Thursday, May 31, 2007


How does corruption happen? Maybe, it starts off like this ...

Lucinda: Please forgive me for posting this complete report. It's a good one, full of information which the public needs to know. I didn't want to leave any of it out. That's a sincere compliment. Thanks to Les Leyne for the kind of excellence in journalism which serves to keep a province honourable. And, June 1, a hard-hitting Letter to the Editor written by Dale Perkins of Victoria. And then, my gosh, it just goes on and on ... and this isn't even looking at casinos. - BC Mary.

Enforcement branch's superficial, inept investigation left consumers at risk

Les Leyne
Times Colonist -- Thursday, May 31, 2007

The B.C. Lottery Corp. wasn't the only outfit that dropped the ball when it came to double-checking suspicious retailer wins. Ombudsman Kim Carter's exhaustive look at how lax the system is when it comes to probing retailer wins went beyond the internal workings, or non-workings, of the corporation.

The government's Gaming Policy Enforcement Branch was also examined. It came up well short of what might be expected.

Carter looked at four years worth of work from that branch. From its creation in 2002 up to 2006, "it did not conduct any audits or investigations into the lottery retail network or into its complaints handling process."

Sometime in 2003, it confirmed that the lottery corporation had a statutory obligation to report any suspected fraud to the branch.

But a year later, when the branch got two e-mails about suspected retailer fraud, it didn't bother treating them as formal notifications that would trigger investigations.

Carter said: "In the small number of complaints it received about lottery retailers it relied on BCLC to conduct the investigation."

And the lottery corporation, as she made abundantly clear, had next to no interest in investigating much of anything.

Carter also took a detailed look at the branch's investigation last winter when the integrity of the lottery retail network first came into question.

And what she found was a superficial patch-up job.

Although the branch did have some systemic concerns about the corporation's prize payout system, the report it produced didn't reflect them.

The enforcement branch claimed to have reviewed 74 files forwarded by the corporation involving attempted fraud. In fact, Carter said, it only looked at short summaries of those investigations.

The branch said in December it was satisfied the corporation had handled the complaints appropriately.

But when Carter sat down with officials three months later, they told her they "had not yet received the complete files and could not confirm that the appropriate action had been taken in each case."

She said the enforcement branch obviously had some concerns about the scrutiny of winners claiming prizes of $10,000 or more. But she found it did not investigate that issue.

"In our view the overall tone of the report is reassuring rather than seriously concerned. The depth of the investigation and the fact that a number of disquieting pieces of information were toned down or left out contributes to this result," the ombudsman found.

The branch's report didn't discuss the fact the corporation relies on retailers to identify themselves when claiming wins. It didn't point out that BCLC has no way to verify if claimants are retailers. It didn't identify the fact there was inadequate scrutiny of retailer wins, or that the corporation had paid out prizes to retailers with suspiciously vague stories about when they bought their tickets.

Most significantly, Carter found the branch "only took a cursory look" at prize payouts under $10,000, despite the fact that category accounts for 99 per cent of all winning tickets.

"It appears GPEB did not independently investigate this area and simply relied on lottery corporation assertions," the ombudsman concluded.

Here's the comparison of investigations. The ombudsman uncovered enough to write a scathing report that prompted an apology from the corporation, a verbal lambasting by the minister and a whole new independent audit.

The Gaming Policy Enforcement Branch found nothing.

"I'm a lot less than pleased about the report they delivered in December," Solicitor General John Les said after it all came to light. "I'm going to be very interested in the recommendations of the auditor in the next several months. It may well be that changes need to be made there."

His personal motivation for staying on top of this mess is that the branch left him looking pretty foolish. He relied on them for background -- as any minister would -- when he wrote a letter published in the Times Colonist last winter parroting the line that generally, all was well. "Detailed investigation" of retailer wins, he assured one and all. "Rigorous and extensive testing," he promised. "No issues have surfaced."

It was all a snow job.

