OMBUDSMAN REPORT André Marin, Ombudsman of Ontario • March 2007 Investigation into the Ontario Lottery and Gaming Corporation’s Protection of the Public from Fraud and Theft Director Special Ombudsman Response Team (SORT) Gareth Jones Lead Investigator Elizabeth Weston Investigators Mary Jane Fenton Rosie Dear Kwame Addo Grace Chau Garvin DeFour Irene Buncel Early Resolution Officers Anne-Sophie Leduc George La Rosa Alphonse Barikage Senior Counsel Laura Pettigrew Wendy Ray Elaine Penalagan Ombudsman Report Investigation into the Ontario Lottery and Gaming Corporation’s Protection of the Public from Fraud and Theft “A Game of Trust” André Marin Ombudsman of Ontario March 2007 Table of Contents Executive Summary.......................................................................................................... 1 Overview ............................................................................................................................ 7 Investigative Process......................................................................................................... 8 The OLG: A Winning Enterprise.................................................................................... 9 The Rules of the Game ................................................................................................... 9 The Retail Relationship................................................................................................. 10 And the Winner is? ....................................................................................................... 11 Missed Signals: Paul Rutherford’s story .................................................................. 11 Fighting to be Heard: Bob Edmonds’ story.............................................................. 12 On the Inside Track........................................................................................................ 17 Finders Keepers ............................................................................................................ 19 The Best Things in Life Are Free ................................................................................. 19 Not Up to Scratch.......................................................................................................... 20 Getting the Inside Story.................................................................................................. 20 Inside or Out?................................................................................................................ 22 The Name Game ........................................................................................................... 24 Damage Control............................................................................................................ 25 The Awakening............................................................................................................. 26 The Numbers Game: Quantifying Insider Wins.......................................................... 28 When the Numbers Don’t Add Up ............................................................................... 30 Reputation Renovation: The Seven-Point-Plan ........................................................... 34 Life After Oct. 25, 2006................................................................................................ 36 You Pays Your Money and You Takes Your Chance: Treatment of Complaints ... 38 Promotion and Punishment: An Imperfect Fit ............................................................ 42 The Trouble With Instant Wins .................................................................................... 44 New Game Plan: Under Construction .......................................................................... 46 Self-Serve Checkers .................................................................................................. 46 Sign Your Ticket........................................................................................................ 46 Customer-Facing Screens......................................................................................... 47 Public Education Campaign..................................................................................... 48 Customer Feedback .................................................................................................. 49 Hindsight is 20-20......................................................................................................... 49 Promises, Promises ....................................................................................................... 50 Why Not Just Ban Them?............................................................................................. 51 Rebuilding Trust: The Retailer Question..................................................................... 52 The Retailer Contract.................................................................................................... 53 Protecting the Public Trust............................................................................................ 54 Protesting Too Much?................................................................................................... 56 Refereeing the Game: The Case for a Regulator .......................................................... 57 The Road to Reform ....................................................................................................... 58 Codifying Decency ....................................................................................................... 59 Putting Integrity to the Test .......................................................................................... 60 Failing the Smell Test ................................................................................................... 60 Moving Forward: Rebuilding Trust.............................................................................. 61 Recommendations........................................................................................................... 63 The Government of Ontario.......................................................................................... 63 Ontario Lottery and Gaming Commission.................................................................... 64 Cultural Change........................................................................................................ 64 KPMG Recommendations......................................................................................... 64 Insiders...................................................................................................................... 65 Complaint Handling.................................................................................................. 66 Corporate Investigations .......................................................................................... 66 Statistical Record-Keeping ....................................................................................... 67 Responses……………………………………………………………………………......68 Appendix: OLG’s Self-Analysis of Response to Ombudsman’s Recommendations………..……………...…………………………….71 Executive Summary 1 The Province of Ontario has become addicted to gambling revenues. In the 2004- 2005 fiscal year, the Ontario Lottery and Gaming Corporation (the “OLG”), the Crown agency that administers government gaming operations, generated nearly $6 billion in overall revenue, close to $2.3 billion of which came from lotteries alone. In 2006, the government lottery business grossed almost $2.4 billion. Tens of thousands of private retail workers – the frontline faces of this lottery juggernaut – feed tickets into terminals in return for millions in cash each year. Without question, government lotteries are big business in Ontario and the Province has come to rely on the money generated. 2 I make no moral judgment about all of this. After all, it is common for Western governments to become dependent on gaming revenue to help fund important government programs. In Ontario, as elsewhere, the considerable profits earned are used for public benefit – to fund a variety of worthy programs, from sports, recreational and cultural activities to health care and hospitals, from environmental and social programs to grants to charitable organizations. By getting into the gaming business, the Province has not only acquired a huge pool of money, it has taken charge of an activity that remains criminal if undertaken privately because of its inherent risks of corruption and abuse of the vulnerable. It has done so in an effort to ensure that funds yielded do not profit criminals but instead assist the people of this province. 3 It is fitting that the OLG’s three core values are “integrity, respect and accountability,” because it is those characteristics that best distinguish criminal activity from socially responsible entertainment. For the same reason, it is disturbing when those core values are given inadequate focus or even forsaken because of a corporate culture that places profits before responsibility. That is what happened in the case of Bob Edmonds, and no doubt to an untold number of others. It is why, based on the results of this investigation, I am firmly convinced that the OLG cannot continue to go it alone. Let it sell lottery tickets because it does it so well, but get it out of the fraud prevention business at which it has proved itself so inept – and have an independent agent regulate lotteries instead. 4 On Oct. 25, 2006, the CBC broke the shameful story of the