News24

How Gidani nearly lost the lottery licence

2012-02-27 12:09

Johannesburg - Confidential recordings of National Lotteries Board meetings reveal for the first time the true severity of a security breach which saw winnings looted in the R4bn-a-year competition.

The breach saw an employee seconded to national lottery operator, Gidani duplicate winning tickets which were about to expire and collect R250 000 in winnings during 2009.

It was so serious that the Board - the state’s lottery oversight body - considered withdrawing Gidani’s licence, worth nearly R400m a year, and controversially awarded in 2007.

Over the last year media reports have speculated about the breach and a Carte Blanche insert identified some detail of how it was orchestrated and the employee accused of it.

Leaked recordings

At the same time the Board and Gidani have repeatedly downplayed the severity of the security breach first mentioned cryptically in the Board’s annual report.

But nearly seven hours of recordings leaked to Media24 Investigations tell another story.

They show how, over meetings at the end of 2009, the Board – far from downplaying the seriousness of the breach – grappled with what do and discussed how:

- Two security audits questioned the operator’s security measures to protect confidential lottery data;

- The failure to secure the data appeared to be a blatant breach of Gidani’s lucrative licence agreement and that it could have lost the licence;

- The lottery could have been plundered weekly using the same security hole – and that Gidani (and its business and technical partner, Intralot’s) internal security systems would not have picked it up, and;

- The breach was discovered by accident by a colleague who noticed the alleged perpetrator behaving strangely.

'Major breach'

The recordings reflect Board chairperson Joe Foster saying: “This is a major breach. We can’t just allow this to just go by the wayside, we need to teach them a lesson. They need to pay for their sins.”

Lottery CEO Vevek Ram described how a whistleblower within Intralot SA had approached Gidani’s CEO, Bongani Khumalo, and “told him, listen, I think there’s something going on”, after which Gidani had arranged surveillance of the man.

“They followed this guy around and they looked at surveillance cameras and all that, and they found him out. And they confronted him, and then he confessed.

“Had the whistleblower not come forward, this fraud would be continuing as we speak,” said Ram.

In the recordings Ram speculated that the technician could easily have stolen as much as R50 000 to R100 000 a week undetected. If there had been R1.5m to R2m in unclaimed prizes available in a particular week, it would have been possible for him to take up to R250 000 in a week without being noticed.

The board had initially considered revoking Gidani’s licence, because it had breached two crucial conditions of its licence – failing to take preventative measures to stop fraud and the theft that resulted from the security failures.

At the time, Gidani already had a R5m suspended sentence hanging over its head because of another breach of the licence – relating to unauthorised lottery network access.

But after considering the damage another stoppage would do to the lottery, less than two years after a six-month hiatus in the competition due to the dispute over Gidani’s initial award of the licence, the board instead decided to fine the company.

There were also concerns in the Board about whether similar problems existed in other countries where Intralot operated and that the Board considered sounding the alarm internationally.

The recorded discussions show how members of the Board became more suspicious over Intralot, a listed Greek company with operations in 53 countries.

Vulnerabilities

The decision to fine Gidani an effective R7.5m was considered a slap on the wrist, by at least one board member with whom Media24 Investigations spoke, although other experts said it was fair.

Last week Gidani insisted the problem was not as serious as the recordings suggest, insisted it had been unfairly fined – and that its security systems had always been water-tight.

What made the breach even more shocking to the Board was the fact that two independent security audits – the first one done at the board’s insistence by auditing firm KPMG in 2008, and a second audit by an independent expert some months later – had shown vulnerabilities in the databases containing the prize winner data. The fraud had, therefore, been entirely avoidable.

After the breach, meetings reveal, Intralot brought in two technicians from Greece to restore security.

But before the breach was discovered the IT manager working for Intralot was able to steal a quarter of a million rand in unclaimed prizes between April and July 2009.

The employee faced criminal charges which are still pending.

This meant that someone with a winning ticket could have claimed a prize, only to be told it had already been claimed.