He was roasted in the legislature yesterday, but relied on the new independent audit that he ordered in response to Carter's work. There's no idea what that will turn up. New Democrat Bruce Ralston called that an "investigation of an investigation of an investigation."

But this province's supposed gaming-enforcement watchdogs go into it with two strikes against them.

Or this ...

Selling [numbered] company pocketed $1.9-million profit

The Globe and Mail - May 31, 2007

VANCOUVER -- Questions were raised in the British Columbia Legislature yesterday about a piece of land that was allegedly "flipped" by a numbered company to the province when the government began acquiring a right of way for a massive transportation project known as Gateway.

Guy Gentner, the NDP MLA for North Delta, suggested in the House that the government paid too much for the land, allowing the company to pocket $1.9-million in profits.

Mr. Gentner said that nearly 40 per cent of the cost of the $1.1-billion South Fraser Perimeter Road, which is a key piece of Gateway, is allocated for land acquisition, making it the largest purchase of property for any highway project in B.C.'s history.

"For speculators, there's a lot of money to be made here," Mr. Gentner said in directing questions to Kevin Falcon, the Minister of Transportation.

"Can the Minister of Transportation explain how it is that a numbered company paid $1.7-million for contaminated industrial land at 7590-80th Avenue in Delta on February 25, 2004, and flipped it less than a year later, only weeks before the announcement of the South Fraser Perimeter Road route selection, for $3.6-million?" he asked {snip} ...

Full story at:



Times Colonist
Letter to the Editor: Friday, June 01, 2007

Re: "Lotteries, minister failed the public," editorial, May 30.

The provincial ombudsman's report is just the tip of the iceberg. What we now discover is that B.C.'s entire gaming industry is run by a Crown corporation that lacks ethical and moral integrity.

This latest scandal is all about lottery ticket customers swindled by dishonest retailers. However, just as important are the thousands of pathological gamblers in the province who are enticed by B.C. Lotteries' slick ads and promotions. This scandal is about the suicide victims who died because of their gambling addictions. It's also about the many, many families and marriages that have failed because of gambling.

This government has become addicted to gaming revenue and lacks the moral fortitude to admit the error of its ways.

This government also lacks the courage to keep the promise to "stop the expansion of gambling that has increased gambling addiction and put new strains on families," a B.C. Liberal "New Era" promise made during the 2001 provincial election campaign.

Dale Perkins,


In passing, I saw this section of the Legislature debates at: [Blues]


C. James: In December 2006 the Solicitor General told British Columbians that there was nothing to worry about. He said the B.C. Lottery Corporation was doing its job to protect consumers. Well, yesterday's damning report proves that the Solicitor General misled the public or was himself misled. Either way, someone has to be held accountable for the failures and attempted cover-up. The minister must take action. He must hold someone accountable.

My question to the minister: if he refuses to do that, if he refuses to stand up for British Columbians, will the minister resign? [DRAFT TRANSCRIPT ONLY]

Hon. J. Les: Perhaps it would be helpful for the Leader of the Opposition if I went through the chronology again of what transpired since October of last year.

Members of the House will recall that in October last year, concerns were raised with respect to the operations of the lottery system in the province of Ontario. I immediately asked our gaming policy and enforcement branch to undertake an investigation of the B.C. Lottery Corporation to ensure that similar problems did not exist here in British Columbia.

That report was completed on the 14th of December. I was advised that although there were some issues, in terms of its technical integrity the system in British Columbia was working fine. I so advised the public. I should say, as well, that the Ombudsman's investigation was commenced within a week after the investigation of the gaming policy and enforcement branch.

Clearly, that Ombudsman's report, which was tabled yesterday, was entirely unacceptable in terms of the conclusions that were reached with respect to the operation of the B.C. Lottery Corporation.

Mr. Speaker: The Leader of the Opposition has a supplemental.

