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Jon Lender: New audit recites recent history of lottery’s troubles, including lucrative severance package

On Wednesday, the Connecticut Lottery Corp. announced it was closing its Rocky Hill headquarters temporarily for a “deep cleaning” after one of its employees tested positive for COVID-19 during a health crisis that’s been preoccupying most citizens and government leaders.

On Thursday, the state Auditors of Public Accounts injected a dose of normal into Connecticut’s fevered status quo by issuing a two-year audit report on the lottery’s operations — one of those methodical assessments that they roll out on a schedule seemingly immune from disruption, even by a viral pandemic.

And this latest report, from the office of Auditors’ John Geragosian and Rob Kane, serves as a reminder that even in normal times, the quasi-public lottery corporation has demonstrated an abnormal capacity for generating trouble along with the annual $345 million it raises in state revenue from $1.2 billion in ticket sales.

“The CT Lottery has taken corrective actions on the recommendations and other thoughts included in this report. We are confident we have addressed all of these matters and will actively monitor to ensure continued compliance,” said Tara Chozet, director of public relations and social media for the lottery — whose current CEO, Greg Smith, was appointed after the events cited in the audit.

The new report is less a collection of new and critical findings than a reprise of the lottery’s greatest mis-hits of recent years, running from 2015 into 2018.

Lucrative severance package

For example, it delves again into a lucrative and controversial “transition agreement” that the lottery’s board of directors entered with then-lottery CEO Anne Noble in September 2016, at a time when state consumer protection officials were investigating a retailer fraud scandal that had forced the shutdown of the 5 Card Cash game a year earlier.

“Based upon our review, it appears that the principal reasons for the transition agreement were to enhance Ms. Noble’s retirement benefits and to not reveal the existence of a Department of Consumer Protection investigation” that could have “suspended or terminated” Noble’s gaming license, the auditors said in a letter quoted in Thursday’s report. (Noble has denied her license ever was in jeopardy.)

The report recounts how the agreement with Noble led the auditors to press successfully for passage of a 2018 law that now prohibits quasi-public agencies, including the lottery, from giving a severance payment greater than $50,000 to “an employee resigning or retiring from employment . for the purposes of avoiding costs associated with potential litigation or pursuant to a non-disparagement agreement.”

Under the terms of the agreement, Noble stepped down from her $212,000-a-year post and immediately become a “senior adviser” to the lottery’s governing board at the same pay level. That continued until Jan. 31, 2017, when Noble reached a 10-year employment threshold to qualify for retirement benefits, and then she received $25,000 a month as a consultant to the board through July 2017.

At the time the package was being negotiated with Noble’s lawyers in late summer 2016, the lottery board’s then-chairman, Frank Farricker, wrote in a memo that he wanted to keep the consumer protection investigation “under wraps.”

“Our office understands that quasi-public agencies are granted greater discretion than regular state agencies in the area of employment arrangements. However, we are very concerned that the Connecticut Lottery Corporation employed that discretion in a way that attempted to circumvent the spirit or letter of state laws and regulations,” the auditors said in a letter that they excerpted in the report.

“The investigation of 5 Card Cash retailers resulted in 15 arrests and approximately $363,979 in court-ordered restitution,” the auditors said.

But that was not the only hangover from the scandal. Thursday’s audit report also mentions another unresolved legal problem for the lottery: a complaint by ex-security director Alfred DuPuis that he was retaliated against for being a whistleblower about irregularities and improprieties in the 5 Card Cash game.

DuPuis was put on notice in early 2018 that he faced discipline for alleged “gross neglect” over a million-dollar error made by his subordinates in the Jan. 1, 2018, New Year’s Super Draw. He was put on a brief leave, but then extended it for months by taking time he had coming and never returned to work, retiring late that year. However, he has filed a Superior Court lawsuit and a human rights complaint, claiming it was his role in reporting problems with 5 Card Cash, not the Super Draw, that brought on his problems.

“Through our review, we concluded that the charge of gross neglect and the associated administrative leave with pay could have resulted from arbitrary or retaliatory motives,” the auditors said in Thursday’s report. “We noted that many of these issues are the subject of a Commission on Human Rights and Opportunities (CHRO) complaint Mr. DuPuis has filed against [the lottery corporation]. We believe that CHRO is the appropriate independent authority” to get to the bottom of DuPuis’ claims.