The breach was cryptically referred to in the Board’s 2011 annual report which said Gidani had received a R7.5m fine for “a contravention of […] the Licence Agreement”.

- Listen to the recordings

- Lotto tapes: Gidani responds

- Media24 Investigations
 

Comments
  • Ntombiziyabusa - 2012-02-27 12:26

    If this is the case, how are we supposed to trust that they are not fooling us when they say we have a non winning ticket? Only so that they can claim the prize for themselves!

      Larry - 2012-02-27 12:34

      Trust Me, they have always been fooling us. The whole thing is a scam.

      Godfrey - 2012-02-27 12:55

      Of course it is not run honestly. Has anything which the comrades are responsible for been run honestly? The draws are not conducted live on television but prerecorded. So there is nothing to stop these guys doing a draw, going to the computer and adding in some winning tickets in the name of their wives and girl friends. The stupid looking junior auditor is merely a stage prop.

      Kala - 2012-02-27 13:36

      If you don't buy a ticket you can't be fooled. So many breaches of their contract at yet Gidani is allowed to carry on with hardly even a slap on the wrist. Oh but wait, that's how things are done now.

  • Sinudeity - 2012-02-27 12:31

    Nice job guys... Robbing from the poor, and giving to the rich.

      Nosiphom - 2012-02-27 15:17

      That is what lotto is all about. It is a tax imposed on those who do not understand permutations. I saw a man buying R2000 worth of lotto tickets and I pitied him - he did not look too rich.

      Moss - 2012-02-28 07:54

      Nosipho, i have seen regualar buyer ,white man at spar 14th ave Northcliff (creata mall),he buy ticket around R2000.00 every draw,. the good thing is after every draw all these 3 number,4 numbers match can return all his R2000, and make extra profit ,BUT the problem is he will take forever in front of lotto machine (45 minutes to play and claim prize)

  • Mlungisi - 2012-02-27 12:33

    mmmmmmmmmm

  • Thoka - 2012-02-27 12:45

    this means numbers can be cooked as well. I want refund Mr Khumalo my account no: 0315860005

  • odupreez - 2012-02-27 12:47

    The Lotto is a scam, week after week there is no winner, normal - but have a guaranteed R20 and "bobs your uncle" we have a winner ( ? connected comrade ? ) -- ticket quickly printed and handed over -- If the printing almost expired tickets has been happening -- then of course this is being done -- how in heavens name are these corrupt operators still in business !

      Godfrey - 2012-02-27 12:56

      That is exactly how they do it. The draw is not conducted live so they have plenty of time to add some winning tickets before the draw is broadcast.

      Kala - 2012-02-27 13:37

      You can't be caught by these theives if you don't buy a ticket.

      phumudzo.nemadidi - 2012-07-19 13:48

      you so correct: every time when there is a jackpot there is always a winner out of the blue, however the many times of rollovers. there is serious crime in our national lottery.

  • Mart - 2012-02-27 12:48

    GIVE THEM ANOTHER CHANCE MY ASS !!.This idiotic approach to crime and the facilitation of crime just perpetuates and exasperates the already dire situation in this country. The adage 'people are allowed to make mistakes' is being taken too literally. Watch my lips...."YOU ARE NOT ALLOWED TO MAKE MISTAKES OF THIS NATURE.....PERIOD !"

      Kala - 2012-02-27 13:39

      I'm suprised that this sillyness hasn't appeared on "Ripley's Believe it or not". It's just as mind boggling as some of their regular stuff.

  • Andre - 2012-02-27 12:49

    How on earth can Gidani ever again be trusted with Lotto money - But then mayby it's one bee scratching a other bee's back

  • odupreez - 2012-02-27 12:50

    The urban legend -- I have heard of someone's cousin's aunt's father-in-laws brother that won R1.5 million on the SA Lotto.

  • Steven - 2012-02-27 13:01

    Stopped supporting this so called"Charity"years ago!!!!

  • mengelbrecht1 - 2012-02-27 13:19

    Boycott this scam. The money donated reaches very few deserving causes and now we see how the employers are ripping the company off. Ban it I say!!!!!!!