C. James: The minister can't duck this one. He can't try and hide from this one. He made a statement to the public in British Columbia in December. He said: "The issues have been fully investigated and resolved." That was pretty clear from the minister, but the Ombudsman report said that there was no way to substantiate the minister's claims.

Again, my question to the Solicitor General…. He's been caught up in his own incompetence or been caught misleading British Columbians. The minister wants us to accept that everyone involved gets off scot-free. Well, that's not good enough.

Will the minister now resign?

Hon. J. Les: What I was attempting to convey to the member opposite is what I reported in December was based on information that was provided to me at that time. I share the member opposite's outrage in terms of the recommendations that have flowed from the Ombudsman's report.

We all ought to be equally outraged that the lottery system in British Columbia was not working as it should. We are absolutely committed to making sure, first of all, that all of the recommendations of the Ombudsman's report are fully implemented.

We will go further. We are going to bring in an outside auditor to ensure that there is a complete review not only of the lottery system within the B.C. Lottery Corporation but also the gaming policy and enforcement branch to ensure that we can make further improvements that will guarantee the proper functioning of this body in the future.

C. James: I heard the minister say that he was outraged. Outrage isn't good enough. Action and accountability are what's needed from this minister.

Let's remember that it was the Solicitor General himself who ordered the investigation — the investigation that according to the Ombudsman report turned out to be a whitewash. He is responsible for that failure. He didn't do his job, and he didn't follow through. He left consumers vulnerable to fraud. The incompetence and the cover-up are on his desk in that report.

If the Solicitor General disagrees, then why won't he fire the people who were responsible for this?

Hon. J. Les: I have already said that there will be a complete review by an independent auditor. When the results of that review come in, the chips will fall where they may, and everyone will be held properly accountable. That is a commitment that we intend to uphold.

B. Ralston: The Lottery Corporation service plan states: "The BCLC complies with all policy directives issued by the minister." The minister ordered that the original investigation, which reported on December 14…. That was an investigation conducted by the gaming policy and enforcement branch. He signed off on it.

The Ombudsman's report, which examined that report, found that the so-called investigation didn't look at the complete complaint files — only summaries. There were no written records of the interviews conducted.

So will the Solicitor General admit — and he's had a day to reflect on this — that the investigation he ordered was a complete whitewash and that he participated in a cover-up?

Finally, a good example of what an alert media can achieve:

Lotto firing
B.C. Lottery Corp fires its president. Will more heads roll?
Vancouver Sun - Friday, June 01, 2007 (updated 4:15 pm)

The head of the B.C. Lottery Corp. was fired today, three days after the release of a scathing report that found the corporation didn't do enough to prevent dishonest retailers from stealing customers' winning tickets.

Solicitor-General John Les said he supported the decision by BCLC's board to fire chief executive officer Vic Poleschuk. And he suggested more heads could roll after the conclusion of an independent audit he ordered Tuesday into BCLC and its government regulator, the Gaming Policy and Enforcement Branch.

"We're going to make sure that everybody who played a role that is less than responsible is held accountable," he said. "Let's expose everything. Let's let the sun shine in."

Even criminal charges are not out of the question if the auditor turns up specific evidence of fraud, said Les. {Snip} ...

But NDP Leader Carole James said it's Les - whose ministry is responsible for both BCLC and the regulatory branch - who should go.

"It's the minister who's ultimately responsible," she said. "And it doesn't appear that he's going to resign. So I think the premier should have the courage to fire him."

BCLC's board members, who are appointed by the province, met Thursday evening and this morning by phone to discuss the report into retailer fraud released Tuesday by B.C. ombudsman Kim Carter.

Shortly after 11 a.m., it sent out a brief news release announcing Poleschuk's termination.

"The board of directors has decided a change in leadership is required and we've taken that step," board chair John McLernon said in a written statement.

The statement said the board would be meeting next week to discuss an interim CEO and had confidence in the rest of BCLC's executive team.

