Massachusetts lottery faulted in state audit

John McElhenny

Friday, Aug. 30, 2002 | 9:54 a.m.

BOSTON -- Suspicious claims and tax evasion are plaguing the Massachusetts State Lottery Commission, according to an audit released less than three weeks before the game's chief faces voters in the Democratic gubernatorial primary.

A new poll shows Treasurer Shannon P. O'Brien clearly leading over the other three candidates, and during her campaign she has touted her management of the agency.

"The Lottery is a dramatically different place than it was before I took office four years ago," O'Brien said.

Wednesday's audit by state Auditor A. Joseph DeNucci questioned some claims by instant game winners, including people with the same last name and address repeatedly winning large prizes in a short time period, against high odds.

In one example, 26 prizes totaling $115,000 were claimed in 1999 and 2000 by seven people at the same address, six of whom had the same last name. The agent who sold all 26 tickets also had the same name, the audit found.

"There are tremendous management weaknesses at the Lottery," DeNucci said.

O'Brien said people of the same last name often win prizes. Recent lists of winners include 2,500 winners named "Johnson," for example.

The audit also faulted a policy of automatically withholding taxes only on individual prizes of $5,000 or more, saying the system cost the state an estimated $4.5 million per year. Instead, the audit said, automatic withholding should begin when a player's total winnings reached $5,000 in a year.

O'Brien said state and federal tax codes, not her office, dictate how the winnings are taxed. She also noted that in 1999 her office started giving tax officials the names of lottery players whose payouts defied the odds.

She said she had also cut the commission's uncollected debt and trimmed costs to make it the nation's most efficient, with an operating budget under 2 percent of annual sales.

Last month, another audit by DeNucci's office criticized the performance of the board that manages the state pension fund, which O'Brien also oversees. Since then, the issue has dominated the governor's race.

"If this is her management style, she ought to be at Enron, not in the treasurer or governor's office," said Democratic gubernatorial candidate Warren Tolman.

DeNucci said the audit's timing was unrelated to the Sept. 17 primary. "There's never a good time for an audit. It's like a root canal," he said.

A new Boston Globe/WBZ-TV poll of 401 likely Democratic voters showed O'Brien with a strong lead among Democrats, buoyed in part by support from women and independent voters.

Thirty-five percent of the 401 likely Democratic voters favored O'Brien, compared with 21 percent for former U.S. Treasury Secretary Robert Reich and 15 percent each for Tolman and Tom Birmingham.

The poll, conducted Aug. 25-27, had a margin of error of plus or minus 5 percentage points.

A separate Herald poll of 402 likely general-election voters showed Republican Mitt Romney leading each Democrat head-to-head. Reich trailed Romney 46 percent to 36 percent, while O'Brien trailed Romney 47 percent to 35 percent. Tolman trailed Romney 46 percent to 29 percent and Birmingham trailed Romney 54 percent to 24 percent.

That poll, conducted Aug. 23-27, had a margin of error of plus or minus 4.9 percentage points.