Western lottery clerks claiming high number of prizes: CBC investigation

Despite a consultant's report that concludes the Western Canada Lottery Corporation is not plagued by the same insider winning problems seen in other provinces, a CBC News investigation has uncovered western lottery clerks are actually claiming prizes at a disproportionately high rate.

'It's just inconceivable that they just got lucky and won that many'

BY THE NUMBERS

Western Canada as a whole:

Wins of $10,000 or more between Nov. 1, 2003, to Oct. 31, 2006:

  • Expected insider wins: 34
  • Actual insider wins: 67
  • Probability that insider wins could happen by luck alone: 1 in 2.3 million

Wins of $10,000 or more between June 1, 2007, to Sept. 30, 2008:

  • Expected insider wins: 14
  • Actual insider wins: 30
  • Probability: 1 in 340

Wins of $1,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 162
  • Actual insider wins: 265
  • Probability: 1 in 77,000

Alberta

Wins of $10,000 or more between Nov. 1, 2003, and Oct. 31, 2006:

  • Expected insider wins: 19
  • Actual insider wins: 33
  • Probability: 1 in 357

Wins of $10,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 10
  • Actual insider wins: 14
  • Probability: 1 in 7

Wins of $1,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 113
  • Actual insider wins: 133
  • Probability: 1 in 27

The Secret Shopper Program (2,391 anonymous checks on retailers between May 1 and Sept. 30, 2008):

  • Retailers failed to check for a signature 58 per cent of the time.
  • Retailers failed to provide a validation slip 53 per cent of the time.
  • Retailers failed to return the ticket to the customer 64 per cent of the time.

Saskatchewan

Wins of $10,000 or more between Nov. 1, 2003, and Oct. 31, 2006:

  • Expected insider wins: 7
  • Actual insider wins: 15
  • Probability: 1 in 315

Wins of $10,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 3
  • Actual insider wins: 2
  • Probability: 1 in 1.3

Wins of $1,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins:  38
  • Actual insider wins: 46
  • Probability: 1 in 10

The Secret Shopper Program (800 checks in May, June, August and October 2008):

  • Retailers failed to ask for a signature before validating a ticket 46 per cent of the time.
  • Retailers failed to provide a validation slip 25 per cent of the time.

Manitoba

Wins of $10,000 or more between Nov. 1, 2003, and Oct . 31, 2006:

  • Expected insider wins: 8 
  • Actual insider wins: 16
  • Probability: 1 in 185

Wins of $10,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 4
  • Actual insider wins: 13
  • Probability: 1 in 7,896

Wins of $1,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 48
  • Actual insider wins: 74
  • Probability: 1 in 3,321

The Secret Shopper Program (498 checks in January and June, 2008):

  • Retailers failed to check for a signature 38 per cent of the time.
  • Retailers failed to provide validation slips 27 per cent of the time.
  • Retailers failed to return the tickets to the customer 39 per cent of the time.

Northwest Territories and Nunavut

Wins of $10,000 or more between Nov. 1, 2003, and Oct. 31, 2006.

  • Expected insider wins: 0.2
  • Actual insider wins: 0
  • Probability: n/a

Wins of $10,000 or more between June 1, 2007, and Sept. 30, 2008

  • Expected insider wins: 0.16 
  • Actual insider wins: 1
  • Probability: 1 in 7

Wins of $1,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 1   
  • Actual insider wins: 11
  • Probability: 1 in 22 million

Yukon

Wins of $10,000 or more between Nov. 1, 2003, and Oct. 31, 2006:

  • Expected insider wins: 0.44
  • Actual insider wins: 3
  • Probability: 1 in 96

Wins of $10,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 0.22
  • Actual insider wins: 0
  • Probability: n/a

Wins of $1,000 or more between June 1, 2007, and Sept. 30, 2008:

  • Expected insider wins: 2
  • Actual insider wins: 1
  • Probability: 1 in 1.2

(Source: CBC News investigation)

Despite a consultant's report that concludes the Western Canada Lottery Corporation is not plagued by the same insider winning problems seen in other provinces, a CBC News investigation has uncovered western lottery clerks are actually claiming prizes at a disproportionately high rate.

CBC News hired Jeffrey Rosenthal, a statistics professor at the University of Toronto, to review a 2007 report prepared for the lottery corporation by the consulting firm Ernst & Young.

Ernst & Young found that Western Canada Lottery Corporation clerks are winning prizes at a rate that is only slightly higher than it should be — 1.16 times. Clerks won 67 of 1,586 prizes of $10,000 or more awarded to western Canadians between 2003 and 2006.

"A review of the data over time and over games does not indicate a consistent pattern of retail win rates exceeding the expected win rate," Ernst & Young concluded.

But Rosenthal took issue with the way Ernst & Young calculated the rate of insider wins, saying the firm misinterpreted figures for the number of retailers who play and used old estimates of how many retailers there are per lottery outlet.

