Computer glitch may have affected lotto payouts

By Ken Herman American-Statesman Capitol Bureau Chief Thursday, June 15, 2000

The Texas Lottery Commission on Wednesday began a special audit to determine whether some lotto winners were paid too much or too little as a result of a computer glitch during the first two years of the game.

The glitch, discovered in 1994 by lottery staff, resulted in some ticket sales being recorded twice. Because prizes are determined by ticket sales, the payout could have been affected, lottery officials said.

Lottery officials believed the matter was appropriately addressed in 1994 and did not discuss it again until Gtech, the company that runs the Texas games, recently announced it had found evidence of a more widespread problem.

Though officials do not believe the problem affected many lottery players, the computer problem marks the first time in the state's history that the integrity of the games, which rely in large part on public confidence, was compromised.

Sales of lottery tickets have fallen in recent years, but the games still brought in $900 million to the state in the last fiscal year.

The Lottery Commission audit also will determine whether the state billed retailers for more tickets than they sold.

Lottery Director Linda Cloud, who ordered the audit, said retailers would be reimbursed for any overpayments, but there is probably little the state can do to address incorrect prizes.

Cloud said she does not believe there were many improper prizes. An initial review of the impact of a similar computer problem in the United Kingdom showed errors in less than a 3,000th of 1 percent of the 14 billion transactions from 1994 through 1998, according to Gtech.

The company, whose system is used in the British game, has confirmed that the Texas system had a problem similar to the one that has caused some winners in England's national lottery to be paid too much or too little.

"There is a possibility that Texas' online games were susceptible to this problem subsequently identified in the U.K. during an approximate two-year period after the initial launch of Lotto Texas," Steven Nowick, Gtech's president and chief operating officer, told Cloud in a recent letter.

In addition to Lotto Texas, which began in November 1992, the computer problem could have affected Pick Three, which began in October 1993.

Cloud, who was not executive director at the time, said Wednesday she did not know why an audit was not conducted when the problem was discovered.

"I did something as soon as I found out about it," she said. "I'm just hoping and praying I don't have that many transactions that affect the players."

Cloud added that she is certain the impact will be slight and that there will be no reason for players to lose confidence in the games. She said she expects the auditto take three weeks.

Lottery Commission Chairman Tom Clowe Jr. said he believes the problem was "minuscule" in Texas.

More than $2 billion worth of Lotto Texas tickets were sold through 1994. Pick Three totals added up to about $270 million during that period.

British officials have launched an inquiry into the British computer problem, as well as whether Gtech revealed it as soon as possible.

"Nobody has missed out on a prize they should have won, although some winners were underpaid or overpaid by small amounts," Gtech said in a statement about the problem in Britain.

Company spokesman Steve White said he had no reason to believe the impact in Texas would be more widespread than it was in the United Kingdom.

"Worldwide, we don't think the impact on our customers is going to be significant," White said.

According to Nowick, the consequences of the inaccurate records included a "slight overstatement" of sales figures, inflated charges for some retailers and "modest" overpayments and underpayments to some winners.

In the United Kingdom, the overpayments and underpayments were between $1.50 and $4.50 in American dollars, according to Gtech.

"We accept full responsibility for this malfunction and will cooperate with the Texas Lottery in reimbursing retailers and winners, if any have been found to be affected by this malfunction," Nowick told Cloud.

In a recent statement, Gtech said it discovered the problem in the United Kingdom in June 1998 and corrected it a month later. Though the problem was similar to one discovered in Texas in 1994, Nowick told Cloud that Gtech did not immediately notify its customers about the Texas problem.

http://www.austin360.com/statesman/editions/thursday/news_4.html

-- Martin Thompson (mthom1927@aol.com), June 15, 2000