Letters seeking $1.4 million are sent to 2 vendors
Tennessee Lottery officials have asked two vendors to pay a total of $1.4 million to make up for losses caused by a computer coding error that compromised the Cash 3 and Cash 4 games in August.
Lottery CEO Rebecca Paul Hargrove and two board members disclosed the figure during a meeting Tuesday with The Tennessean's editorial board.
Letters demanding the payment were sent to Smartplay International, the vendor that supplied the computers that contained the software coding error, and Gaming Laboratories International, a company the lottery hired to verify that the Smartplay computers would function properly.
The letters asked for $1.4 million to cover:
- $762,507 in refunds to lottery players who turned in their losing tickets to the lottery.
- $549,259 in increased prizes given out for several weeks after discovery of the glitch.
- $95,000 in fees to KPMG Canada, the company hired to verify the computers now are working properly.
The lottery switched July 28 from a system in which numbered balls were picked to a system in which computers picked the winning numbers. A software coding error prevented the computers from drawing any numbers with repeating digits, such as 3-3-6 or 5-5-5-5. The error wasn't discovered for three weeks.
To compensate players, the lottery offered double refunds or free plays to those who had kept their tickets — as long as the tickets contained numbers that could not have won because of the glitch. The lottery also increased prize payouts for 23 days after the glitch.
Hargrove said both companies submitted the $1.4 million request to their insurance companies. The insurance carriers have told the lottery the matter is under discussion, she said.
Request given to insurer
Smartplay President David Michaud confirmed in an e-mail to The Tennessean that the request was made and turned over to the firm's insurer. He said Smartplay had no further comment.
Gaming Laboratories President James Maida was not available when The Tennessean called Tuesday afternoon. That firm and Smartplay are based in New Jersey.
Asked whether the lottery board would sue the two companies, James Ripley of Sevierville, the board's audit chairman and an attorney, said the issue was "complicated" and would depend on what is best for the lottery.
Tom Dinkins, a lottery player who lives in Antioch, said he agreed the lottery should ask for the money back but also said he thought it proved that the lottery should return to ball drawings.
"We trusted them to get it right, and it didn't happen,'' he said. "Now they are saying we want $1.4 million back, but in the meantime, we have to trust now that they have it right."