Ontario's ombudsman is calling for the provincial lottery agency to launch civil suits to regain millions of dollars in suspected fraudulent insider wins if police investigations fail to result in criminal charges.
"If there's evidence to show that someone fraudulently obtained money that wasn't theirs, I believe that the OLG should be suing them to recover the money in civil courts, at the very least," André Marin told CBC News in an interview Wednesday from Ottawa.
His comments came in response to the discovery that a case identified by Marin in a scathing 2007 report on the Ontario Lottery and Gaming Corp. as the "most shocking" suspicious insider win is still under investigation nearly two years later.
The Dec. 26, 2003, Super 7 jackpot worth $12.5 million claimed by Kathleen Chung in a Burlington convenience store managed by her brother was one of five cases identified in the 2007 report that accused the OLG of turning a blind eye to suspicious insider wins. A report by CBC's The Fifth Estate triggered the ombudsman's probe.
An Ontario Provincial Police spokesman wouldn't confirm that the case is still under investigation, citing privacy concerns and the potential to hamper an ongoing investigation. But he defended the lengthy probe.
"It's impossible to state any particular case will take 'X' amount of time. They're all individual, they're all unique," said OPP spokesman Sgt. Pierre Chamberland.
Starting Nov. 3, retailers will be banned from purchasing lottery tickets at their own stores, but will be able to buy them at other locations.
Original Super 7 ticket bought at St. Catharines, Ont., store.
Ticket redeemed at Variety Plus store in Burlington where Kathleen Chung's brother is manager. It wins a free play in the Dec. 26 draw.
After Dec. 26, 2003
The free play ticket is validated at Variety Plus store and found to be the winner of $12.5 million.
Feb. 5, 2004
Chung visits the prize office to claim the jackpot. She can't remember where or when she purchased the ticket.
June 9, 2004
OLG investigator writes in an email that he has discovered Chung's brother owns Variety Plus.
July 13, 2004
An email indicates Chung declines polygraph test.
July 19, 2004
A Corporate Investigations email says it "does not support the payment" of the prize to Chung.
Dec. 26, 2004
The Super 7 ticket expires. Sometime after this date, the OLG awards the full prize to Chung.
Ontario Ombudsman André Marin releases report on several suspicious insider wins, and calls Chung's $12.5-million win the "most shocking" case.
Aug. 31, 2009
Ontario government fires the head of OLG, Kelly McDougald, and accepts the resignations of all board directors over questionable expenses and other larger problems.
Sept. 14, 2009
Premier Dalton McGuinty announces move to ban Ontario lottery retailers from buying tickets at their own stores.
It's the latest in a string of measures taken over the years by the scandal-plagued OLG to thwart fraudulent insider wins since the 2007 report.
Marin notes, however, that it may be difficult to pursue criminal charges for some years-old insider cases, such as Chung's, because of poor OLG documentation prior to 2007.
New details emerge in 2004 case
Documents recently obtained by CBC News through a Freedom of Information request show that the OLG gave Chung the $12.5-million prize, despite internal recommendations to the contrary.
Chung's story began when a Super 7 ticket was purchased in a St. Catharines, Ont., store in 2003. That original ticket was redeemed at the Variety Plus store in Burlington where Chung's brother is manager, and won a free ticket in the Dec. 26 draw, worth $12.5 million.
The free ticket was checked at the Burlington store and found to have the winning numbers. At first, Chung called the lottery prize office, saying she was phoning on behalf of her brother who "owned" the ticket.
When she appeared at the prize office in person on Feb. 5, 2004, she claimed it as her own and denied any connection to any retailer, and even prepared to sign a declaration stating she didn't have a brother. She couldn't provide information on where the ticket was purchased.
But initial OLG suspicions triggered by Chung's statements were confirmed when an OLG investigator discovered a familial link between Chung and the store where she validated her winning ticket. "I have unofficially found out that Kathleen Chung's brother owns Variety Plus….SWEEEEET!" the investigator emails on June 9.
Subsequent emails indicate Chung agreed to take a $600 polygraph test set up to be administered by a retired Toronto Police Service polygraph examiner. But by July 13, Chung backed out after consulting her lawyer.
Another internal email states that after reviewing the file, Corporate Investigations "does not support the payment of the $12-million prize to Kathleen Chung without the involvement of the courts."
But sometime after Dec. 26, 2004, when the Super 7 ticket expires, the OLG awards the full prize to Chung, without any fanfare or news release. In the following months, the Chungs buy a mansion in Thornhill.
"This very much was the modus operandi that they used at the time, which is you hold your nose and you pay out suspicious claims," says Marin.
"The whole focus of the OLG, at that time, was to make money, irrespective of the public interest, irrespective of who really had a rightful claim to the money and we were able to trace that to the highest echelons of the OLG.
"They had a real policy of coddling up with retailers and retailers exploited that, and many were wily and got away with that."
18 charged in 2 years
Since 2007, hundreds of wins have come under question and the OPP has taken on a key role in the investigations.
A forensic audit released in February 2009 revealed that lottery retailers, employees and their families have taken home $198 million in prizes over the past 13 years.
Starting on Jan. 1, 2008, a unit of 14 OPP officers has been working with the OLG regulator, the Alcohol and Gaming Commission of Ontario, to investigate insider and suspicious wins.
In 2008, the OPP probed 477 insider and suspicious wins, resulting in charges against 14 people. To date in 2009, 355 such wins have been investigated and four people charged, said Chamberland.
Over the years, the Ontario lottery agency has made sweeping changes to prevent fraud, including the introduction of self-serve ticket checkers, requiring customers to sign tickets before validation, and automatic investigations on insider claims worth $10,000.
Premier Dalton McGuinty also recently cleaned house at the scandal-ridden lottery corporation, firing OLG chief executive Kelly McDougald on Aug. 31 over expense abuses.
Ontario's ombudsman says he continues to monitor the OLG and receives quarterly report cards from them.
Marin says he's "hopeful that we've turned the corner" and is encouraged by the latest developments. But he also issues a stern warning to those at the OLG:
"I'm hoping this gets closer to the issue, but if it doesn't we're keeping a very close eye on it. And we'll take another run at it."