[V]ermont’s new lottery commissioner said in a report released yesterday that the agency will ban store owners and employees from playing instant lottery tickets at the places where they work, but advised against a new law banning them from playing the lottery altogether.
Both the Legislature and Gov. Phil Scott called for investigations into the Vermont Lottery after VTDigger published an article in April 2018 showing suspiciously high rates of winning among owners and employees of lottery agencies.
The former director of the lottery, Daniel Rachek, compiled a report for Scott that attempted to cast doubt on findings in the VTDigger investigation while also committing to a series of changes to strengthen the lottery system.
The commissioner of the newly combined Department of Liquor and Lottery, Patrick Delaney, was directed by lawmakers to conduct his own investigation as part of H.7, a bill passed during the last legislative session, but has said that is unnecessary. The report released this week, labeled draft 6 and dated Sept. 27, relied largely on Rachek’s initial report.
On the central question asked by the law — should there be a law banning agency owners and employers from playing the lottery? — the report says no.
“A law disallowing legal gaming by agents, employees of agents, and immediate family members of agents would ultimately prove to be unenforceable and have a significantly negative impact on education funding due to the exclusion of so many potential players,” the report says.
Among the key problems in such a law, it says, is the difficulty of defining who are employees of an agency, and how broadly one defines family.
“If my son works at Price Chopper collecting carts will I be prohibited from purchasing lottery tickets, there?” it asks. “What about a Dunkin Donuts employee that is co-located in a gas station that sells Lottery — is that employee prohibited?”
It also says that passing a law preventing employees from playing would make it harder for law enforcement officials to investigate their potential theft or cheating, as it will push them to ask friends to cash in tickets.
“Legislation will take away the best evidence that law enforcement will have to prove the crime — the agent employee cashing the ticket,” the report says.
While Delaney argues forcefully against a new law, he does say that changes will be made to the state’s contract with lottery agents to restrict where employees can play.
“The DLL will modify its agent agreement to prohibit owners and employees from playing instant ticket Lottery games at their place of employment,” it says.
The ban does not apply to interstate numbers games, such as Powerball, because the commissioner says those games are impossible for local agents to manipulate.
VTDigger’s investigation, “More Than Luck?,” 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.
In addition, 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. At least five of the state’s 25 most prolific winners over this stretch were current or former convenience store employees or owners.
One woman, Penny Durant, 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 stores in and around Hardwick.
“It’s just too lucky,” University of California-Berkeley statistics professor Phillip Stark said of another winner, Julie Messier, who won at least 30 instant tickets of $500 or more from 2011 to 2016.
While there has been at least one case of an employee being prosecuted for gaming the system by inflating bottle redemption receipts to buy lottery tickets, in most cases VTDigger did not find direct evidence of wrongdoing.
Delaney’s report also includes a survey of 76 of the state’s 626 lottery retailers. More than a third of retailers that responded said their store had “been victimized or an employee suspected of a crime involving lottery tickets.” About a quarter said they had reported the problem.
More than three-quarters said they currently allow employees to purchase lottery tickets at work, though less than 3 percent said they are allowed to buy tickets while working. About 9 percent said employees are allowed to cash their own tickets.
The report also lists the various ways in which the lottery is strengthening its oversight and security systems, some that have been completed and others still in the works. They include:
– Instituted procedures to more frequently review prizes claimed by Lottery agents and their employees.
– An expanded claim form for agent/employee/immediate family wins to collect information about any relationship a claimant might have with Lottery agents and their employees.
Reviewing all top prizes greater than $25,000.
– Asking gaming vendors to attach the agent/employee status to each claim instead of the individual claimant.
– Set a standard where the individuals that win multiple times and above a certain amount will trigger a closer inspection by VLC Security.
– Conduct an annual survey of Lottery retailers to determine if they have had any type of ticket thefts within the past year?
– Conduct a periodic survey of retailers regarding suggested security enhancements that they would like to see in our new gaming policies.
– Work with an instant ticket vendor to provide a mobile application that will permit players to check the winning status of their own tickets.
Have gaming vendor issue an email alert to Vermont Lottery Security for unusual validation patterns.
The Liquor and Lottery Department will also change its lottery retailer agreement to ban ticket discounting, a practice in which agents or other individuals find a third party to cash their winnings so they can avoid being flagged in the systems and having their winnings go toward paying criminal restitution or owed child support.
The report notes that the VTDigger investigation talks about techniques to cheat the lottery that have been discovered in other states, but not in Vermont. The smartphone app that allows players to check their own tickets, for example, means they don’t have to rely on vendors, who in other states have been found to provide fake results when checking a ticket, and then pocketing the difference.
Some of the other changes appear to respond to issues that have arisen with how the commission collects information on winners, and specifically how it tracks whether they work at, or are close to others who work at, a lottery agent.
Rachek admitted in his initial report that there was no way to answer the question of whether agency owners and employees were winning at a disproportionately high rate, because the commission doesn’t track the number of employees, store owners and their relatives who buy tickets, nor does it keep tabs on total amounts spent.
Yet both Rachek and Delaney conclude that the VTDigger story — which included an analysis of existing data, a description of six big winners with agency ties, and interviews with statisticians — was misguided.
“The recent article that was published by a local media outlet could be fairly described as sensational and troubling; if the assertions had been proven to be true,” Delaney writes in the conclusion of his report.
He writes that the initial responses from Rachek and other senior lottery officials, who were dismissive of VTDigger’s findings, were “disturbing and inappropriate considering the seriousness of the accusations.”
Delaney thanks Rachek, a career FBI agent who retired into the lottery, on conducting an investigation that cleared the state of any failures, and says the VTDigger article did not have evidence to support the claims that the dream of winning is more likely “if you own or work at one of the state’s lottery agents.”
“The article did encourage the Division of Lottery to take a close look at its policies and procedures with an eye towards improvement,” Delaney notes.
Attorney General TJ Donovan and Gov. Phil Scott have both said they are also satisfied with the report conducted by Rachek, who is now the deputy commissioner of DLL in charge of the lottery, despite him overseeing the very body that’s being investigated.
Senate leader Tim Ashe, D/P-Chittenden, has previously said that the law directed Delaney to conduct his own investigation, and that senators will not accept a recital of Rachek’s findings.
Ashe said in an email Wednesday he was out of the country and would not be able to read Delaney’s report until this weekend.
The language of the law is as follows:
LOTTERY AGENT SALES PRACTICES; INTEGRITY; REVIEW; REPORT
(a) The Commissioner of Liquor and Lottery shall conduct a review of: (1) lottery prize winners by agency location to determine whether a disproportionate number of winning tickets sold by each lottery agent was purchased by the owner or an employee of the agent, or by an immediate family member of the owner or of an employee of the agent; and (2) the sales, fraud prevention, and security practices of each lottery agent to determine whether those practices are sufficient to preserve the integrity of the Lottery and to avoid the occurrence or appearance of illegitimate winnings by the owner or an employee of the agent, or by an immediate family member of the owner or an employee of the agent.
(b) On or before October 1, 2018, the Commissioner shall submit a written report on the findings of the review conducted pursuant to subsection (a) of this section to the Joint Fiscal Committee. The report shall include a recommendation regarding whether a lottery sales agent, the owner or employee of a sales agent, and the members of the immediate household of a sales agent or owner or employee of a sales agent should be prohibited from purchasing lottery tickets from the agent’s licensed sales location.