January 19, 2006 PUBLIC ACCOUNTS

COMMITTEE

The Committee met in Room 5083 at 10:00 a.m.

CHAIR (Joyce): I just want to thank everybody here for attending.

Ms Carinci, thank you very much to you and your officials for attending. I

thank the media and the general public for attending.

Just a few items. When anybody is speaking, we ask that you turn on the mike

- there is a talk button there - because the proceedings will be recorded and we

need the talk button pushed in order that it be recorded.

We are just going to go around the table and introduce everybody in the

beginning. Then, we are going to have a few preliminary things that we have to

do. Ms Carinci, then, will have some opening statements.

I will start with myself. I am Eddie Joyce, Chairman of Public Accounts.

MR. HARDING: Harry Harding, Vice-Chair of the Public Accounts Committee.

MR. YOUNG: Wally Young, a member of the Public Accounts Committee.

MS GOUDIE: Kathy Goudie, a member of the Public Accounts Committee.

MR. HUNTER: Ray Hunter, a member of the Public Accounts Committee.

MR. BARRETT: Percy Barrett, a member of the Public Accounts Committee.

MR. COLLINS: Randy Collins, NDP, MHA for Labrador West.

MS GOODWIN: Hi, I am Cynthia Goodwin. I am the Director of Public Affairs

and Social Responsibility of the Atlantic Lottery Corporation.

MR. DAIGLE: Hi, I am Patrick Daigle. I am the Vice-President of Finance

and Corporate Services of Atlantic Lotto.

MS CARINCI: I am Michelle Carinci, President and CEO of the Atlantic

Lottery Corporation.

CHAIR: We have to swear in the witnesses.

Swearing of Witnesses

Mr. Patrick Daigle

Ms Michelle Carinci

Ms Cynthia Goodwin

CHAIR: The procedure we are going to follow this morning is, we are going

to ask Ms Carinci for her opening remarks, then we are going to start with

questions from the members of the Committee. I mentioned to Ms Carinci that any

time her officials need a break, that is not a problem whatsoever - a five or

ten minute break - so don't hesitate.

Ms Carinci, please.

MS CARINCI: Good morning.

I would like to thank the Chair and the members of the Committee for the

opportunity to come in and talk about the Atlantic Lottery Corporation and, as

well, truly paint a picture of the gaming industry as it is in Atlantic Canada

today, and in Newfoundland and Labrador.

The Corporation is owned by the four Atlantic Provinces. Our mandate is to

provide sustainable financial growth through responsible regulated adult

entertainment products for the benefit of all Atlantic Canadians.

Each province appoints two board members, which gives us a total of eight

board members. As well, there is an independent chair who is a non-voting member

of the board. The board oversees us from a governance perspective. They approve

the strategic plan, business plans, operating plans. They form policy and really

provide oversight on - actually, on a monthly basis we meet.

I would like at this point, though, to acknowledge Phil Wall, who was a board

member of ours for over nine years. For the four-and-a-half years that I worked

with him, he lent great support, guidance and governance. I also acknowledge

Gary Norris and Terry Paddon, who are our current board members for Newfoundland

and Labrador.

Myself, I thought I would give you a little bit of a background. I have been

in the lottery and gaming business for over thirty years. I started when I was

twelve - that is a joke - and have been in senior positions, both on the

regulated side of the business as well as in the private sector side of the

business.

In my former position, I worked for GTECH Corporation and I worked with

lotteries all over the world, of which there are well over 100, so I have

experience on every continent and jurisdiction, pretty well, worldwide. My

family and I moved to Moncton four and a half years ago.

Now to gambling and gaming. Gambling and gaming has actually been a source of

revenue for governments and shareholders, and it dates back to the Chinese

dynasty of 100 BC where the game of KENO was actually first introduced. Today,

as I said, almost every country, jurisdiction, province and state offer

regulating gaming within their jurisdiction. Most of those members belong to the

World Lottery Association which I am going to come back to because it is an

important association in terms of standards, principles and best practices

worldwide.

This year marks the Atlantic Lottery Corporation's 30 th

Anniversary, and so for, I think, thirty years the Atlantic Lottery has been a

stellar example of Atlantic cooperation, and has been contributing to the

economy though regulated gaming entertainment, and in short making a difference

in the community. The corporation is also an advocate for corporate social

responsibility. It lives by the principles of leadership, governance,

transparency and integrity, community commitment, customer care, valuing our

employees, respect for the environment, and equality and diversity. In fact, for

two years in a row Maclean's Magazine has recognized the corporation as being

in the top 100 employers in Canada.