John Fraser, a spokesman for the board, said no board members be commenting further on the matter. Fraser said the board has not yet decided on what, if any, severance Poleschuk will receive.

Poleschuk, who's been with BCLC since 1985 and its CEO since 1999, was paid $442,667 last year.

A message left for Poleschuk at his home in Kamloops was not returned by late afternoon.

Carter launched her investigation of BCLC in December after the Vancouver Sun reported lottery retailers in the province were winning major prizes at several times the rate of the general public.

According to internal lottery documents obtained by The Sun, over the past six years, those who sell lottery tickets have won 4.4 per cent of all lottery prizes over $10,000 - a rate three to six times what would be expected given their share of the population. Retailer wins were more common for some games than others - with a high of 11.6 per cent for Keno.

The figures, obtained through a Freedom of Information request, raised fears retailers might be stealing customers' winning tickets - by, for example, falsely telling a customer their ticket was a loser.

Immediately following The Sun's December story, BCLC said it had confidence in its security system and believed the high rate of retailer wins was simply due to them playing more often.

However, Carter's report found major problems with virtually every aspect of BCLC's payout procedures - such as the total lack of scrutiny for prizes under $10,000. Carter's investigators also uncovered more than 20 examples of retailers who won multiple times over just a few years and others who were paid out big wins even though they couldn't tell BCLC when or where they bought their ticket.



By Paul Willcocks
Paying Attention - Thurs., May 31, 2007

Everything about the B.C. Lotteries scandal is just so sleazy. It's not just the incompetence and the false assurances. No one is taking responsibility.

The government corporation charged with promoting gambling left the door wide open for fraud. People who bet on Keno or lotteries - and against all odds win - risk being cheated out of their prizes. It's easy for corrupt retailers to tell people their tickets are worthless, then turn around and claim the prize.

The public guardian is supposed to be the Gaming Policy and Enforcement Branch in the Solicitor General's Ministry. But it was useless. Worse than useless, really. When the issue finally became too big to ignore, the branch didn't investigate to see if people were being cheated. It offered up false reassurance.

So did Solicitor General John Les, who provided inaccurate information to the public about their safety from fraud and theft. And none of this would have come out, if it was left to B.C. Lotteries or the ministry. It would have been hidden.

But the CBC did a story on the extraordinary number of lottery ticket sellers who won prizes in Ontario. The Vancouver Sun filed a freedom of information request, and reported the same was true in B.C.

That was last fall. The news stories offered the government and B.C. Lotteries a chance to respond with a real investigation.

They didn't. Quite the opposite. Instead of addressing the problems, they went into what the NDP calls cover-up mode. B.C. Lotteries and the enforcement branch claimed they had investigated and there was nothing to be concerned about.

There were only 74 cases of potential fraud and everyone had been investigated, B.C. Lotteries said. The Gaming Policy and Enforcement Branch said it had done its own investigation and everything was fine. It had reviewed all 74 cases, the branch said.

Les said the public had nothing to worry about. "In the past few years, the B.C. Lottery Corp. has received only 74 complaints about lottery ticket validation concerns and those were all fully investigated and resolved," Les said "When a retailer claimed a prize, a detailed investigation was conducted."

None of that was true.

The government said that should end the matter. But the province's ombudsman was hearing from consumer complaints and decided to launch an investigation. The ombudsman's findings, just released, are grim.

There are no effective procedures to protect people from being cheated. Neither the lottery corporation nor the enforcement branch did anything to check for scams by unscrupulous dealers in kiosks, stores or bars. It was up to the public to somehow detect fraud. But when people did complain, they were usually brushed off.

That claim of 74 cases. False, the ombudsman said. There were more like 200. The claim that every case was investigated. False. The enforcement branch's statement that it had reviewed the corporation's handling of those cases. False. The claims of controls to ensure retailers weren't cheating. False.

The enforcement branch's performance was particularly dozy. In the four years since it was created, the branch did not conduct one investigation into the integrity of the lottery corporation's retail network.

