White County Circuit Judge Thomas Hughes ordered a new trial in the dispute over the ownership of a $1 million lottery ticket today, Fox 16 reports.

The judge's three-line order came, Hughes wrote, "after reviewing the actions of counsel appearing in the case."

Three weeks ago, Hughes awarded the lottery winnings to Sharon Duncan, the woman who claimed to have purchased the winning ticket at a convenience store in Beebe before discarding it when she said the ticket scanner did not indicate that it was a winner. Sharon Jones redeemed the ticket last July after she said she found it discarded in a waste bin.

The Arkansas Lottery Commission met today to, among other things, appoint a new chair and discuss the proposed 2013 budget. Touchy items, such as the search for a new internal auditor and the $20 lottery ticket lawsuit were barely mentioned. Internal auditor Michael Hyde submitted his resignation on May 11, for reasons that remain a bit murky. At today's meeting, all we learned was that the search was ongoing and the job description has changed a bit. Now the word "preferred" has been added to the earlier "required" experience working with a lottery, presumably because auditors with lottery experience are few and far between. Regarding the lawsuit over tampered with tickets the Commission is required to submit an opinion to the court by June 1.

Also of interest — Director Bishop Woosley mentioned that at the June 19 legislative oversight committee meeting, the legislature will discuss the lottery's request for expanded power for its security department, to investigate vendors and others suspected of ticket tampering, to issue warrants and to make arrests. Currently, the security department investigates fraud and if necessary, turns information over to the state prosecutors, but it doesn't operate as a state law enforcement agency. The lottery's aim is for this issue to be voted upon in January during legislative session. About a dozen other state agencies already have designated law enforcement status.

The 2013 budget was unanimously approved by the Commission, with the last minute addition of a $250,000 "promotional budget," at Woosley's request. This promotion will run for a specified time and advertise bundled deals on so-called online games, which are chances sold on drawings. Players who purchase the packages will pay for a few games and receive one for free, in order to introduce them to new games. The budget projects a $98 million net. The projection for this year is $102 million, but it is expected to fall short.

UPDATE: The budget can be viewed here.

For 2012, the lottery is under budget in expenses, including a $900,000 reduction in salaries. But the proceeds are also below budget, due to what Woosley termed an "over-optimism on online games." The number of lottery retailers remains fairly steady. The high point was June 2010, when the lottery had 1,920 vendors. Currently the lottery is at 1,870.

Ben Pickard was elected chairman to succeed Dianne Lamberth. George Hammons was elected vice chair and Steve Farris was elected secretary.

UPDATE: To answer a prosecutor's question — yes, results of investigations conducted under the police powers would be turned over to prosecutors, as other state agencies do. Some more info here on that.

Michael Hyde, the Arkansas Lottery's internal auditor, has informed the Lottery Commission of his intention to resign.

He told the lottery commission in an e-mail that he was resigning effective 5 p.m. June 22. But he'll be using accrued leave time in the meanwhile. His note thanked his assistant, Whitnie Hall, for her hard work, dedication and loyalty. He otherwise said nothing about his reasons for leaving.

I'm trying to find out more. Hyde had irked some members of the commission with persistent findings of questionable activities during the Passailaigue era and, more recently, with continuing questions about the legality of a contract change that benefited lottery vendor Scientific Games.

I've tried to reach lottery officials for comment, but so far I've heard only from Commissioner Bruce Engstrom, who's been a generally minority critic on the commission of the Scientific Games deal. "It was apparent that this commission has adopted an attitude that if you find a problem, the last thing you do is let anybody know about it," he said. "That runs 100 percent counter to the responsibilities of an internal auditor."

Engstrom, an accountant, continued: "Through diligent work, when he uncovered irregularities, it made a significant number of people on the commission unhappy." Engstrom said he thought the Scientific Games controversy was a "tipping point" for Hyde. Engstrom said his own feeling was that some on the commission were looking for a way to fire Hyde. "That put a lot of pressure on him and I think that's what prompted him to move. I think it is a great loss to the commission. I wish him well."

