June 15, 2006 - 5 PM - Ooops ... CORRECTION - I goofed on a TLC staff members name with regards to the first person who did the "exceptions testing." I erroneously reported that it was Renae McCoy but it should have been Renae Clark. Sorry folks, that was an honest mistake. It has been corrected in my story.

June 15, 2006 - 2 AM - Part 3 of a 4 Part Series - Since late last year, the TLC has been going through a number of audits/investigations. The audits are being conducted by the State Auditors Office (SAO). They completed the Security Audit in early May and are currently working on 3 more - A "Human Resource" audit [unhappy employees], a "Prize Payment" audit [overpayments and underpayments to Lotto Texas jackpot winners & advertised amounts] and a "Procurement" audit [verifying the TLC adheres to state guidelines and rules in purchasing products and services]. After these reports are completed, I understand that there is one more audit to come.

The HR and Prize Payment audits are due out in July. They were suppose to be out sooner, but they tell me that they write, then they let the TLC respond so this is dragging out much longer than anticipated. The results of these reports will tell us alot about our state government - do agencies cover for each other or does the SAO really hold agencies accountable.

I say this because the SAO Security Report was "carefully" worded - they used terms like "reasonable time span" [what's reasonable?] and "generally satisfactory." For me, a classification of "generally satisfactory" is not what I want to hear about how I'm doing. How would you like to hear your doctor say that your health was "generally satisfactory?" I'd want to know what wasn't satisfactory!

One thing the Security report said was that the security of lottery drawings was "generally satisfactory but needed improvements."

YES, I'd say that improvements are definitely needed in this area. In the past couple of years, the TLC has done away with some pretty important job functions - particularly in the area of insuring the integrity of the games.

How Does A Lottery Insure "Integrity of the Games?"
For Online Games -
Since start up of the Lottery, the TLC had employees whose job was to conduct exceptions testing on G-Tech's software upgrades and verify sales, audits, billing, etc. "Testing" means that when G-Tech wanted to upgrade their software, TLC staff would test the software BEFORE it was put into production by G-Tech.

Originally the "exceptions testing" was done by Renae Clark followed by Chuck Wilson.

Mr. Wilson began working for the TLC in Aug 1992. His first years at the TLC was as a Systems Compliance Specialist but at the time he left in 2002 - [3 months after Mike Fernandez was named Director of IT] he had advanced to the position of Systems Administration and Quality Control Assistant Director. Twice he held the position of Acting IT Director and was passed over twice for the Directors position.

For 7 years, Mr. Wilson had an office at G-Tech as well as lottery headquarters. He was known for his exceptional expertise in the area of testing software. They say he was extremely knowledgeable and very thorough ... he should have been ... he has a Master in Systems Engineering and an Undergraduate in Engineering.

For you and me, Ms. Clark & Mr. Wilson and those in Security was Quality Assurance...they were THE watch dogs for the TLC and the People of Texas in keeping tabs on G-Tech.

When Mr. Wilson left the lottery in 2002, the position Systems Administration and Quality Control Assistant Director, was never filled by anyone.

The Lottery does have 3 employees, "Software Compliance Specialists" whose job is to ensure the integrity of the electronic code - electronic reporting, etc...for online games. They are Abel Perez, Cylinda Dominguez and David Graves and the supervisor is Joe Goebler. (Mr. Wilson hired David Graves and Abel Perez did work for Mr. Wilson.)

But the question is - do these employees have the same qualifications that Mr. Wilson had and are they currently performing the SAME tests to insure the integrity of our games?

For instance, do they run test scripts to exercise all the customer game play and retailer reporting functions, go through weekly billing, and verify that the Lottery’s Internal Control System (ICS) reports the same activity that they perform?

Do they know exactly the number and amount of all sales, the numbers selected on all the online tickets, the scratch off tickets sold and paid, on-line ticket redeemed, and the winning numbers? Do they still test all reports, billing, and audit functions? Do their figures match G-Tech's reports?

Do they still try to ‘spoof’ or ‘cheat’ the system with multiple validations, multiple winning tickets, altered tickets, hardware and communication line failures, and any thing they think people might try to do to cheat the system? Do they do this from the perspective of the retailer and customer?

Do they still alter test scripts for each install so they can focus on new features, fixes to any problems, and new games. Do they perform regression tests to make sure a software change or new hardware doesn't have any unintended adverse affects anywhere else in the system.

