Wednesday, March 19, 2008

The Tennessee Lottery made a series of missteps and oversights after a software glitch began generating faulty winning numbers last year, and players bought about $2 million worth of unwinnable tickets before the error was found, according to a state audit. The sweeping audit from state Comptroller John G. Morgan reviewed the entire episode between July 28 and Aug. 20, when a programming glitch caused no duplicate digits to appear in winning Cash 3 and Cash 4 numbers. "A combination of unexpected and unlikely events unfolded" that eventually "resulted in the integrity and competence of all parties being called into question in the ensuing publicity," according to the audit. The report found no fraud associated with the episode. It also praised the lottery for its swift response once the glitch was identified, saying that executives and staff "engaged in good-faith efforts to disclose the programming error and to exhibit complete transparency." Lottery President Rebecca Hargrove said the lottery had implemented all of the comptroller's recommendations, "and then some." "I am confident that the system that we have in place is completely random and fair," she said. But some players are still suspicious. Al Palmer, a Henry County retiree, used to play Cash 3 and Cash 4, but stopped last year when the lottery gave up using ping-pong balls to draw winning numbers and instead began using computer software — software that ultimately proved to be faulty. "There's nothing that would make me play the Tennessee lottery again," he said. If he did play again, he said he'd sooner cross into Kentucky and play its lottery. $2M in tickets unwinnable In all, players bought about $2 million in tickets that could not win because they contained duplicate digits, the comptroller said. After the programming error was found and fixed, the lottery temporarily increased Cash 3's top cash payout from $500 to $599 and Cash 4 from $5,000 to $6,000. The lottery also paid $762,507 in refunds and $549,259 in increased prizes. The episodes began as soon as the lottery switched on July 28 from the mechanical ball system to a computerized system for generating random winning numbers in the Cash 3 and Cash 4 games. The problem stemmed from a mistyped letter in the computer application for the live draw. Because coding included a "u" for "unique" — instead of "r," for "repeating" — the machine was incapable of drawing repeating digits as winning combinations, such as 9-6-9 or 2-2-0-6. The company that tested the equipment, Gaming Laboratories International, checked a test-draw mechanism before the software went live, but did not test the flawed live draw program; the company claims its contract did not require it. As a result, the problem was not found. "I think the paperwork's pretty clear," said GLI's general counsel, Kevin Mullally. "They have a certification letter that doesn't ever mention the part of the software that has the error." Smartplay, a New Jersey-based company that developed the automated draw system, had opportunities to identify the programming error the first day the computers went into use, "and they did not do so," according to the audit. In days leading up to the system going live, Smartplay officials were present to install software and observe the first day of live draws, missing a chance to catch the non-repeated numbers. It is "uncontested" that Smartplay could have identified the problem, the audit said. A man who answered the phone at Smartplay Tuesday said, "we don't make comments to the press," before hanging up. The man refused to give his name. Glitch fixed in 10 minutes Lottery officials, who received the numbers by text message, also did not notice the lack of repeat digits, according to the audit. The lottery received its first e-mail about the potential problem on Aug. 1, a second two days later, and six more in following days. Lottery executives knew about the e-mails, but continued to believe the drawings were anomalies, the audit said. After 12 days, Chief Financial Officer Andy Davis reviewed data showing 70 draws without duplicate numbers for both Cash 3 and Cash 4. Had test draws been included, it would have shown that not a single one of 232 draws contained a duplicate number. Another lottery officer agreed to contact the vendor, but thought he was supposed to contact GLI, rather than Smartplay, which the audit called a "critical misperception." After consulting with GLI, the lottery conducted draws using a test system separate from the live system. Results with duplicate digits appeared, and "the decision was made to stay the course and to continue to monitor the draws." But e-mails continued to pour in, and "deeply concerned" lottery officials decided on Aug. 19 to contact Smartplay. A lottery official talked to Tom Markert, Smartplay's executive vice president, on Aug. 20. He ran one test, which immediately revealed the problem; Markert estimated that the entire process took less than 10 minutes, according to the audit. Contact Theo Emery at 726-4889 or

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