Rosenthal said 67 insider wins is, in fact, 1.94 times higher than it should be. Statistically, retailers should only have won 34 times between 2003 and 2006 — and there's less than a one in 2.3 million chance that they could have won 67 times.

"It's just inconceivable that they just got lucky and won that many," Rosenthal said.

"The numbers show pretty clearly that retailers are winning significantly more than you'd expect could happen by pure luck alone," he added. "So there is something happening here.… There is something going on that should be investigated."

Ernst & Young stands behind report

Both Ernst & Young and the Western Canada Lottery Corporation (WCLC) were sent a copy of Rosenthal's report and both refused to do an interview with CBC News. However, they did provide written statements.

"Ernst & Young stands behind the report we prepared for the Western Canada Lottery Corporation," the consulting agency wrote.

The agency would not elaborate, and would not directly respond or comment on the error discovered by Rosenthal.

"As with any client project, we're not able to discuss with you (or any third party) the work done for WCLC."

Ontario Ombudsman André Marin, who investigated the Ontario Lottery and Gaming Corporation (OLG) and uncovered major problems, said the western lottery should have been subject to an independent review, as other lotteries have been.

"We were able to blow the whistle on it and get [the OLG] to change, whereas the Western [Canada] Lottery Corporation has not had an investigation, has not had the kind of independent scrutiny of their operations, and they have been able to slip under the radar screen no doubt."

Recent data also troubling

In addition to reviewing numbers from 2003 to 2006, CBC News received the most recent insider-win data in the West. The numbers suggest the problem continues.

The Western Canada Lottery Corporation is one of the few lottery corporations in Canada not covered by access to information legislation. But when CBC News asked for the data, the corporation provided it.

The numbers showed that in 2007 and 2008, there were 265 insider wins of $1,000 or more. The chances of that being possible by luck alone is less than one in 77,000.

"The fundamental problem with lotteries is they are singularly obsessed with the bottom line, with profits," Marin said.

As a result, he said lotteries across the country have tended to look the other way on the insider win issue.

"What concerns them is there will be a chink in their public relations armour, fearing that if they look like they are vulnerable, people will stop buying tickets."

WCLC increased scrutiny of lottery retailers

Western Canada Lottery Corporation refused to talk directly about the insider win rates discovered by the CBC, or the errors in the Ernst & Young report. 

"Statistics serve to guide decision-making, and alone are not evidence of anything," the lottery corporation said.

"The appropriate decisions to make to address any issues arising from retailer wins are: To institute a full range of consumer protection measures; to delay payment and investigate all retailer wins; and to engage the latest transactional data analysis methods available to search for evidence of inappropriate retailer activity. As I have outlined to you in great detail, WCLC has taken all of these measures and continues to expand and enhance them, as new methods of analysis and detection become available."

Even though the Ernst & Young report found no significant problem with insider win rates, the WCLC still made changes to combat the possibility of insider fraud.

Lottery retailers now face more scrutiny when they win and changes were made in the stores. Machines now "ding" when a ticket proves to be a winner, alerting the customer to the win, and customers must sign the back of a ticket before giving it to the clerk to check if it's a winner. In addition, the clerk must return the ticket to the customer whether it's a winner or not.

Clerks fail to follow the rules

However, CBC News has learned that clerks are failing in large numbers to follow the new rules.

The Western Canada Lottery Corporation runs a "mystery shopper program." The program does undercover spot checks on retailers to see if they are following the new rules. Details, which had never been publicized before, showed some disturbing numbers.

Here's the findings from spot checks conducted in 2008:

  • In Saskatchewan, retailers failed to ask for a signature before validating a ticket 46 per cent of the time and failed to provide a validation slip 25 per cent of the time.
  • In Alberta, retailers failed to check for a signature 58 per cent of the time, failed to provide a validation slips 53 per cent of the time and failed to return the ticket to the customer 64 per cent of the time.
  • In Manitoba, retailers failed to check for a signature 38 per cent of the time, failed to provide validation slips 27 per cent of the time and failed to return the tickets to the customer 39 per cent of the time.

"Those numbers are outrageous," Marin said. "There has to be in the system a well-known principled position, that there is zero tolerance for fraud and the organization will take the steps to send that message.

"But if you let those kinds of numbers out there, it means that you are prepared to look the other way. And if you are prepared to look the other way, then you are letting fraud happen and letting the public be ripped off."

Concerns about wins by lottery retailers emerged in 2006, when the CBC's Fifth Estate did an investigation about rampant insider winning in the Ontario lottery system. Reaction was swift and furious.

Marin launched his probe of the Ontario Lottery and Gaming Corporation in October 2006, and a week before his report was released in March 2007, the lottery corporation dismissed its CEO. At the same time, the Atlantic Lottery Corporation conducted its own investigation and admitted insiders were winning far more than they should, and instituted changes to fight the problem. And, after an ombudsman investigation in B.C., the British Columbia Lottery Corporation fired its CEO.