Folks, these are a few of the things that insure the integrity of our games.

There's alot to insuring integrity for Scratch Tickets - And we no longer have it.
Since start up through 2004 - someone from the TLC Security Division has been present at the printers to oversee the printing of the scratch ticket games.

So exactly what does Security do at the printers to insure integrity of the games? Short answer - A bunch. The long answer is very complicated so I'm going to give a few examples so I hope you'll get the picture and see the significance.

Besides the obvious checking the quality of the printing and paper stock used for security reasons - Security would pull and test the tickets as they were being printed. Why pull tickets for "security" reasons? The short answer is that if there is a problem down the road by a player, they would have sample tickets from the press run. This would enable them, at a later date if necessary, to determine how long that particular printing problem had been going on.

Remember too, that once the latex goes on the tickets, no one can see what's printed underneath. Keep in mind as well, we're talking about the printing of millions upon millions of tickets for each game so you'd better have samples along the way. You need a way to determine when and where the printing problem began.

Scratch ticket presses use as many as 25 "print stations" to print each game. In otherwords, each game could need 25 special effects to print it and as the paper passes through the press, these different things are done at each "print station."

Example of "print stations" - As the paper starts rolling through the press ... one station covers one ink color, the next station cover the next ink color (this is a 4 color process - sometimes 5 color), one station prints the play area - the symbols found under the latex ... (to print the symbols involves a computer that can input all the different ways to make the ticket a winner or a loser); another station prints the bar code, another station prints the seal code, another station puts the latex on the ticket, another station does the perforations ... I could go on and on but I think you get the picture. As a publisher, I can tell you that printing is very interesting and a delicate process.

What are some of the things Security checks for? The latex that you scratch off. Can you see through it - if so - that's a security breach. Does it scratch off too easily? This is another security breach. Is it too hard to scratch off where the consumer ends up scratching off the symbols and damaging the ticket? Security makes sure that the finished product can't be compromised by anyone and this is a very detailed and time consuming job.

All of us in publishing know that when you're printing a big job, someone better be there to spot check the pages coming off the press. When you're talking about printing 1 million scratch tickets per hour, there's a lot of damage that can be done to the tickets if someone is not there to press proof and I can assure you, pressmen don't check it like the customers do!

Security also insures the parameters set by the TLC for each game. They test and made sure that the prize structure is being printed to specs.

FYI - Most all lotteries have Security present at the printers. But Texas doesn't anymore. They got rid of our checks and balances.

After tickets are printed and shipped, Security verifies that nothing has changed in the validation files. After verifications, Security would load the validation files into G-Tech's computer. BUT more importantly, for security reasons, Security would have a back up file of the original validations and it WAS kept in a safe that only two people could access.

IF anything comes into question at a later date on a scratch ticket, Security would be able to verify that no one altered the validation - via G-Tech's computer - on any of the tickets. Remember, they had an original file in the safe.

To put it bluntly, G-Tech personnel have access to the validations files. Conceivably, someone could go buy a scratch ticket then change the validation code to show that the ticket he has is now worth $500. After changing the ticket number validation in the computer, all one would have to do is take the ticket to a retailer and say - "Hey, scan my ticket tell me if this is a winner." WOW, he's got $500 and no one will ever know any better. This is because everyone knows that many low and mid tier prizes are never claimed so a dishonest person feels relatively safe at not being caught.

Security, after each game was closed, would then do an audit to make sure that this very thing didn't happen - remember - Security has a copy of the original validation file. Security would also find out WHY the top prizes were never claimed. Were the tickets sold and not claimed, were they returned as damaged, were they stolen and all validations canceled. At least an effort was made on all the top prizes that didn't come in. This is no longer done.

The main person who did the press proofing, validation work, audits, checks and balances for the TLC was Captain Jim Siegler - a commissioned police officer. Siegler had been with the TLC since 1992 but he was cut - along with many others - in the 2004 re-organization and NO ONE is checking the scratch tickets in the manner I just described.

Security nor anyone else at the TLC receives an original validation file - to be kept in a safe - so a comparison to G-Tech's reports can be done at the close of a game. The printer downloads the file directly to G-Tech's computer now. As one person put it to me, "the fox is guarding the hen house now."

