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Korean lottery embroiled in scandal

Sep 26, 2005, 7:27 am

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InternationalInternational: Korean lottery embroiled in scandal

The state-run lottery business in Korea is under investigation over two separate scandals involving charging high commission fees and suspicions that the operator manipulated winning averages to attract customers.

Lawmakers demanded yesterday that the Board of Audit and Inspection make public the result of its inspection of the process of the commission rate has been determined.

Since last year, the nation's audit agency has been investigating suspicions that the Korea Lottery System, the lottery system operator, received preferential treatment from the government that allowed it to collect higher commission from profits than the average international rate.

The government has also come under fire as it was involved in the selection of who operates the controversial KLS. The Kookmin Bank, the nation's largest retail bank issues the lottery's tickets, and was known to have suggested candidates for system operators to the government based on reports written by the Hanyoung - a Korean partner of international accounting and consulting firm Ernst & Young, also engaged in the selection process.

They all denied any wrongdoings.

The KLS took 9.523 percent of the revenues from the lottery business in commission, which far exceeded an average of 3 or 4 percent of commission fees taken in other countries.

In response to public criticism over the steep commission fees given to the KLS, the government lowered the fees to 3.144 percent in April 2004.

Jeon Yun-churl, the head of the BAI, said last month that it was wrapping up its probe into the allegations, but no results have been announced yet.

The lawmakers accused the BAI of condoning the irregularities of the state-run lottery business, citing that a high-ranking BAI official took up a position in the KLS last March.

"There is possibility that the retired high-ranking official who left to join the KLS pulled strings with the BAI," said Choi Jae-cheon, a lawmaker of the ruling Uri Party in the inspection session.

The BAI said yesterday that it had looked into allegations that the KLS manipulates its lottery program to raise the probability of winning prizes and thus attracting people.

The BAI cited that there were a total of 3,140,000 cases of people winning prizes in 2003, whereas the probability stood at 2,650,000.

But, it added that it should ask foreign experts to analyze the program to examine whether or not the system was manipulated.

"We are suspicious of the process, but we have to observe the probability of this over a longer-term," said a BAI officials during the session.

Under the new lottery system which was launched in 2001 to raise public funds, the government takes 30 percent of revenues and the Kookmin Bank and the KLS receive 2 percent and 3.144 percent, respectively. Half of the revenue is given away as prizes and the rest is used for operation expenses.

The KLS, which faced cuts on their commission, filed a petition with the Constitutional Court in May 2005, saying it is unconstitutional for the government to set the maximum limit of the lottery commission.

The KLS also filed a civil suit against the Kookmin Bank in July, asking the bank to return previously-agreed commissions of 19.5 billion won. It lodged an administrative suit against the Prime Minister's Commission on the Lottery as well.

Korea Herald

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2 comments. Last comment 15 years ago by Chewie.
Page 1 of 1
New Mexico
United States
Member #12305
March 10, 2005
2984 Posts
Posted: September 26, 2005, 7:43 am - IP Logged

This has a familiar ring to it.  Evidently these innocent, child-like asians are learning bad habits from various US lottery systems.  Otherwise they'd have to think them up for themselves, which would cause the habits to be far more inscrutable.  Seems clear the MBA that dreamed this up came out of Purdue, rather than out of Seoul University.

Time frozen Chosun came unAmericanized and drifted back into inscrutability, where the auditors have a more difficult time finding evidence because they're someone's cousin, and because uncovering evidence can result in a brief course in muzzle-flash.



Absorb the good, ignore the bad, weigh the ugly.

It's about number behavior.

Egos don't count.


Dedicated to the memory of Big Loooser


    Sparta, NJ
    United States
    Member #18330
    July 9, 2005
    1977 Posts
    Posted: September 26, 2005, 9:05 am - IP Logged

    Corruption in Korea? I'm shocked. Who would have thought it was possible.


    |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

    I only trust myself - and that's a questionable choice