The lottery denies that DuPuis was retaliated against, but both his court case and administrative human rights claims are still pending. A year’s worth of hearings in his human rights case have concluded.

The lottery’s issues have expanded into a chain of enduring problems. They’re not all recounted in the report, but what follows is an updated rundown.

FBI called in

In July 2019, then-lottery Vice President Chelsea Turner testified at one of the hearings on DuPuis’ human rights complaint that she had contacted the FBI around 2014 with suspicions of wrongdoing by Farricker, the lottery board’s then-chairman.

FBI agents soon initiated an investigation during which Noble, the lottery’s president/CEO at the time, secretly recorded at least one conversation with Farricker, using a listening device concealed in an eyeglass case.

The FBI investigation was quickly shut down for lack of evidence.

But Turner’s long-after-the-fact revelation of that federal probe prompted the lottery’s current CEO, Smith, to suspend her later in July 2019 from her $190,000-a-year job.

Further controversy arose last year when Smith, under questioning at the human rights hearing by DuPuis’s attorney, refused repeatedly to state his reasons for suspending Turner. The hearing’s presiding officer — Michele Mount, the state chief human rights referee for the Commission on Human Rights and Opportunities — said of Smith: “If I had the power of contempt, I would put him in contempt.”

Turner never returned to work, using leave she had coming to her until she resigned earlier this year to take a job in Massachusetts for less pay. She now has a lawsuit pending against Smith and the lottery corporation seeking unspecified damages — and claiming she was defamed, damaged financially and subjected to treatment so unjust that it was tantamount to a firing.

On Wednesday, the Connecticut Lottery Corp. announced it was closing its Rocky Hill headquarters temporarily for a “deep cleaning” after one of its employees tested positive for COVID-19 during a health crisis that’s been preoccupying most citizens and government leaders. On Thursday, the state Auditors of Public Accounts injected a dose of normal into the fevered status quo by issuing a two-year audit report on the lottery’s operations — one of those methodical assessments that they roll out on a schedule seemingly immune from disruption, even by a viral pandemic. And this latest report serves as a reminder that even in normal times, the quasi-public lottery corporation has demonstrated an abnormal capacity for generating trouble, along with $345 million in annual state revenue from $1.2 billion in ticket sales.

Suspended Lottery Game Had Too Many Winners

The Connecticut Lottery and state Department of Consumer Protection shut down the 5 Card Cash game after noticing there were more winners than the game’s parameters should have allowed, and determining that some lottery agents were manipulating machines to print more winning tickets and fewer losers.

The investigation is ongoing, Consumer Protection Commissioner Jonathan Harris said Friday afternoon, but lottery retailers found to have cheated could face criminal charges.

“Loss of license is just the beginning,” Harris said. “They could go to jail for this.”

The Connecticut Lottery and its contractor are working on a software update to eliminate the problem. Sales of the popular lottery game could resume next week. People who hold winning 5 Card Cash tickets cannot cash in their tickets until the game resumes. Harris said lottery and consumer protection employees will work through the weekend to get the game back online as soon as possible.

“This is an isolated incident with a specific game and it’s important that it was detected and that we are determining the causes and fixing the game,” Harris said. “The integrity of the lottery is of prime importance.”

Just how some lottery agents were able to manipulate their machines is not clear, but investigators believe there was a vulnerability between the time a ticket was ordered at a terminal and when it was printed.

“They were able to slow down the machine and pull up a history,” Harris said. “Slowing down the machine meant that somehow there was a delay in the time a ticket was generated to when it was printed.”

During that delay, some agents were able to determine whether the ticket waiting to print was a winner or a loser, he said. They would void the losing ticket, but allow the winning ticket to print, he said.

Harris said he does not think those who manipulated the system were sophisticated hackers, but rather people who were able to figure out how the lottery terminals work.

The Connecticut Lottery and state Department of Consumer Protection shut down the 5 Card Cash game after noticing there were more winners than the game's parameters should have allowed, and determining that some lottery agents were manipulating machines to print more winning tickets and fewer losers. ]]>