How's this for checks and balances - insuring the integrity of the game - hummm ...

So you're wondering why did the TLC do away with security at the printers too - management decided that security might miss something. They decided they'd rather hold the printer responsible for the quality, prize structures and validations. No offense is intended to G-Tech and Scientific Games - but - there is something seriously wrong with this picture - the state of Texas is depending on contractors to count and account for the states money with no oversight.

As for proofing print quality from a Marketing standpoint, the TLC press proofs via the computer. We all know that you can't see details much less pull tickets off the press from a computer screen. Those tickets aren't tested until they arrive at G-Tech's warehouse.

About the SAO's HR Report
In light of what I posted June 7th - Are TLC Employees Happy Now - The SAO report should really make for an interesting read to say the least. I believe it will be even more interesting after I post the story about Mark Bradshaw. You see, I don't think anyone has stopped to figure out exactly when the TLC started having HR problems.

Every problem has a beginning point and that's the key component here. Linda Cloud and I went 'round and 'round about player issues - NOT employee issues. TLC employees were loyal die hard fans of Nora Linares & Ms. Cloud. They may not have all agreed with Ms. Clouds decisions but they supported her decisions and they were FREE to speak their minds without FEAR of being fired. That, my friend, is the TRUE meaning of Teamwork. What's in place now is more like a "dictatorship" - and for now - I'll EXCLUDE Director Sadberry as he deserves a chance to prove himself and turn things around.

About the SAO's Prize Payment Report
You will read - on my website - all about the Prize Payments that are under investigation. The scope of the SAO's audit includes how many jackpots were falsely advertised, the overpayments [roughly $100 million] and the underpayments (the cheated winners issue).

I plan to show you everything regarding the payment issue including some new discoveries that I have not reported yet. I have documents and spread sheets that prove - without a shadow of doubt - that the TLC literally threw away millions and millions of taxpayer dollars in prize overpayments while cheating others out of a measly $3 million.

My goal is to present this information in a manner that you can fully understand. This is a challenge for me but I think I've already got it presented that way now. I've tested it on "lay-persons" and they understood .... so, watch for my "prize payment" report.

About the Procurement Report
I won't be able to provide as much insight on the Procurement Report, however, I have sources who do have the knowledge and understanding of this issue. I will count on them for help so I can keep you informed on that report.

About Lotto Texas and the recent Promo to get Lotto Texas sales up ...
No, Lotto Texas sales are NOT up. This is in spite of 1) giving us lower odds [they gave us a game we still opposed] and 2) they mailed ONE MILLION promotional pieces - "Buy a $5 Lotto Texas ticket and you'll receive a FREE $2 scratch ticket." Sales are still lousy.

Why are the prizes so low? The reason is they lowered the percentage of sales allocated to the prize categories. When we played 6/54 the first time, they "said" they were returning 55% of sales in way of prizes [never really true though] but under the new rule, it was lowered to 50%.Then on top of this reduction, they lowered the percentage for the prize categories.

FYI - Lotto Texas is NOT the same game we played once before. "Online games" consist of TWO major factors - one is the "prize structure" [prize structure is how much money is allocated for each prize level] and the other is the "matrix" [how many numbers we have to pick from]. The only thing that's the same in this game is the matrix - it's 6 of 54. You can read more about this if you want ... A Legend Has NOT Returned!

Why no jackpot winners - I thought they reduced the odds to help us win? They may have reduced the odds from what they were, but they aren't selling enough tickets to cover the 26.8 million total combinations. They only sell about 2 million tickets. That means there are 24.8 millions combinations NOT sold. The odds are still too high based on the number of people who actually support the games. This is why I pushed so hard for our 6/50 game back.

The TLC refused to give consumers the game they wanted so people are refusing to support the game. You should see my mail about this. Unreal ...

I think this is really sad because the state is losing - we're not, we're saving our $$ - but the state is losing millions in potential revenues.

While discussing which matrix to play, Gary Grief told the Commissioners on Feb 27, 2006, "I can tell you the only thing I'm certain of and that is that revenue from Lotto Texas is going to continue to decline. That -- that is what I'm sure of. That's the only thing I can tell you today." [Grief proposed 6/54 - I was pushing them to give ya'll the game you said you'd play - 6/50]

Anyway, how's that for being negative? Can't do it so why try? Good thing he doesn't work for me because I don't ever quit trying ... can't never could ... with the attitudes they have, they won't get sales up because they don't know how.

