Nov. 3, 2003 – Sen. Louis Hill called on Gov. Charles W. Turnbull and Attorney General Iver Stridiron Monday to take legal action to collect money he says is owed the V.I. Lottery by its contractor Caribbean Lottery Services.
Hill said on WVWI Radio that CLS owes the local agency $886,180 — $465,180 in Powerball fees and $421,000 in other fees based on contractual obligations dating back a full year.
"I have spoken to Paul Flemming, director of the V.I. Lottery," Hill said, "and documents have been presented to me that this money is owed. In the contract between CLS and the government, it is clear that CLS must pay the government. If they don't pay, the government has the authority to cancel the contract."
However, according to Todd Washington, general manager of CLS, that is not the case. Washington said later on Monday that CLS is the V.I. Lottery "master agent." He said lottery "sub-agents" are the ones responsible for running up the debt. "They owe the [V.I. Lottery], and they owe CLS," he said. By sub-agents he referred to V.I. Lottery dealers, on the street and in commercial establishments where tickets are sold.
Washington said CLS has terminated the selling privileges of those sub-agents who have not been paying what they owe and has sent a list of the agents to the V.I. Lottery. "When those funds are settled and collected," both the V.I. Lottery and CLS "will receive what is owed to them," he said.
"We are the middleman," Washington emphasized. "We sell games off our system" for the V.I. Lottery. He said CLS must make its contractual Powerball payments to the Multi-State Lottery Association, which operates the popular game, "every two weeks, even if we don't have the money."
CLS was never behind in its payments to the V.I. Lottery before last November, Washington said. "When they got Powerball, they went nuts," he said, referring to the dealers. He said the sub-agents would sell the tickets on an "adjusted average" commission of 6 per cent, "and they just stopped paying."
Stridiron on Monday afternoon pronounced the situation "confusing" but said he will try to help resolve it. "Because of the various conflicting and competitive statements about who owes what to whom," he said, "rather than [assuming] an adversarial position, we have invited all the parties together with their attorneys to resolve this issue."
According to the attorney general, it might seem that the obvious answer is to tell CLS "you owe the money; pay up or else." However, he said, it's not that easy. "We have looked at all the documents, and it's a contractual relation that requires all of us to sit down and come to an understanding as to what is a subcontractor."
A meeting of the parties involved is scheduled for Friday, Stridiron said.
Hill in his radio comments said he considered it outrageous that "in a time of fiscal crisis" any business would "not pay their obligation to the government in an amount of almost $1 million."
Senator: Eliminate Powerball middleman
Caribbean Lottery is aware of its obligations to the V.I. Lottery, Hill said, "and it has had ample time to properly address any problems it may be experiencing. If CLS fails to make its obligation current, the government should take immediate action to cancel its contract." And then, he said, the V.I. Lottery should "seek to conduct the Powerball lottery themselves."
Washington said his organization holds Hill "in the highest regard, but the fact of the matter is that he has been misled. I've been told by our attorneys and by our chairman that we are a 'master agent,' and the sub-agents not only owe [the V.I. Lottery] a lot of money; they owe us more."
Flemming wrote Turnbull concerning "a very serious contractual concern that has created a hostile relationship between the Caribbean Lottery Services and the V. I. Lottery." He told the governor that he had met with Robert Washington, CLS chief operating officer, and his son, Todd, the general manager, in an effort to resolve the issue.
The Washingtons agreed that the money is owed to V.I. government, Flemming told the governor, but they claimed that Austin Andrews, Flemming's predecessor, had made a verbal agreement to provide enforcement assistants to help CLS in collecting money from its sub-agents.
A bill to confer peace officer status on investigators of the V.I. Inspector General's Office and enforcement officers with the V.I. Lottery was held in the Senate Government Operations Committee on Oct. 8.
In his letter to the governor, Flemming stated that "calls to CLS go unanswered for weeks, and when commitments are made … they are not kept." He said these conditions are "grounds for the termination of the contractual agreement" between the V.I. Lottery and CLS. Flemming said he was aware that Stridiron's office was trying to set up a meeting of the parties to resolve the issue but charged that "CLS is finding it difficult to commit to a specific time."
Not so, Todd Washington said on Monday. "We have been planning to meet with the attorney general for the last several weeks," he said. "The meeting is scheduled for Friday."
Washington said CLS and the V.I. Lottery "have had discussions concerning the significant number" of sub-agents "who have refused to pay, have delinquent accounts, or have issued bad checks to CLS."
Audited statement of sales sought
Flemming wrote to Robert Washington on Oct. 24 requesting full payment of the $886,180 by Oct. 30. He also asked for an audited statement of "all Powerball sales and CLS service sales to date."
Todd Washington stated on Monday: "CLS does not owe the V.I. Lottery $886,180."
He did not say on Monday that the company would comply with the request for an audited statement. What he did say is that after a number of discussions with the V.I. Lottery, "CSL has engaged the services of a collection agency to assist in the collection of money owed" to the V.I. Lottery by its sub-agents. He said CLS took the action at the suggestion of Gilmore Estrill, V.I. Lottery operations director.
Andrews, who was fired by the governor as V.I. Lottery executive director last May, had provided Powerball gross sales figures for the territory to the Source a month earlier. The game was introduced locally on Nov. 16, 2002. Ticket sales through last April 19, the most recent date for which figures were then available, totaled $2,013,870, Andrews said in May.
He gave the monthly gross sales as: November — $138,606, December — $579,636, January — $422,091, February — $339,002, March — $342,402, and April 1-19 — $192,133. From these gross figures, substantial but unspecified amounts go to the Multi-State Lottery Association, which operates Powerball and pays the prizes; to Caribbean Lottery Services, which is contracted to run the game in the Virgin Islands; and to the V.I. Lottery, for its internal operations. What's left goes into the V.I. government coffers. (See "Andrews: Powerball grosses $2 million so far in V.I.".)
Andrews was under fire for V.I. Lottery operations going back beyond those involving Powerball and CLS. The agency, which exists to bring revenues into the local government coffers, last year was in debt to the government to the tune of $4 million.
In August, Flemming told the Senate Finance Committee in a Fiscal Year 2004 budget hearing what his top priority was for the politically and financially troubled, 67-year-old lottery system he had inherited. It was, he said, to bring about change "so that our stakeholders, our players, our dealers, our employees and our commission can have a full measur
e of expectation and confidence that this is indeed the very best lottery possible."
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