Coveted tickets land at Lottery

Workers, retailers given game seats After over $1m spent, ethics questions raised

Email|Print|Single Page| Text size + By Lisa Wangsness
Globe Staff / May 11, 2008

The Massachusetts Lottery has paid out millions of dollars over the last six years on sponsorship deals and other transactions that have allowed the agency to obtain thousands of coveted tickets to the Red Sox, the Celtics, the Patriots, and the Bruins.

The vast majority of the tickets were given away as part of an unusual program that rewards the Lottery's most successful retailers with sports tickets, but a Globe review of the program found that some were also used by Lottery employees, their families, and friends. The Lottery's record keeping is so poor it is impossible to determine how many; its highest-ranking officials conceded they do not know how many tickets were handed out between 2003 and 2006.

Some tickets the Lottery acquired were nearly impossible for most fans to buy, including seats at the 2007 Red Sox playoffs. Others were as expensive as they were hard to get, such as the 600 tickets the Lottery awarded for this year's American Football Conference Championship game and a pre-game event, worth about $700 a pair.

The Lottery spent more than $1 million on tickets this fiscal year alone. In the past, it has also received thousands of tickets through advertising contracts and complex licensing deals allowing the Lottery to use professional sports brands on scratch tickets. But the program has not received much public scrutiny. The Lottery's annual financial statements do not mention the Lottery gives out sports tickets as part of its "agent incentive program," and visitors who click on the agent incentive portion of the Lottery's website are required to provide a password to access further information.

The practice is not a common one among lotteries nationwide. Only a handful of other states use sports tickets as retailer incentives, and those that do give away a tiny fraction of the number Massachusetts does - 3,820 tickets in the 2007-2008 sports seasons.

The tickets are given out even as retailers already have a significant financial interest in selling as many Mass Millions and scratch tickets as they can. They pocket 5 percent of all lottery sales; last year, the average retailer made about $37,000, and the state's top agents made millions. The Lottery also hands out other incentives to retailers, such as bonuses to those who sell winning tickets and cash awards doled out in random drawings. Incentives for retailers last year totaled $42 million.

State Treasurer Timothy P. Cahill, chairman of the state Lottery Commission, said he attended several games but only because he had to perform a function for the Lottery. "The only time I would go is if I had an official duty, presenting prizes as part of promotions," he said. "I only went if there was a role for me. I usually bring a staff member with me." He said he never brought an outside guest.

He defended the rationale for the sports ticket program, which he said has helped the Lottery hit an all-time sales record this year. Noting that the 5 percent retailer commission has not increased in 35 years, he said awarding sports tickets to retailers is an effective way to push retailers to promote specific Lottery tickets and to improve sales overall by displaying Lottery posters and other in-store marketing materials.

"The theory behind it is to get the agents to sell the products we want them to sell and also to reward them," he said. "It's a way we get some control over the 7,500 free agents that sell our products."

He acknowledged, however, that the Lottery failed to maintain complete records of the program during his first term as treasurer, which began in January 2003, the same year the Lottery began awarding sports tickets to retailers.

"I'm not happy about it," Cahill said. "It's not the way I thought things were being managed. Obviously we accept responsibility for that, and we've tightened things up tremendously since then."

He said new management had greatly improved the program's administration. After the Globe's inquiries this month, he said employees assigned to work at games would no longer be allowed to bring outside guests.

Examples of the Lottery's poor record keeping include its files explaining use of tickets for the 2006 Deutche Bank Championship golf tournament, a swank Labor Day event whose participants included Tiger Woods. The records say that 10 of the 50 tickets to a luxury "chalet" the Lottery received on each of the four days of the tournament went to the State House. There was no further explanation. Lottery officials said they did not know who received those tickets. Not only could Lottery officials not say where all the tickets went, but they also could not say exactly how many sports tickets the agency received between 2003 and 2006. The lottery lacked contracts for those years. Without that documentation, it is impossible to know whether the tickets were used improperly.

According to the Secretary of State's office, the Lottery is required to keep all contracts for six years after their expiration. Joseph C. Sullivan, the Lottery's executive director from 2003 to 2007, now the mayor of Braintree, said he was unaware of any record keeping problems.

"When you serve as executive director, you accept responsibility for the operations of the Lottery," he said. With "that particular program, it surprises me, because the people running the program are generally very good on record keeping."

Cahill said the Lottery's new director of marketing, Diane Anderson, overhauled the management system after she joined the organization in early 2007, and since then the Lottery has kept much better track of the tickets. After the Globe's inquiries exposed record keeping flaws, Cahill said he also directed both the Lottery's new internal auditor, Suzan de Waal, and its outside auditor, KPMG, to review the records. But even during the last year, the Lottery did not always follow its own rules governing how Red Sox tickets would be disbursed.

