ST. THOMAS - Although ticket sales have increased during last year, the V.I. Lottery continues to lose money, its executive director told the Senate Finance Committee on Tuesday.

Since the beginning of the fiscal year in October, the Lottery has been operating with a net loss of nearly $332,000. That is despite a 9.4 percent increase in ticket sales.

"I am not here to paint a glowing picture of the Virgin Islands Lottery," Executive Director Paul Flemming said before the committee. "The Lottery is facing some serious cash-flow problems."

Part of those problems are because of money lottery ticket agents owe. But the Lottery and its master agent, Caribbean Lottery Services, disagree over which entity is responsible for that debt.

Caribbean Lottery Services manages Caribbean Lotto, Pick 3, Pick 4, Hot 5, Caribbean Keno and instant scratch games. V.I. Lottery still operates the territory's traditional lottery.

At the Finance Committee meeting Tuesday, officials from Caribbean Lottery and the V.I. Lottery aired their differences.

As a master agent that administers games for the Lottery, Caribbean Lottery says it has no obligation to pay the Lottery for debt from vendors who do not pay for the tickets they sell.

Bob Washington, Caribbean Lottery's chief executive officer, said the V.I. Lottery should have gone after the money but did not.

"We've been asking for help. We said, 'V.I. Lottery, these are your agents. You can terminate them. Simply help us,'" he said.

Flemming testified that the contract between the two parties obligates Caribbean Lottery not only to reimburse the Lottery for money that goes uncollected from ticket vendors, but also to collect that money as well. Caribbean Lottery's contract requires that it pay the V.I. Lottery 10 percent of its gross revenue from online game and scratch ticket sales and 14 percent of the gross revenue from Powerball sales.

Flemming said Caribbean Lottery owes approximately $800,000 on uncollected ticket sales since it and the V.I. Lottery signed their contract two years ago.

But Caribbean Lotto officials said Tuesday they are not contractually obligated to pay the Lottery anything for the uncollected debts.

Both parties are in negotiations to amend their contract to settle the dispute. Washington said that Caribbean Lottery has agreed to pay $200,000. In return, the V.I. Lottery would send out its enforcement officers to collect the unpaid lottery ticket balances. The contract amendment also would clarify that both Caribbean Lottery and the V.I. Lottery share responsibility for pursuing delinquent ticket vendors, and specify that Caribbean Lottery does not have to pay for uncollected vendor debts.

As of now, however, neither party has signed the agreement.

Attorney General Iver Stridiron, who is involved in negotiating the terms of the amended contract, said at Tuesday's meeting that he hoped both parties would come to a final agreement within days.

Collecting outstanding debt is not the Lottery's only financial problem, Flemming said Tuesday.

By law, the V.I. Lottery is required to pay 5 percent of its revenues into the territory's General Fund. Because the Lottery consistently has had difficulty turning a profit, it has paid only a fraction of what it owes the government.

Flemming said Tuesday that to date, the Lottery owes the government $4.4 million.

While much of the hearing focused on the financial problems of the Lottery, Flemming said there is hope for a brighter financial outlook. He presented a number of reforms that are designed to pull the Lottery out of the red.

These include increasing the first-, second- and third-prize jackpots in the territory's traditional Lottery and adding smaller prizes ranging from $250 to $5,000. Flemming also said the V.I. Lottery will upgrade its computer systems, which are so outdated they are not even Y2K compliant, and purchase a new drawing machine that picks the winning lottery numbers.

At Tuesday's hearing, Washington also told senators that lottery giant GTECH Holding Corp. is negotiating to buy Caribbean Lottery's parent company, Leeward Islands Lottery Holding Co. That move would improve the company's operations and ticket sales in the territory, he said.

The $40 million deal is awaiting regulatory approvals and is expected to be completed in May.

Virgin Island Daily News

-- Anonymous, April 15, 2004