I doubt Mr. Grief would make it working in the private sector because that kind of thinking is not allowed - especially when it come to sales. The old saying is ... never say never. BTW - The Commissioners "insured" the accuracy of Mr. Grief's statement by adopting a game the People of Texas did NOT want. 6/54 did not work the first time around, why would it work the 2nd time around? How many companies do you know that tried something different, the idea failed; then they changed again, that idea failed ... so they go back to the 2nd idea that failed the first time? Why not go back to what was successful ORIGINALLY?

Anyway ... let's move on.

Trends Report Reporting vs Actual Scratch Ticket Sold
I was somewhat shocked when a couple of players found what appeared to be, mathematically, scratch ticket discrepancies and questioned me about it. They were reading in the Trends Report that 90% of a particular ticket had been sold so they figured that if they bought all the remaining tickets, they'd have to be rich because of all the prizes that remained unclaimed. In fact, they calculated that the Trends Report had to be WRONG.

This got my attention because I calculated it too and found they were right in their theory. So I immediately asked Mike Anger, Director of Operations, about it. His explanation was complete. It's really not a discrepancy. In the Trends Report, you will see where such and such scratch ticket is "80% sold." However, this does not mean that 80% of the scratch tickets have really been sold to "players." It means that 80% of the tickets have been sold to Retailers. You see, the TLC sells the tickets to retailers in packs of 125 to 250 tickets. When the retailer starts selling the tickets, he "validates" them and the TLC counts that "pack" as having been sold. There's a big difference in how many tickets have been sold to retailers vs how many tickets players have actually purchased.

Why did the TLC finally decide that I was a member of the press?
Back in December 2005, two players called me who were having claim problems. You read about the one who lost his $25,000 winning ticket then found it but couldn't collect his money. This story actually went world wide. Well, I intervened for the player and the TLC found itself in a sticky situation.

I spoke to Stephen White, Enforcement Chief, and several other staff members in trying to get answers for the player. In those conversations, there were several things said to me that was wrong and I called their hand on it. They re-checked and came back to correct those statements so I didn't have any problems with them being wrong other than what I thought about their lack of knowledge about Lottery functions.

Anyway, the TLC decided that if they would just formally acknowledge that I was as a member of the press, then they could keep me from talking to any staff member because all members of the press are suppose to talk ONLY to Media Relations.

The TLC refuses to accept the fact that I am also a player who may have player type questions. I should be allowed to obtain the same info from Customer Service that ya'll can get but Customer Service folks have been instructed not to talk to me. Since there's such a bad history of firings, I won't put them in a position where they may get fired.

About the Fired Employees
I am pleased to say that those that I know have found other employment and say that they love their new jobs. They tell me that they work in friendly work environments and don't have the stress in their lives that they had when they worked at the TLC. They look back at those days and say, "Gosh, I can't believe its been a whole year ... I can't believe I allowed someone to talk to me that way ... I can't believe I allowed my supervisors to treat me the way he did ... I'm gone now but I still have friends who work there and I want to help change things for them ... I loved my job at the TLC but I hated my boss - if he was gone - I'd love to have my job back although I'm happy where I am too ..." Things like this is what I hear.

It is my opinion that the TLC has lost some very good help in the past 3 years. Look at Keith Elkins ... he's a TV Reporter now .. I watch him every time I go to Austin and think about how good he was as the TLC spokesperson. I do not mean any disrespect to his replacement, Bobby Heith, I'm just saying the Elkins was good at what he did and the image he portrayed for the TLC was well received by both the people and the major media. Keith was fired at will because he questioned the purchase of new balls and machines PRIOR to proposing the rule.

Anyway, let's wrap up ...

You asked me ... "If the TLC always gets a DRAFT report, then how do you explain the unexpected report Texas Tech gave to the Commissioners last year?"
Great question that was asked and it's answer is very simple. Toni Ericsson was the person who was responsible for reading that draft. She was an Acting Director at that time. I personally think that she either didn't read the draft or she didn't understand what she read. Whatever the case - it got past staff and to the Commissioners and caused a BIG stink! What a day that was.

Coming - Part 4 of a 4 Part Series - In Memory of Mark Bradshaw ...