[V]ermont’s liquor and lottery chief said Monday he does not plan to conduct his own review of the state’s lottery system, a decision the state’s Senate leader says would contradict a law that went into effect last month.
Patrick Delaney, commissioner of the newly merged Department of Liquor and Lottery, said he would instead rely on findings compiled in May by lottery director Daniel Rachek when reporting back to the Legislature later this year.
The legislation merging the liquor and lottery commissions, Act 1, says “The Commissioner of Liquor and Lottery shall conduct a review of” lottery prize winners and security practices to determine whether lottery agents, employees or their relatives gamed the system, and what should be done about it if so.
That provision was added late in the legislative process, in response to a VTDigger investigation in April showing that people with close ties to lottery agencies — either through family or employment — were winning instant lottery games at suspiciously high rates, which statisticians said were nearly impossible to explain based on luck alone.
VTDigger’s investigation found that at least 117 retailers, or those close to them, had won a major lottery prize — defined as $600 or more, between 2011 and 2016. Collectively, they won nearly $1.8 million. Employees at 29 convenience stores claimed more than $1.4 million in prizes from stores they worked at, or formerly worked at, or from neighboring outlets.
After its publication, Gov. Phil Scott separately asked Rachek, a former FBI agent who was director of the lottery commission before the merger and is now deputy commissioner of the combined body, to review the integrity of the lottery and report back.
Rachek spoke to individuals named in the VTDigger article, compiled data on lottery winnings during the period in question, and determined there was no wrongdoing. He also made recommendations for how the state could shore up its lottery system.
“The report was presented to the governor and we are going to use that report as a baseline for the required report to the Legislature,” Delaney said in an interview Monday, explaining that he saw no need to do the same work again.
“The report in and of itself deals with the same issues in respect to the lottery game itself and what were perceived to be anomalies in the winners,” he said.
Sen. Tim Ashe, D/P-Chittenden, the leader of the Senate, said that decision would not meet the requirements of the commissioner as outlined in the law.
“The Vermont Lottery’s self-evaluation does not comply with the law passed by the Legislature and signed by the Governor in June,” Ashe said in an email Monday, referring to Rachek’s report.
“We want a fresh set of eyes on this, a full review of store practices, and specific recommendations regarding whether and how lottery agent store owners and employees may buy lottery products — the Vermont Lottery’s own review failed each of these tests,” he added.
Ashe said he had been “impressed” with Delaney’s work as head of the liquor control commission since he was appointed to the post in 2016.
“I’ll be extremely disappointed, though, if he chooses not to follow the law,” he said.
Asked about the senator’s comments, Delaney said, “I can certainly follow up with Sen. Ashe when time allows and see what he has in mind.”
State Auditor Doug Hoffer said his office is too busy to investigate the lottery anytime soon, but he felt that there was cause for concern based on the VTDigger investigation, and questions that remain unanswered in Rachek’s review.
“It doesn’t seem to me that it has covered all the ground that you guys first mentioned,” Hoffer said of Rachek’s report.
“It doesn’t seem completely objective,” he added. “It seems a little defensive, which isn’t very surprising. That’s the way people and institutions often respond when they perceive they’re under attack. I think there’s more they could have done.”
In particular, Hoffer said Rachek’s report seemed to focus too much on whether people were employees or relatives of employees at the time of the winning, rather than taking a wider view of how people might benefit from their current or former links to lottery agents.
For example, he said he would have looked more closely at whether big winners were cashing in other people’s lottery tickets to help them avoid having to claim that money themselves and have it seized by the state for delinquent taxes.
“It isn’t whether you are employed by an agent, people can work together who are not employees or agents,” he said.
Hoffer also said he found it odd that the lottery director suggested that because the suspicious winnings were a small fraction of total winnings, that somehow made them less of a concern.
“I don’t think that’s important frankly. It’s almost as if they were trying to discredit the messenger, which is too bad,” Hoffer said.
“I think the subject is worthy of independent investigation, whether that’s me or my office remains to be seen,” he said, noting that the attorney general would be better suited for such an investigation.
“What may be happening here, if there is collusion it’s probably criminal, and that’s not what my office does,” Hoffer said. “We wouldn’t even look at these individuals, we would look at these lottery operations and see if we felt they have internal controls to avoid what is going on.”
Delaney, who was the Utah portfolio manager for Southern Wine and Spirits before taking up his current post, had a different reading on the investigation.
“It was concluded that the information presented in the Digger article was misstated or incomplete in most cases,” he said, referring back to Rachek’s report for specific examples of inaccuracies.
“The report details specifically who, what, where and when in terms of the information being presented erroneously,” Delaney said.
He noted that some of the people identified in the article as being lottery agent employees, owners or relatives of either group, were found to have not actually been in those positions at the time of their big lottery winnings.
For example, Penny Durant, one of the state’s luckiest lottery players, “made at least 111 claims worth $500 or more from 2011 to 2017 and won more than $300,000 during a period when she or family members worked at area stores,” according to VTDigger’s initial investigation.
According to Rachek’s report, the lottery’s security director, Brian McLaughlin, followed up with Durant and received a different answer about her date of employment at the store, and noted that she worked in the bottle redemption part of the store, and never sold lottery tickets.
Rachek also reached out to statisticians quoted in the VTDigger article and asked if they would revise their assumptions after being given additional information about particular cases. They generally said they would increase the odds of certain scenarios playing out given the new data, but did not change their general opinion that the winning rates were unlikely.
Delaney said he saw nothing left to investigate.
“I would be inclined to say that the points that were raised in the article have been fully vetted. Whether or not that has been sufficient is a subjective assessment,” he said. “I am confident the lottery games have integrity, they are fair … and there is no illegal activity.”
One of the questions Delaney will have to answer when reporting back to the Legislature is whether he believes there should be new rules that place restrictions on those with links to lottery agents — owners, employees or immediate family — from playing at the store where those connections exist.
Delaney said he did not believe such a law was appropriate. He noted that a memo has been sent out to lottery agents suggesting that employees refrain from playing while on the clock.
“Once you start making definitions about family members, about employees, etc., that’s a very fluid and dynamic environment. It really could not serve any particular purpose to disallow this activity by law,” he said.
Rachek’s report also recommends a closer review of individuals who win often and a review “all top prizes won by everyone greater than $25,000.” And it suggests looking into the development of a smartphone app that allows players to check their own winnings, rather than rely on vendors who, in some states, have been found to deceive players about winning tickets so they can pocket the proceeds.
Delaney said this work was ongoing, and that he supported any efforts to make the lottery more secure and trustworthy.
Attorney General TJ Donovan said he too was satisfied with Rachek’s report, and ready to put the issue to bed. He added that he had met with Rachek about his findings and had the utmost confidence in his ability to impartially investigate his own agency.
Donovan said he was not familiar enough with the new liquor and lottery law to say whether a separate review was required.
“I was certainly satisfied with Dan Rachek’s review — if a different review is done by someone else, that’s fine — he certainly answered my questions, but I’m not that familiar with law and requirements,” he said.
Asked about the general practice of having agencies investigate themselves, Donovan said: “You raise a fair point. I just think in this instance Dan Rachek was qualified to do the job and he did it well.”
Hoffer said that although he was not prepared to take on an investigation now, that could change — and it remained to be seen how the Legislature and administration would respond to Delaney’s decision not to conduct his own review.
“It’s entirely possible the governor’s office or the secretary of administration may review it [Rachek’s report] and decide they want something more,” he said. “It’s entirely possible that, as Sen. Ashe pointed out, they might not be satisfied.”