ALC under-reported insider wins

The Atlantic Lottery Corp. under-reported the rate at which retailers and insiders wonlarge jackpots and it has launched an internal review on the issue, following an investigation by CBC News.

The ALCstudy is intended to shed some lighton whatthe corporationis calling "anomalies" in the amount of wins that insiders havepiled up in recent years.

A CBC review of lottery wins, by what the ALC calls "non-arms length" players, shows the group won or shared 146 jackpots over $10,000 during the last four years worth a combined $58 million.

That's 8.3 per cent of all the jackpots over $10,000 even though the same group won just 3.9 per cent of prizes below $10,000 during the same period.

Larry Doherty, the vice-president in charge of risk management at ALC, said the findings require "a deeper analysis" that the corporation will now undertake.

Doherty said the pattern uncovered in the investigation is puzzling.

"Seeing the numbers, I guess my initial reaction was, yes we do have to do some deeper analysis and understand it," he said

Big lottery wins by people connected directly and indirectly to ALC surfaced as an issue early in September when the body published its 2010- 2011 annual report showing non-arms length players had won 30 jackpots over $25,000 last year, which is 12 per cent of the total.

ALC dismissed questions about the high number at the time, saying the previous year the same group had won just four per cent of the big prizes and that fluctuations were normal.

But CBC News questioned that four per cent number and ALC now admits insiders actually won eight per cent, or double that rate, two years ago.

In Nova Scotia, Dave Wilson, the cabinet minister responsible for the Atlantic Lottery Corp. remains confident in the organization.

Dave Wilson said he doesn't believe officials deliberately misrepresented the numbers.

"I believe we have controls in place ... that allow for customers here in Nova Scotia that play the lottery to have confidence that there are appropriate controls in place," he told reporters in Halifax.

"We always can improve on controls no matter what we're talking about, so I look forward to the review and hopefully see what they have to say on strengthening those controls."

Embarrassed on their behalf

Maureen Tingley, a mathematics professor at the University of New Brunswick, said those statistics kill the corporation'sfluctuation excuse.

Tingley questioned ALC's initial claims that nothing was odd with the amount of big wins going to insiders.

'I'm essentially embarrassed on their behalf that they issued what is now understood to be a shoddy report.' Maureen Tingley, UNB professor

She said the numbers should have triggered an investigation long before now.

"I'm glad they're looking at their numbers," Tingley said.

"I'm essentially embarrassed on their behalf that they issued what is now understood to be a shoddy report."

ALC estimates there are 100,000 people in Atlantic Canada who could be considered non-arms length players.

They include employees of ALC, ALC retailers and suppliers and their employees and close family members of all three groups.

That works out to 5.6 per cent of Atlantic Canada's adult population, although ALC admits that is a rough estimate. Butthe corporationcan't explain why a group that size would win 3.9 per cent of small prizes and 8.3 per cent of big prizes.

However, Doherty said he's convinced there is no cheating or stealing behind the numbers because ALC investigates every non-arms length win to ensure it is legitimate.

"We do remain confident that our processes give us a great degree of assurance that the ticket has gone to the rightful owner," Doherty said.

Previous studies

TheAtlantic Lottery Corp. investigated its insider winsseveral years ago and put in place security measures to ensure the wins were legitimate.

ALC isnt the only lottery corporation to discover that insider wins were higher than first believed.

In 2009, theOntario Lottery and Gaming Corp.found itself in a similar situation.

The amount of Ontario lottery prize money claimed by insiders over 13 years was almost double what was originally thought.

Deloitte, in an analysis of data provided by the Ontario Lottery and Gaming Corporation, found $198 million, or 3.4 per cent of total winnings, was claimed by insiders in the previous 13 years.

Originally, the OLG had determined that the value of insider winnings was $106 million or 1.7 per cent of total winnings.