Engstrom said the reaction by commissioners critical of Hyde's work "sends a terrible message to other employees and anybody else who might apply for the job: If you find a problem, keep quiet. I don't think that's what the people of Arkansas want out of an internal auditor."

Said lottery director Bishop Woosley:

Max, I can confirm that Mr. Hyde resigned. I have no comments beyond wishing him well and advising that I can’t speak to his reasons for resigning as I have not spoken with him. As you probably know, the Internal Auditor works for the Commission as a whole and not the Director. That position is hired by and reports directly to the Commission. Because of that, only the Commission can speak to his replacement and the process for replacing him moving forward.

Sharon Duncan, winner of a lawsuit over a contested $1 million Arkansas lottery ticket, talked about the case on NBC Today's show today.

She revealed that she'd once offered to split the ticket winnings with the woman, Sharon Jones, who fished it out of a discarded ticket bin in a Beebe store, but couldn't work out a settlement. Since winning a circuit court ruling that the ticket was hers, she said she's learned she might have a hard time getting the money.

Last week, a judge ruled that Duncan was the rightful owner of the ticket and deserves the prize money, which he ordered Jones to pay back. But Jones and her husband claim they have already spent about $190,000 of the $680,000 they were awarded after taxes and are unable to pay back the money because neither of them is currently employed. Jones and her attorney are appealing the ruling.

I know a store clerk has testified that Duncan bought the ticket in question and threw it away after it was scanned and shown not to be a winner. What I still haven't been able to find in the reporting is a clear explanation of how the clerk and Duncan were sure that the ticket Jones removed from the trash bin was the ticket Duncan had bought and scanned. Anybody?

After John Walker sued over lottery scratchoff ticket tampering, I filed an FOI request for internal documents related to that issue. I received a bundle of responses late yesterday, much of it routine communication between the Arkansas Lottery and its vendor, Scientific Games, on design and production of the $20 "Arkansas Millionaire" ticket.

There seems to be general agreement that tickets at at least one retail outlet had been tampered with. Pin pricks were used to see if tickets had a winner in a $50 instant winner box on the ticket. Walker's suit alleged also, however, that security director Lance Huey had told an unhappy lottery player who discovered the tampering that there had been problems in the printing of the tickets. The Arkansas Lottery has denied that, including in a statement last night, and continued to sell the tickets.

This particular batch of material, though redacted in some key spots (presumably to protect "proprietary" interests of Scientific Games), includes some e-mails relative to the controversy. In one of them, a Scientific Games employee writes that a simple "bonus spot" feature is "inherently carry more risk" for attempts at tampering, but that a number of design elements are included to make it difficult for cheaters to identify winners without tampering being obvious.

Other notes show Huey was in discussions with Scientific Games about ticket tampering beginning April 24, but the printed record reflects no indications from either side of problems in ticket design, only the report of pin pricks. There were no "security or quality issues" in reviews during the printing, the company said. The printed record doesn't constitute a complete record of lottery and vendor communications, however. Several notes refer to telephone conversations. A redacted portion of one note that I asked about indicate that one of the printing strategies used to make it harder to tamper with the tickets was properly done, Lottery Director Bishop Woosley told me.

By the way: Scientific Games has as much interest as the lottery does as keeping the tickets in play. It printed 3 million of the $20 tickets and will keep 1.92 percent of all sales as a commission. A sellout this would make almost $1.2 million for Scientific Games.

The Arkansas Lottery scratchoff fiasco has a thickening plot.

Fox 16 reports on an interview with two clerks fired from a Little Rock convenience store after a complaint to the Little Rock police over sales of $20 tickets that had been tampered with, apparently by someone attempting to find winners. The allegation in a lawsuit is that the store sold losers to unsuspecting customers.

The clerks say they are fall guys and that they play the lottery — and lose — like everyone else.

"It's a cover up," said Clarence Walker. "They're trying to put it on us so the Lottery Commission will be in the clear."

The Walker brothers say the whole situation would be cleared up if someone would just take a look at the security tapes from inside the Raceway. However, when Fox16 asked to take a look, the store clerks said absolutely not.

You remember the story about the lawsuit filed last week concerning tampering with a type of lottery scratchoff ticket? At a minimum, ticket sellers found that a tiny pinprick could reveal when a certain type of ticket (shown) was worth an instant $50 and apparently went through a store supply to find winners and sell losers.