  • ludlowdj - 2012-02-27 13:20

    Thew lotto has been a scam since the government took it over, anyone who was part of the old KZN lotto will know that the replacement national lotto is a scam, not to mention the past history of irregularities of the lotto runners internationally. The main players are the people who can least afford it.

      Peter - 2012-02-27 14:21

      ludl you hit the nail on the head. The old KZN lotto awarded 90% of ticket sales as prizes. This corrupt ANC lot only give 40% of the take in prizes, and then the corruptly steal most of the draw prize. Typical ANC methods of self enrichment, at the expense of the poor.

  • Moss - 2012-02-27 13:21

    some lotto tickets come with already damaged barcode,when you try to claim your price it will not scan,even manual numbers that they use some time in you right corner are faded (by default) you wlll nt be able to claim your prize. I have seen it 4 time in boksburg and springs area.

  • Hendrik - 2012-02-27 13:33

    With this news "out" I feel vidicated that I stopped buying lotto tickets from the time Gidani took it over. prior to that I would regularly make a small donation to charity twicea week. Did not trust this Gidani lot with the loto right from the start. Feeling rather pleased now that they were not able to swindle me out of anything as I've not given them anything.

  • Dennis - 2012-02-27 13:34

    Lotto should be organised and run by a totally independent body !! No cadres !!

  • Abram - 2012-02-27 13:34

    another gravy train for comrades at the peoples expense,hey guys we work hard 4 these money

  • Shirley - 2012-02-27 13:35

    Lord help us-these corrupt thieving lowlifes are everywhere!

  • maseratifittipaldi - 2012-02-27 13:45

    Ntombiziyabusa : Do you think that they will leave millions lying around and let you or me "win" by chance?

  • Sandra Millar - 2012-02-27 14:02

    We have NEVER been this close to our goal of getting rid of these useless people. Well done Jeanne

  • Garysyd705 - 2012-02-27 14:13

    It the grrrave!

  • Garysyd705 - 2012-02-27 14:14

    It the grrrave!

  • Mtizozo - 2012-02-27 14:18

    I would like the NEC of the ANC to take over from Lotto and manage it.

      Irene - 2012-02-27 15:14

      They're even more corrupt!

  • Sam - 2012-02-27 14:29

    What I would like to know is this: where will the money for the R7,5m fine come from?

  • Christopher - 2012-02-27 14:34

    I have played the Lotto once...Never will again in this country as there is so much corruption... Its stupid. I would rather donate money to my favourite charity as I know they will receive it and do something worthwhile with my hard earned money.

  • Gavin - 2012-02-27 14:50

    The way I understood the lottery was to help the poor get a hand up, and for it to help various charities. From what I've read in the media, the plan got corrupted and the money goes pretty much to help the rich get richer. Alot of winners have ended up dead, as they can't cope with the sudden wealth and ANC parties have been financed with lottery money. Have you ever taken a look at the folks standing in the lottery queue ? They should have a sign above them that says: abandon hope all ye who enter here.. The lottery is another form of (informal) tax, I pay enough taxes to the evil empire thank you very much.

  • Jacques - 2012-02-27 16:51

    What a combination! The ANC deploys cadres to run the Lottery Board, which in turn contracts Greeks (look at how well they are managing their own money)to do it on their behalf. The Lottery Board has no intergrity left. They should all be fired.

  • John - 2012-02-27 19:02

    Uthingo Management was a far better company running the lotery.

  • Silvana - 2012-02-28 06:19

    Just another rotten apple in this wonderful cart we call the new SA.

  • Tracy-Lee Robertson - 2015-02-03 13:26

    Makes so much sense now..I spend a lot of money buying lotto tickets and always check online..when I go to claim my money they tell me my ticket won nothing..so I always just leave it thinking its my mistake..R10.50 here and there and sometimes more..one time had to claim R150 and had fight with the lady at the garage cause I couldn't understand why when I check online it shows I have 4 numbers or sometimes 5 but they say not a winning ticket or I have claimed already. .from now on I will question every single cent.

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