TEXAS LOTTERY
Agency enlists help from outsiders
The search is on for a new leader after jackpot scandal
By LISA FALKENBERG
Copyright 2005 Houston Chronicle Austin Bureau

AUSTIN - A lottery watchdog who helped expose inflated Texas Lotto jackpots and a math professor whose students found problems with lottery advertisements were among 10 people chosen to help find the next leader of the struggling Texas Lottery Commission, officials said Friday.

Dawn Nettles, a frequent critic of the lottery, later withdrew from the search committee, saying her participation would be a conflict of interest.

C. Tom Clowe, who chairs the three-member commission that oversees the agency, appointed the committee and will lead its members in identifying candidates to succeed former Executive Director Reagan Greer.

Greer, a former Bexar County district clerk, resigned earlier this month after approving inflated jackpots recommended by his staff. He was the fourth lottery executive director to leave amid controversy.

Even though the three lottery commissioners will ultimately pick the new director, as they have in the past, Clowe has touted the involvement of outsiders as a show of openness and a first in the agency's 12-year history.

Conflict of interest cited
Several of the members said they were surprised to have been appointed, including watchdog Nettles, who publishes the Garland-based newsletter The Lotto Report.

After initially accepting Clowe's invitation to serve, Nettles withdrew from the committee Friday, citing a conflict of interest.

"I do not see how I can go up there and partake in interviewing prospective directors and then come home and report on it," Nettles said. "I don't think that's ethical."

Nettles helped expose the inflated Texas Lotto jackpots last month when she filed a complaint with the attorney general.

Greer later admitted approving a June 8 estimated jackpot of $8 million recommended by his staff, even though Lotto sales would support only $6.5 million.

Greer had said he trusted his staff's recommendation and didn't examine the form carefully.

The lottery's own investigation found three other instances of inflated jackpots.

Gerald Busald, a math professor at San Antonio College, said he was honored and a bit surprised that commissioners chose him, especially after he criticized them at their last meeting for allowing a culture of secrecy to prevail at the agency.

"They're trying to open up the process so that they're less likely to be criticized if the next one should flame and burn," Busald said. "My only hope is that the best possible happens and that we do get a person with integrity who could help change the culture of the commission.

"You need someone in there, not only to have high moral character, but they're strong enough to stand up and change it if it's not right."

The search committee could begin interviewing candidates as early as September, Busald said, and help identify three to five candidates for the commission to consider.

Busald said his students were instrumental in getting the lottery to change fine print on scratch-off tickets that referred to customers who broke even as "winners."

And, Busald said, the lottery changed advertisements touting an average of $75,000 for Cash Five winners after his students calculated the average amount as $57,575.

More openness
Others appointed to the committee include:
•The executive director of the State Bar of Texas.
•A Texas Ethics Commission member.
•Two former lottery commissioners and a lottery employee.
•A representative of the charitable bingo industry.
•The president of the Texas Grocery & Convenience Association.

One of the former commissioners, Anthony Sadberry, was involved in hiring the first three lottery directors.

Sadberry, a Houston attorney, said Friday that nothing was wrong with the old process. But he said the involvement of citizens creates more opportunity for transparency.

"I think this shows that it's opened up," Sadberry said. "The public should hold us responsible to do our jobs. There's no reason why this shouldn't result in a good selection."

lisa.falkenberg@chron.com

Ken Rodriguez
There's still a chance for Lottery to lose even more credibility
San Antonio Express-News
07/22/2005

The Texas Lottery Commission is looking for a new executive director.

If you want public trust in The Lootery to plummet even more, pray that Gary Grief gets the job.

Grief is the acting executive director who knew that a Lotto Texas jackpot had been inflated by $1.5 million in June. Warned by an e-mail that there wouldn't enough money to pay the advertised amount, Grief failed to share that warning with commissioners.

When he was deputy director last year, Grief learned of similar problems.

According to a copy of an e-mail written by a former TLC employee, Grief attended a meeting in late spring 2004 to address jackpot shortages.

"At that time, it was known that the jackpot could not be funded at the lower levels," the former employee wrote. "The meeting was to discuss ways to 'roll' the jackpot. ...

"Gary Grief was aware at that time that there was a problem."

Reagan Greer resigned as executive director earlier this month after approving four inflated jackpots. Grief knew about at least two inflated jackpots and got promoted.

I know what you're thinking: Good Grief, how can I, too, watch a scandal unfold, do nothing to stop it, and become CEO?

Answer: Apply for a job at TLC.

Lee Deviney, once the commission's chief finance officer, warned of the June jackpot shortfall and got fired.

If he had kept his mouth shut, he might be running the place.

The commission is run by the "Report No Evil" principle. Don't believe it? Then consider the reaction of commission chairman Tom Clowe when Grief was promoted to acting executive director.

Calling Grief "experienced" and "knowledgeable," Clowe said, "He is the most qualified, and he will do the best job."

Grief has done such a good job, he directed the commission's security force to be gutted. To save on salaries and improve efficiency, 32 of 37 security jobs were eliminated.

One former supervisor in the division describes the security force today as "non-existent."

Another former supervisor says, "The integrity and security of the lottery has been compromised."

Security has become so anemic that TLC has quit tracking stolen lottery tickets.

Background checks on employees and retailers were once routine. But TLC can no longer fully screen applicants who might have felony convictions.

The commission can't say it didn't anticipate problems.

In December 2004, a draft of an audit warned of grave dangers if the security division was dismantled.

"The Lottery has heightened its vulnerability to internal and external acts against the Lottery by not having prepared adequately for the reorganization and reduction in force," says a copy of the draft, which was obtained by this column.

"By not ensuring that current safety and security functions are maintained throughout the process, employees and external perpetrators could and may commit acts that will expose the Lottery to theft, loss of revenue, resulting in a negative impact in the public's perception of integrity."

Not surprisingly, this version of the audit does not appear on the lottery's Web site (www.texaslottery.org).

Another version, significantly edited, appears instead. In this version, there is no mention of the lottery's increased "vulnerability" or of exposure to "perpetrators" of ticket fraud.

In the sanitized version, TLC notes that the auditor "did not identify any issues that would materially impact the integrity and overall security of the lottery's operations, gaming services and instant and on-line ticket productions."

Who edited the draft? Who made the original warning - poof! - disappear?

Lottery spokesman Bobby Heith provided no answers.

Grief did not return calls.

The commission is looking for new leadership. The commission has had four executive directors, all of whom departed ingloriously.

If the commission wants to uphold tradition, there may be no better candidate than Grief.

krodriguez@express-news.net