Minnesota State Lottery director Ed Van Petten abruptly resigned Friday, coming after an inquiry found that taxpayers have reimbursed the director for staying in his own timeshare unit when traveling.
"This morning, I met with Minnesota Lottery Director Ed Van Petten," said Gov. Mark Dayton's chief of staff Jaime Tincher. "During that meeting, Mr. Van Petten offered his resignation. I accepted his resignation. We will immediately begin a search for his replacement."
Van Petten had been reimbursed for more than $7,000 after he and his staff stayed at his personal timeshare units during conferences in Las Vegas, Atlantic City and New Orleans, lottery travel records show.
The reimbursements appear to violate a state policy that forbids employees from being "reimbursed for staying at the house of a relative, friend, or personally-owned property," according to Minnesota Management and Budget, the state's budget office.
Van Petten initially defended the arrangement in an interview Thursday, saying he does not own the properties and can only use the timeshare units a few weeks a year. "I don't view it as personally owned property," he said.
Van Petten said he pays an annual fee as a timeshare owner and used the state reimbursement money to defray the costs. He said his timeshare fees average out to $311 a night, but got reimbursed by the state at a lower rate, actually saving taxpayers money.
"If I'm wrong, I'll do whatever is right on the deal," Van Petten said Thursday.
The Minnesota State Lottery is already facing new scrutiny in court and by legislators after a wrongful termination lawsuit by a former top official who raised the issue of excessive alcohol use at out of state conferences and meetings.
Rep. Steve Drazkowski, R-Mazeppa, is calling for a legislative audit to look at the timeshare arrangement and the broader issue of lottery travel spending since Van Petten arrived in 2012.
Sen. John Marty, a Roseville DFLer and a regular lottery critic, said the timeshare reimbursements and travel costs "raise red flags."
The lottery is one of the smallest departments in state government, yet Van Petten has typically spent more on out-of-state travel than the leaders of the state's largest and most complex agencies, according to data from the state's budget office.
In 2014, Van Petten spent $6,126 on travel, nearly $2,000 more than Minnesota Human Services Commissioner Lucinda Jesson and nearly $2,500 more than Tom Landwehr, commissioner for the Minnesota Department of Natural Resources. In 2015, he topped each of them again.
When he and his staff attend out-of-state meetings, they often stay at upscale venues like Miami's Trump International Beach Resort and the Marriott Marquis in New York City, according to travel records. When a lottery official traveled to Los Angeles, he stayed at the Sunset Marquis in West Hollywood, where the first night stay topped $400.
Van Petten said lottery staffers usually book rooms at the hotels where the conference is being held, so the costs are not really in their control.
He said the conferences and meetings give lottery staff a chance to get new ideas and see the latest research about marketing, technology and other issues from industry experts.
"There's no substitute for face-to-face meetings," Van Petten said. "I think it's very beneficial. I don't know any industry that doesn't have a trade conference."
The lottery is an unusual creation of the state that must return a large share of profit to the general fund budget. Since its inception about 25 years ago, the lottery has poured about $2.5 billion into the budget for state services, everything from transportation, to parks, to state nursing homes.
Van Petten highlighted that lottery profits sent to state coffers keep increasing even though sales are flat or down slightly — indicating the lottery is operating more efficiently than ever.
The fresh concerns about lottery spending come as many state legislators have been relentlessly targeting what they call government waste and loose oversight. In 2013, a state audit criticized the lottery for allowing three employees to accumulate frequent flier miles on personal accounts without ensuring rewarded miles were used to reduce cost of future state-paid business travel.
"We are seeing more of this situation where there's two Minnesotas — people who work for government live in one Minnesota, and the people who pay the bill live in another Minnesota," said Drazkowski, a frequent critic of government spending. "That's not right."
Former interim lottery director Johnene Canfield, who was fired earlier this year for being intoxicated on the job, has alleged in her lawsuit that she was discriminated against because Van Petten encouraged her to drink during work-related travel even though she was ordered not to. Gov. Mark Dayton's former chief of staff, Lt. Gov. Tina Smith, suspended Canfield for two weeks for being publicly drunk at out-of-state conferences and meetings.
(See Records show alcohol-related misconduct by former MN Lottery official, Lottery Post, Nov, 7, 2015.)
Canfield has also alleged gender discrimination, saying she was treated differently than male colleagues accused of other kinds of misconduct, but who kept their jobs.
The lawsuit cites Don Feeney, the lottery's research and planning director. Feeney has traveled out of state 16 times in the past two years or so, with trips to Vancouver and Seattle, Myrtle Beach, Orlando and San Francisco, among other cities, according airline and hotel receipts. In recent years, he has stayed at expensive hotels including Helmsley Park Lane on Central Park South in New York City, the Mayflower in Washington, D.C. and the Venetian in Las Vegas.
Feeney, who did not return a phone message seeking comment, has frequently traveled to conferences aimed at curbing gambling addiction, including a stint as board president of National Council on Problem Gambling.
"I firmly believe we have an obligation to support organizations such as that and we do, quite vigorously," Van Petten said about Feeney's travel.
The lottery has a state mandate to address gambling addiction, every year giving the Department of Human Services up to $2 million to address the issue.
The lottery is a relatively small agency, employing 154 people. In fiscal year 2015, the lottery took in about $535 million from selling games of chance, like scratch-off tickets and Powerball.
By contrast, the state Department of Human Services has a two-year budget of $33.8 billion and more than 6,000 workers and lots of business in Washington, while the Department of Natural Resources commissioner oversees 2,700 workers.
Now Van Petten is likely to face new questions from legislators as they prepare for the 2016 legislative session, which convenes in early March.
Marty, a veteran DFL lawmaker, said he will not tolerate questionable spending that creates cynicism among the public.
"Frivolous spending erodes trust in government to do important work" in education, health care and the environment, he said.
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