Campbell, Director Differ Sharply on Lottery’s Condition

Sen. William Campbell, the GOP’s nominee for state controller, accused top lottery officials Tuesday of serious financial bungling, including sloppy bookkeeping that he said left lottery accounts more than $1 million out of balance.

Quoting unnamed sources, the Hacienda Heights Republican also charged that lottery equipment was purchased but never received, some part-time employees were paid in advance for work never performed and all lottery employees are overworked to the point that mistakes are inevitable.

Campbell offered no documentation for his allegations, saying only that the information came from “sources inside the lottery” and that top lottery officials are well aware of the problems. Lottery director Mark Michalko strongly disputed Campbell’s claims, calling them “unsupported” and accusing the Republican senator of failing to check his facts with top lottery officials.

“For whatever reason, Sen. Campbell feels we are going to move forward in other than a prudent manner, and that is simply not true,” Michalko said.

He added that the state controller’s office and two outside auditing firms constantly monitor the lottery’s financial transactions “so that the integrity of the games and the accounting would never be questioned. That has been the lottery’s approach from the outset.”

Deputy State Controller Arnold Schuler, who oversees state auditing of lottery money, said he has “no knowledge” of Campbell’s allegations. He added, however, that accounting problems were turned up in a report issued last May, but that lottery officials have since moved to correct most of those problems.

Lotto Start-Up Near

Campbell’s allegations at a Sacramento news conference came as the state is preparing to launch its computerized lotto games. The legalized “numbers games” are scheduled to start later this month, although lottery officials have not yet decided on the exact date.

Campbell maintained that pressure to begin the new games is primarily responsible for management problems and he called on the lottery commission to delay the start-up until public hearings can be held and a full investigation is completed.

“Although the lottery has been very successful in producing millions of new dollars for education,” Campbell said, “that does not justify speeding to meet deadlines rather than making sure the books balance.”

While Campbell did not provide specifics to back up his allegations, Michalko said he assumes the $1-million discrepancy Campbell referred to was an “inaccurate” reference to inventory problems discovered in March that left the lottery with 148,000 lottery tickets not originally accounted for.

Michalko blamed clerical errors for the problem but said all the additional tickets were invalidated and “the state is not out even a dime.”

Firm Denial

Michalko also said there “is absolutely no indication or any factual basis” for charges that equipment was purchased and never received and that there has been “no situation where anyone has been paid for services not rendered.”

On the question of employee work hours, Michalko conceded that most employees put in many hours of overtime. But he said the overtime has not resulted in mistakes and has helped to increase ticket sales to twice the original projections.