Security checks at lottery ticket sale locations at about 200 locations statewide in recent months have revealed no improper payments of prizes to or by store personnel, Iowa's lottery chief told a panel of state legislators last week.
Terry Rich, chief executive officer of the Iowa Lottery, played up the safety and profitability of the lottery before members of the Legislature's Oversight Committee in the wake of an expansive report by Iowa's Ombudsman of State. The April report found the lottery failed for years to aggressively prevent fraud and theft, which has been problematic in other states and in Canada.
Calling more than 99.9 percent of the lottery's transactions problem-free, Rich tried to reassure the watchdog panel that there is no need for new laws and administrative rules to protect customers.
But ombudsman's investigators who listened to Rich's comments walked away unsatisfied with his remarks. After the meeting, they said they would like to see Rich and legislators explore more of the 60 changes they recommended.
Deputy ombudsman Ruth Cooperrider said several of the proposed changes — such as disqualifying convicted thieves from being able to obtain lottery licenses — cost little or nothing but make good fiscal sense.
The lottery also has failed to say exactly what recommendations it intends to pursue. Some — such as actively trying to recoup money stolen by retail workers — seemed a fiduciary responsibility to investigators.
"Somebody should go after the prize money being obtained from stolen tickets," said Jeff Burnham, one of two investigators who looked into three years' worth of complaints by lottery customers.
The ombudsman's 2½-year investigation found at least three retailers collected lottery winnings after improperly withholding the full amount from customers who produced winning tickets. Nine more won major prizes, beating long odds to do so.
The review also found that numerous customer complaints went unexplored and that at least 15 were not forwarded to security officials — including some that could have revealed criminal wrongdoing.
Rich said Thursday that the lottery has made some changes and is exploring new technology — including installing self-checking machines at retail locations — that promises to enhance the integrity of the games going forward.
The lottery has complied with some of the ombudsman's recommendations. But Rich and others within the state-run operation have resisted making others, saying they are either too costly, pose a safety risk or are otherwise impractical.
"If we had to make sure every store clerk never ripped off a customer, it would cost too much," Rich told lawmakers.
In Minnesota, at least eight people who worked at retail locations were charged with felony fraud after compliance checks in December and January.
The Iowa Lottery conducted most of its checks in February, April and May. Some store clerks failed to require signatures of winning ticket holders as required, but all tickets were properly paid out by workers in the stores, gas stations, taverns and fraternal organizations visited.
Rich said his job is to maximize revenues while making sure the lottery operates with integrity and dignity. He noted that the ombudsman found no widespread fraud. In addition, a state auditor's report in February showed no "material" weaknesses in internal control over financial reporting and no instances of noncompliance.
The Iowa Lottery offers several games that generate big revenue for the state: Instant-scratch tabs brought in $114 million last year; Powerball, $47.4 million; Pick 3, $5.4 million; Hot Lotto, $11.8 million; Pick 4, $2.1 million; $100,000 Cash Game, $3.4 million; pulltabs, $17.8 million.
Thanks to MaddMike51 for the tip.