This happenstance suggests that the design of the ticket could have been improved so that it wasn't so readily susceptible to tampering. The lawsuit also alleges, however, that the lottery security chief, Lance Huey, told an unhappy buyer of losing tickets who discovered the tampering that there'd been a problem in the production of the tickets. The lottery so far has not responded to specific questions about that, citing the pending lawsuit.

I've asked for any correspondence with vendor Scientific Games relative to this problematic series of tickets.

But I did get an answer to one question:

Are the lottery tickets subject to the lawsuit still being sold?

Yes.

Why?

No answer was forthcoming to that question.

Your odds against winning remain overwhelming, moreso if there are any other dishonest ticket sellers who are aware of an easy way to find and segregate winners.

UPDATE: The LRPD has released a report on the complaint about illegal activity filed for its investigation. It identifies the store where tickets were allegedly taken by three employees as a Raceway at 6425 S. University. It had not been identified in the lawsuit. A store official identified three former employees as suspects in thefts of more than $1,500 worth of tickets over three months. If each one paid off $50 the value of the theft was far higher, naturally.

State Rep. John Walker of Little Rock, who is also a lawyer, filed a lawsuit today in Pulaski Circuit Court alleging that tampering with lottery scratchoff tickets created a situation in which an unknown number of gamblers could have been sold $20 scratch-off tickets without a chance of winning.

Walker's suit alleges that Arkansas Lottery Commission officials were informed of the tampering scheme, but tried to hush the plaintiff up by giving him some lottery merchandise and even free lottery tickets.

Here's the lawsuit. It names the Lottery Commission, the lottery director and security chief and Scientific Games, a vendor for the tickets.

In it, Rick Tomboli of Little Rock, the plaintiff, said he bought two $20 Arkansas Millionaires scratchoff ticket at a local outlet. They were losers. He noticed they had a tiny pinprick over a section on the ticket that said "Bonus $50." He went back to the store and found all the other tickets in the game had small pinpricks in the same place. As I understand, the pinprick revealed the color of a message below, enough to determine if a ticket was a winner or not. The lawsuit alleges that the store, unidentified, removed winners from those for sale and sold only losers.

Tomboli said he complained to the lottery, which brought a visit from Lance Huey, the lottery's security director. He says Huey told him the tickets were printed improperly and would be pulled. He offered Tomboi an assort of lottery tote bags, shirts, hats and sunglasses as compensation for his trouble. But Tomboli returned to the store and found tickets with pinpricks were still being sold. According to the lawsuit, Huey "frantically" called back the next day. He allgedly told him the lottery didn't want to reprint that run of tickets and lose the sales. According to the lawsuit, "Huey admonished the plaintiff not to tell anyone and conveyed to him that someone from the retailer would contact him to maybe find a way to compensate him." Walker told me that a representative of the store, who indicated he was acting with lottery blessings, offered Tomboli a roll of free lottery tickets.

Walker has filed his suit as a class action on behalf of all those who may have bought tickets. It says the defendants violated their fiduciary duty to operate the lottery with integrity.

So far, I've been unable to reach Lottery Director Bishop Woosley and Public Affairs Director Julie Baldridge for comment. Walker said his team had gotten in touch with Lottery Commissioner Bruce Engstrom, who's been raising questions about lottery operations. He said Engstrom immediately took his complaint to lottery officials. Engstrom confirmed that he'd spoken with Tomboli and former lottery counsel Bridgette Frazier yesterday morning at Walker's request and, as soon as he heard of the allegations of fraud, notified Woosley. He referred further questions to him. But he said he'd learned enough to know that there were indications of problems and that lottery officials were looking into them.

UPDATE: The lottery has little to say. Statement on jump, but it confirms the matter is under investigation by Little Rock police and it reports that three employees at the store in question have been fired. But it is dead silent on allegation that the plaintiff was encouraged, including by gifts, to remain silent.