The law requires every suspected case to be reported to be the branch, but it never noticed that it hadn't received a single report since 2002.

Its investigation into the allegations looked to be more about public relations for B.C. Lotteries than protecting the public. "The depth of the investigation and the fact that a number of disquieting pieces of information were toned down or left out contributes to this result," the ombudsman found. {Snip} ...

Paul Willcocks on B.C. politics and life at:

Like I was saying, it isn't rocket science to put a few checks and balances in place on these obvious areas of temptation. Here's a Letter to the Editor on that very point:

Australians have checks against lotto fraud

Published: Saturday, June 02, 2007

Part of the problem with the B.C. Lottery Corp. is the people running it: Fire the top echelon and start over.

Take a tip from Australia. There, you can buy a registration card, which, when presented with your lottery submission, will register the ticket(s) in your name only. This costs $2 a year. Further, if your ticket is a winner and has not been claimed within two weeks, a cheque for the winning amount will be sent to you at the address on your registration card. So tickets lost, stolen or put through the washing machine are no longer a worry.

I lived in Western Australia for quite a few years, and I would occasionally get a cheque in the mail for a winning ticket that I thought I had checked, but obviously hadn't.

Barry MacKay

While Big News is enjoying its sudden truth-seeking, a major question still goes unanswered: how come so little is said about the well-known issues such as organized crime often associated with gambling of any kind?? How about it, Michael Smyth? ...


Enforcement branch is also in need of a cleanout

Michael Smyth
The Province - Sunday, June 03, 2007

The people who run the government's $2-billion gambling business became aware five years ago that lottery players might be getting ripped off by dishonest ticket sellers. {Snip} ...

I remind you of ... the government's total dysfunction when it comes to policing gambling.

The B.C. Gaming and Enforcement Branch is the same outfit that issued a misleading, error-riddled report last fall saying everything was fine with the province's lottery-retailing system.

That didn't satisfy B.C. Ombudsman Kim Carter, who issued last week's devastating report revealing that the system is wide open to theft and fraud by unscrupulous ticket sellers.

The bottom line: Firing lottery chief Vic Poleschuk was the correct move -- though at first defending him and then letting him twist in the wind all week shows just how dazed and confused these people are.

To restore confidence, more heads must roll. The B.C. Lotteries board should be fired, too, and then the granny-hunting enforcement branch should be cleaned out and overhauled.

Anything less would show the government cares more about its own soaring gambling profits than protecting players being fleeced of their winnings. {Snip} ...


So who was the owner of the numbered company?
Thanks for the compliment, anonymous 4:36, but I don't know mysterious details like that.

That's why the company's registration identity is a number, rather than a name, I guess.

An employee of a retailer (say 7-11 as a fictionous example) rips off an unsuspecting customer who fails to validate their own ticket. This becomes the fault of the BC Government.

The same employee on the other hand short changes a customer on a refund or skims a credit card number yet nobody is going to argue that this is the fault of the Governor of the Bank of Canada or the CEO of the CIBC.

So are we suggesting that every employee working for every retailer in the Province that has anything to do with lottery ticket sales or redemption must now be individually approved and certified by the lottery corp?

Lay the fault where it lies and punish the offenders who are the criminals.
I am guessing that buried somewhere deep in the paperwork is a "friend" (of a friend) of our Premier, or the Liberal party of BC, or the federal Liberals. The story about it being bought cheap and was paid for at fair market value "just before the announcement" doesn't sit well with me. This provincial government has turned into a(nother) scandal waiting to happen.
So, anonymous 8:21, are you saying: terminate all the watch-dogs because it doesn't matter if they fail to supervise lottery transactions?

Just guessing here, but I think that when CTV's W5 (or was it CBC's 5th Estate) outed the problem in Ontario, the B.C. Lottery Corp would've looked better if (a) they could have assured the public that they'd been really, really checking this stuff all along ... or (b) that they'd immediately begin to check B.C.'s lottery win records.

