Sandy Garossino of the watchdog group Vancouver Not Vegas Coalition said Tuesday.

Her group, which successfully fought the initial casino application, has written to Finance Minister Mike de Jong and B.C.'s Gaming Policy and Enforcement Branch, asking that Mr. Graydon be blocked from taking his new job.

"In jurisdictions that have more experience regulating and governing gambling this move would never be tolerated. And it's not uncommon at all for regulators to refuse to essentially approve an appointment of this kind," she said. "We object to this appointment. He's in possession of confidential information – and the whole thing just stinks to high heaven."

The letter states that "the extraordinary move by Mr. Graydon to Paragon casts a shadow over the entire [resort] project. It's essential that the integrity of BCLC and the public service remain above reproach."

When asked about that letter, Jamie Edwardson, a spokesman for the Ministry of Finance, said the government is conducting an audit into Mr. Graydon's departure. "So there is an active review under way on that very question," he said.

A spokesperson for Paragon said Mr. Graydon was unavailable, and the company did not wish to comment.

In the B.C. Legislature this week, Shane Simpson, gaming critic for the NDP, has been raising questions about Mr. Graydon's change of jobs.

Of particular concern to him is the $86,000 payout, given even though Mr. Graydon quit his post and went immediately to work for another company.

"If a deputy minister were to leave their position they would be required to take a one year cooling-off period before they could go to work with somebody who they were directly involved with," Mr. Simpson said. "Apparently the Lottery Crop. operates under a different set of rules. … And that's a problem. …I've spoken to other people in the industry, competitors of Paragon, and they are concerned, because this guy leaves the Lottery Corporation with an awful lot of information about all of the key players."

In Question Period, Mr. de Jong said Mr. Graydon was only paid what he was owed, including salary hold-back, vacation time and salary for the two months of notice he'd given. Although Mr. Graydon gave two months' notice, the BC Lottery Corp. board of directors asked him to leave immediately, opting to pay out the notice period, Mr. de Jong said.