This could be a big deal. If one store figured out this flaw in one game's tickets, did others? Is this the only game subject to such tampering? Why would a lottery security official instruct a citizen of Arkansas who believed he was wronged by operation of the lottery to not disclose publicly what would occurred? Why wouldn't the tickets immediately be pulled? Is this part of the enhanced services lottery vendor Scientific Games is providing for the sweetheart contract the Lottery Commission recently approved after the fact? Does it not seem that the Lottery Commission bends over backwards to cover up mistakes, misdeeds and bad judgment? Do lottery officials not understand that people are far more forgiving of honest mistakes than they are of coverups ? Do lottery officials not understand that mistakes damage credibility less than intentional acts of deception?

Sadly, the evolving story of the Arkansas Lottery is running to form. A game for suckers.

The Arkansas Lottery Commission is no Jeff Long.

Rather than stand up for integrity and demonstrate independence from the forces of ill (giant vendors that wrangled sweetheart contracts from former lottery director Ernie Passailaigue), the commission voted today to give after-the-fact approval to a contract with Scientific Games that didn't receive commission approval. This is costing gamblers and scholarship recipients $7 million a year. Lottery Director Bishop Woosley, who was legal counsel procurement director under Passailaigue when he agreed to the amendment, has defended the legality of the deal.

Two commissioners — Bruce Engstrom and George Hammons — voted against the approval. Instead of losing jobs for this deal, as Engstrom had reported employees had feared, they essentially got a round of applause. Scientific Games is going to give back about $2 million of the $21 million or so in excess revenue it could reap from this deal.

Earlier, the Legislative Oversight Committee also washed its hands of inquiring further into or objecting to the way in which Arkansas was snookered. It said it saw no need for further review.

Most everyone involved wants no further inspection that might further substantiate what seems increasingly obvious — Arkansas is getting snookered by veterans of the game, which is after all, a game for suckers.

The big question remaining is whether the Lottery Commission will now punish internal auditor Michael Hyde for turning up the important and uncomfortable questions about vendor contracts and for also being a persistent check on the travel and personnel abuses of the Passailaigue era. This is what auditors are supposed to do. Except at places content to let foxes guard the henhouse.

UPDATE (from LM): After spending nearly an hour in executive session, the commission reconvened — without Commissioner Engstrom, who left quickly after the commission announced it would reconvene — to report that no action was taken on the employee evaluations (no names were officially mentioned, but the commission was obviously evaluating Hyde and Woosley). Commission chair Dianne Lamberth said the evaluations would continue when the commission next meets in May.

MORE: Internal Auditor Michael Hyde told the commission that none of the findings in his audit had changed and recommended that it seek outside legal counsel and, should the contract be deemed invalid, seek financial redress. Despite that recommendation, the commission voted to reaffirm the contract with Scientific Games (SGI) and allow Director Bishop Woosley to continue negotiating.

After Commissioner Ben Pickard made the motion to reaffirm the contract, Commissioner Bruce Engstrom proposed delaying action, considering the governor’s recent statement that he’d asked his legal counsel to look into the matter and that it might take an attorney general’s opinion to resolve.

Attorney General spokesman Aaron Sadler said today that no one had requested an opinion on the matter.

Following the vote, Woosley spoke of the potential risks of invalidating the contract.

“You have to weigh, do you want to cancel a contract and invalidate a contract, and suspend sales for three or four months to six months, when we’re making nine or $10 million or $11 million a month in scholarship money? If the allegation is that we should sue to collect $20 million dollars — which I disagree with — but if it’s true, you invalidate the contract, it’s going to take you four to six months to get a new instant ticket vendor, you’re going to lose $40 million in the process and you’re going to lose customers and sales and you’re going to cost people sales. It’s a business decision. It’s not cut and dried. It’s very grey.”

Last September, after Arkansas Lottery Auditor Michael Hyde discovered that then-Lottery Director Ernie Passailaigue had altered the terms of a contract with the lottery's largest vendor, he explained his findings to Lottery Commissioner Bruce Engstrom, a certified public accountant, at the Arkansas Lottery offices. Once Engstrom reviewed Hyde's preliminary findings and saw how favorable the new terms were to the vendor, Scientific Games (SGI) — estimated by Hyde to cost the lottery more than $21 million over the seven-year term of the contract — he and Hyde went through the findings with Lottery Director Bishop Woosley, at the time lottery legal counsel and formerly the procurement director. According to Engstrom, when Hyde began discussing investigating whether another vendor should've won the contract based on its bid, Woosley said, "If this gets out, we're all going to lose our jobs."