A March 2007 memo describing the Lottery's procedure for giving out Red Sox tickets stated that for games where retailers were served food or given a tour, a Lottery employee should attend as "host." The memo did not say anything about employees bringing guests. But records indicate that for four Red Sox games last year - including the sold-out final game of the regular season on Sept. 30, when the team was on its way to the playoffs - Lottery employees, interns, or regional sales representatives and their guests used six to 12 of the 200 tickets for each game. Lottery officials said all the employees who attended those games acted as hosts to monitor pre-game events or oversee the retailers attending the games.

Fourteen tickets to each Patriots home playoff game also went to Lottery employees and their guests. Lottery officials said staff members performed specific duties to help manage the event, attended by nearly 300 retailers, such as running raffles and signing in guests, at a pre-game hospitality event. But all 14 also had tickets to the football game. Cahill said Lottery employees must stay through some games to supervise agents.

Lottery officials said they encouraged employee hosts to take along other Lottery employees for company and assistance, but they acknowledged that family members and friends often went along instead. Anderson, the new marketing director, said she brought her son or her daughter to a couple of Red Sox and Patriots games.

Guests were allowed, Lottery officials said, to entice employees to agree to staff evening and weekend games without being paid overtime. Cahill said he had not personally been aware of the policy until the Globe raised questions about it, and he said he would prohibit the practice in the future.

"If we could go back and write the policies first before we started the program, obviously we would, but it sort of evolved," he said. "I do understand that the perception of being able to bring a guest doesn't meet the strict standards of public employees and (not) being able to accept gifts, but no one did it for that reason."

The Lottery is without question the most successful in the country - it has higher sales and earns more per capita than any other lottery. The money is a critical component of municipal budgets in Massachusetts' 351 cities and towns. Lottery officials say the program is instrumental in keeping sales strong.

"The people who sell our products are the people behind the counter - store owners, hardworking people," Anderson said. "And so we try to give them programs that will drive our business and reward them for being successful . . . and also give them a unique opportunity that they maybe can't really go out and get on their own."

Lottery officials say they have been measuring the effect of sports ticket incentives on lottery sales. They say that sales have reached record levels in 2008 as it has given away more sports tickets than ever. But a correlation between the sports ticket program and better sales is not always clear. The Lottery grew three times as fast as any other in the nation for several years in the 1990s, before it began offering sports tickets as prizes to agents. Sales dipped in 2007, when the agent incentive program was going strong.

Lottery officials say that that the incentive program is a "model for other lotteries across the nation and the world," and that representatives from lotteries in Washington state and France have come to Massachusetts in order to study it. But no other US lottery has come close to duplicating the Massachusetts sports ticket program. Some lottery officials in other states said they feared such a program could raise concerns about fairness and employee ethics.

The Wisconsin Lottery did a Milwaukee Brewers scratch ticket last year and also advertises on the radio and TV networks for the Green Bay Packers. But that state's lottery does not accept free sports tickets unless they can be used by lottery players.

"We're sensitive about whether or not retailers can receive something that players can't receive," said its spokesman, Andrew Bohage. "We talked about the notion of letting retailers win the opportunity to have a luxury suite at Brewers games, but then . . . we are open to criticism if our staff goes along to ensure that all of that goes well - that, in fact, we're benefiting from that. That became a great fear for us."

Boston's four professional sports teams have profited handsomely from the Lottery's business. In the current fiscal year, which ends June 30, the Lottery has spent more than $1.5 million of its $10 million advertising budget on contracts with the teams, plus nearly $1.2 million in direct ticket purchases. Additional money has flowed from the Lottery to the Red Sox and the Celtics through a company that licenses professional sports team brands for use on scratch tickets. Those licensing deals, worth millions of dollars, have often come with game tickets attached. In 2006, for example, when Massachusetts Lottery signed a licensing deal for its first Red Sox scratch ticket, the contract provided more than 1,400 tickets to baseball games.

The Lottery also sometimes buys trinkets to give out to agents who attend the games. It spent $4,730 this year, for example, on framed Patriots game towels that it handed out to retailers who attended the Patriots playoffs.

Cahill said Boston's professional sports teams are ideal partners because they are beloved brands that are also well-managed, successful and spend a great deal of money in the state, which helps the local economy.

"To associate with them I think just says good things about the Lottery," he said.

He added that the Lottery's longstanding partnership with the Red Sox helped it secure the country's first-ever Major League Baseball scratch ticket deal, an arrangement that has over the past several years helped the Lottery increase its sales by hundreds of millions of dollars. Cahill said he plans to continue running the program because he is convinced that it is effective, and that it is now being run properly.

"When you have new things like this, there's a little bit of a learning curve," he said. "I'm committed to it going forward. . . . I believe it works."

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