It doesn't take a rocket scientist to notice something was out of whack about the amazingly high ratio of "wins" by insiders.

And, just incidentally, the buck usually stops at the top, doesn't it? Where the real responsibility sits?
What I'm suggesting Mary - very differently from Anon 8:21 - is that no retailer, no employee of a retailer and no member of a retailer's immediate family should be permitted to buy any lottery products and would be barred from receiving any benefit from any lottery win.

Retailers should also be barred from paying out any winnings - apart from free tickets and perhaps up to $10 prizes. Such winnings should be paid out through the lottery branch itself. We pay them enough!

The first thing any accountant learns is that cash and near cash transactions must be carefully monitored and safeguarded.

The whole provincial lottery system - from one end of the country to the other - ought to adopt the same careful rules and regulations. Or the whole crooked business should be shut down.

Pay them a higher commission if necessary but, as in any business that handles cash, take care of the cash, trust - and verify.
Many thanks, gw. Makes perfect sense, what you say.

Here's another commenter who I'll call Anonymous:

about three days ago , the NDP in question period called for Les to stop the bonus from the gambling guy. No can do said Les, it's up to the board. next day the bonus was stopped. Fire the clown was the next position by the NDP in question Period. can't do that says Les it's up to the board. House closes down and today the fellow who was making 450,000 a year plus bonuses got fired. They wouldn't do anything until the house was shut down. Had they done something dramatic they would have been following the direction of the opposition and Gordo would cut his throat before admitting they might be right. Sleazy but very effective.

And as one paper said, Gordo just had to go see Arnie the day the pay item was in the house. Gordo's boys cooked it up to make sure he wouldn't have to listen to complaints from the other side. He has if we like it or not, some smooth operators around him, and of course we pay for it all. wonder where Lali was or Corky or the lady from North Island. One or two may have had a job elsewhere but it would be interesting to find out.

Monday and the big event should be back on. Bill is away for a few days but will be back by then and his reporting of events sure does come in handy.
BC Mary

First of all, there is no proof that any one of the retailers named as having won large prizes actually did anything wrong. In fact one of them claimed that he was purchasing up to $100 in tickets a day so it is probably not a huge suprise that eventually he won. If lottery retailers buy 10x more tickets than the average person it is likely that they are going to win 10x as often.

I am not saying that there isn't fraud in the system. I am saying that calling for the resignation of executives who have no direct role just means that the taxpayer will be shelling out a million bucks in severance and other compensation without actually fixing anything.
Hi, anonymous 7:15:

Nobody assigned guilt. OK?

But what upsets many people -- rightly so, in my view -- is that the B.C. Lottery Corporation wasn't checking ... wasn't doing its due diligence in areas where CASH is changing hands.

What the Opposition was calling for was the resignation of the Minister responsible for lotteries. No penalties there for the taxpayers to shell out for, eh?

And it was the Minister (John Les) who fired the CEO of BC Lottery Corp. Ya figure that CEO had demonstrated a competence worthy of continuing that big "big bucks" salary? Wasn't it $454,000. plus perks last year alone?

But it would be helpful to know exactly why the CEO was fired so abruptly -- after the Legislature had shut down so these questions couldn't be asked.

Hi Mary,
The idea that was suggested from Australia (just above here) makes good sense to me. I always wondered whether the odd ticket I buy (and almost never check the number) might actually BE a winner.

Can you think of a single thing this government has actually handled since 2001 that HAS been done properly?

I can't. Virtually everything they touch has the hint of either incompetence, special deals, or neglect.

What happened on the Legislative Library file in the end?

Nothing they've done, from log exports to health care, from university education to schools management, from the Olympics to Rapid Transit, from the environment to chronic care, from the Convention centre to BC Rail has not been touched by some hint of malfeasance, poor management or scandal.

And they thought they deserved a RAISE!
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