Days later Hyde and Woosley met with Passailaigue and his lieutenant David Barden, who pointed to Tel-Sell, a sales and customer support operation run by Scientific Games for the Lottery that includes four staffers, as a service the lottery received in exchange for the new contract terms. Neither Passailaigue nor Barden offered any other explanation for the altered terms, according to notes from the meeting and Engstrom. The day after that meeting Passailaigue tendered his resignation. Barden followed shortly after.

After the lottery hired communications director Julie Baldridge as interim director, Engstrom said he pushed for consideration of the issue to be delayed until the lottery hired a permanent director.

On Wednesday afternoon, the Lottery Commission will meet to again consider the validity of that contract with Scientific Games. It's also expected to go into an executive session to evaluate Hyde and Woosley. Hyde will likely present a final version of his audit of the lottery's contract with SGI. A copy of the audit was sent to commissioners last week.

WEDNESDAY MORNING EDITORIAL FROM MAX:

Michael Hyde presents strong evidence that contract amendments approved by Ernie Passailaigue with lottery vendors didn't comply with the law. Bishop Woosley, now the man in charge and the lottery's former legal counsel, was on the staff then and working for Ernie P. He disagrees. Investigations are underway on whether a taxpayer lawsuit might be in order to settle this difference of opinion.

A matter on which there is no dispute is that the South Carolina Swindle puts millions of extra dollars in the pockets of lottery vendors by taking them away from gamblers and college students' scholarships. The deal stinks. It is far worse than industry standards. If it wasn't such a stinker, Scientific Games wouldn't be offering $2 million in chump change to make the controversy go away. (It isn't the only big vendor favored by contracts better than those typically awarded.)

If the Lottery Commission today tries to, effectively, backdate approval of this rotten deal and, in the bargain, punishes an internal auditor for vigorously vetting the integrity of the lottery operation, it will have forever lost what public credibility it ever had. The University of Arkansas and Jeff Long set a high standard yesterday. Will the Lottery Commission do so well today?

The Arkansas Scholarship Lottery has announced that Paulette Hodges of Blytheville claimed a $1,000,000 prize today at the lottery's Jonesboro claim center.

Hodges won the prize in last Friday’s Mega Millions draw by matching all five of her ticket’s white ball numbers; her extra dollar for the "Megaplier" turned $250,000 into $1 million. She bought the ticket at the Flash Market at 1305 Main St., Blytheville. She says she's going to use some of the money to remodel her house and bank the rest.

The lottery office said there 39 winners across America with her same numbers, 37 winning $250,000 and 2, with the Megaplier, winning $1 Million.

Meanwhile, I'm dashing out to buy a ticket for the $540 million pot that will be drawn tonight. I'm feeling pretty lucky — here's how the LA Times described my chances:

If you have one friend in Canada, put the name of every person in Canada in a hat and pick one, you are five times as likely to pick your friend’s name as you are to win the jackpot with a single ticket.

After a three hour Arkansas Lottery Commission, which I had to leave early to come back here and write a quick column before our print deadline: a few quick takeaways.

*The Arkansas Lottery Commission desperately needs to retain outside counsel to review its contract with the instant-ticket vendor Scientific Games (SGI). As we've previously reported and as he detailed at the meeting today, Internal Auditor Michael Hyde believes the contract is invalid and has cost the lottery $7.5 million dollars. Director Bishop Woosley said today that he disagrees with Hyde's understanding of the SGI contract. Invalidating the contract would open the lottery up to a multimillion dollar lawsuit from SGI, he said. Pressed by Commissioner Bruce Engstrom on whether the deal had been good for the lottery, Woosley would only say that a valid deal does not equal a good deal.

*Scientific Games vice president and legal counsel Phil Bauer read a prepared statement at the end of the meeting, citing the more than $176 million dollars it helped the lottery generate. "We take our reputation for high integrity very seriously, and compliance with all applicable laws, rules and regulations in our business operations is of the highest priority to Scientific Games," he said. And later, "While we understand the role of the internal auditor and welcome and support transparency in government, we cannot continue to stand by as our reputation suffers damages by these repeated and unjustified attacks." He then asked the commission to formally reaffirm its contract with SGI.

The commission declined. I left before I could get comment from anyone, but I'm told the commission has not scheduled its next meeting.

Here's a bit of my column sub for Max for this week's issue. I'll try to add to this post later tonight if I can get time.

It wasn't hard to explain Ernie Passailaigue's decision to resign as director of the Arkansas Lottery last September. He'd faced two firing attempts, two scolding legislative audits and was facing harsh criticism over a $100,000 fine levied by the IRS on the lottery for late payment of taxes withheld from lottery winners. But notes the Arkansas Times obtained via a Freedom of Information request from a meeting between Passailaigue, the lottery's internal auditor and other lottery officials held the day before Passailaigue tendered his resignation suggest another reason for his departure: Internal Auditor Michael Hyde's investigation into the validity and benefits of a contract with instant-win vendor Scientific Games International (SGI).

At a meeting tomorrow afternoon, the Arkansas Lottery Commission is likely to consider a settlement with Scientific Games International (SGI), the instant ticket vendor that’s received almost $7.5 million more than it would have had a contract approved by the Arkansas Lottery Commission and the Arkansas Lottery Commission Legislative Oversight Committee been honored. Among the terms SGI has offered in a proposed settlement is a $2 million credit as an incentive for the state to keep contracting with SGI.

Commissioner Bruce Engstrom helpfully boils down the matter at hand. “There are two basic questions that need to be answered: Did we get screwed? And, if we got screwed, are we stuck with it?"

Below, consideration of those questions and a few more.

Did the lottery get screwed?

According to Arkansas Lottery internal auditor Michael Hyde’s preliminary report, yes.

As I reported last week, on Aug. 18, 2009, the Lottery Commission agreed to a contract with SGI to provide the lottery with scratch-off tickets. Nearly a week later, former Arkansas Lottery Director Ernie Passailaigue altered the terms of the contract without approval from the Arkansas Lottery Commission or the Arkansas Lottery Commission Legislative Oversight Committee. From when the lottery began in September 2009 until Feb. 29, 2012, the difference between the original terms and the terms to which Passailaigue agreed have cost the scholarship lottery $1.95 million and lottery players $5.5 million, according to a lottery internal audit. Over the seven-year life of the deal, the altered contract will cost the Arkansas Lottery $21.7 million more than the original contract, according to Hyde’s estimates.

Catching up this morning on a sketchy Internet connection, I read Lindsey Millar's update on Ernie Passailaigue's legacy as director of the Arkansas Lottery.

A catchy moniker is needed, something akin to, say, the South Carolina Swindle. The Ernie P. era, we now know, won't be distinguished only by the $800,000 in pay and lavish leave bestowed on the Palmetto State Posse who got our lottery off the ground. The biggest rip was the sweetheart deal Ernie P. set up with major lottery vendor Scientific Games.

Internal auditing has revealed that the deal — including a crucial amendment approved by nobody but Ernie P. — has cost Arkansas roughly SEVEN MILLION DOLLARS. Scientific Games wants to pay a $2 million rebate for the state to forget the whole thing and continue its sweetheart contract terms.

Let me point out what $7 million means to real people, as opposed to lottery executives and lobbyists:

* SCHOLARSHIPS: $2 million worth*. FOUR HUNDRED scholarships at $5,000 per year, the first-year rate, more at the current level.

* GAMBLING WINNINGS: $5 million worth. That's a $10 payoff on FIVE HUNDRED THOUSAND TICKETS.

Making the state whole would be a messy business. Ending the sweetheart deal also would be legally contentious. It also — and this is key — could expose lax oversight by the legislature and commission. You can understand a desire to sweep all this under the rug and move along. Let's not. Where's the outrage from all those running for office this year on good government platforms?

*An earlier version of this post confused the scholarship and gambling winnings numbers.