Since the corporation began over $1.4 billion in prizes has been paid to

winners right here in Newfoundland and Labrador, the largest being $17 million a

couple of years ago; $1.2 billion has gone to the shareholders for good causes

within the Province; almost $500 million has been paid to our retailers and site

holders in commissions; over $6.5 million has been spent directly in

Newfoundland and Labrador on goods and services; and we have sixty-eight

employees here today with a payroll of $3.6 million on an annual basis. We are

also very proud to have our very own printer of break-open and pull-tab tickets,

and that is British Bazaar, and they have over 100 employees who are directly

related to the lottery business employed here in St. John's.

The profits to Newfoundland and Labrador have grown, as you have seen by our

annual reports, year over year for the past thirty years, and in the past year

in addition to the $117 million in profit that went to the shareholder, we also

spent over $200,000 in the communities sponsoring such things as the Winter

Games, the Summer Games, the Corner Brook Triathlon, and a variety of other

community events which we do on an annual basis.

We have excellent relationships that we have developed here in the Province

with all of our stakeholders, and I think that attributes a lot to our

sustainable success year over year in this every-changing working place that we

are in.

Now, I would like to talk a little bit about that to, sort of, give you a

picture of what has happened with gaming. The marketplace is changing on many,

many fronts, and we evaluate that on a regular basis, everything from what is

happening in the marketplace, also to public sentiment and public opinion around

gaming. Well, the once very popular Irish sweepstakes of the 1950s and 1960s -

nobody in this room, of course, would remember that - they had a draw every

three months and, of course, it was very popular and very attractive but that is

certainly not the case any longer.

I can remember, actually, when I started back in 1975, there were five

employees and we had a draw every three months. I sort of scratched my head and

said to Cynthia: I don't know what we did between draws. Today, we have

something like over 1,500 when you add up daily draws and all of the things that

we have. But even popular games, like Lotto 649 are losing their lustre with our

players who are, today, in search of something that they call experience. So, it

isn't entirely about the winning anymore, it is about the experience and the

entertainment and the social piece of gaming, and the interactivity has become

much more important. That is apparent when you look at - I talked about we had

four draws when you look back in the 1970s, and today in Canada there are over

120 gaming facilities, either casinos, gaming at the tracks.

In British Columbia and Ontario, they also have what they call community

gaming centres, which offer electronic bingo and KENO to support the charities

who had diminishing revenue. If you look back ten years ago, there were no

facilities. So, that gives you a picture of what has happened in terms of - and

also not with the demand so much, but the appetite for a much more interactive

social gaming as opposed to buying a ticket, waiting three days and then looking

at the numbers. So, that social experience has become very important.

Then, of course, we have the Internet which has grown dramatically. Five

years ago, the spend on the Internet was estimated - and I underline, these are

estimates because not all of these unregulated operators open their books to

you. So, they are estimates that we get through very reputable financial

institutions worldwide. About five years ago it was estimated that $22 billion

was being spent on the Internet in gaming. Today, that estimate is $70 billion

and growing. Now, it is estimated that there are over 2,000 unregulated sites on

the Internet today. Canadians are spending somewhere around $700 million, and

growing, on gaming on the Internet today.

Then there is the poker craze that we have seen in the last week in the news,

not only in bars and in community halls but also on-line, which again,

demonstrates the appetite for the marketplace today in looking at more social

and more interactive types of gaming entertainment. Last year it was estimated

that $1.3 billion was spent on on-line poker rooms worldwide. That estimate is

now - they are saying in two years that will be $5.9 billion. Today our children

can participate twenty-four hours a day. Anybody can play on-line poker in an

unregulated environment.

The point of all of that is to say that the traditional market that we know,

the lotteries, the fun-for-a buck that we have seen over the last thirty years,

has matured and flattened. Well, we have seen things like VLT revenue and other

forms of gaming has grown. Again, it is because that is what the player wants

and that is what our players are interested in and, certainly, the unregulated

competition is providing that today.

So, if the regulated lottery or gaming organizations are to continue to

generate shareholder profit for good causes and protect the public, we do need

to stay relevant to our players in the marketplace today. Our rule in that is

not advocate gaming in any way, shape or form, but rather to provide options to

our shareholders and opportunities to sustain, albeit, a moderate growth from

gaming revenue in a very sociably responsible way in this regulated environment.

The four keys changes that are happening in the marketplace today that, I

guess, create opportunities and challenges for us - one is the changing

demographics and player behaviour that I spoke to. Those folks in their twenties

and thirties, and even forties, no longer want to just play impassively, they

want to look for convenience and they also want interactivity.

The consolidation at retail is also providing a challenge for us. As we all

witnessed, what has been happening across Canada, and inland Canada, is where

the Ma and Pa stores, the independent variety stores, that used to be our bread

and butter and mainstay are disappearing and being swallowed up either through

key accounts and chains who are buying them out or big-box stores coming in and

putting them out of business. The way we deliver our product and distribute our

product is also a challenge for us. Technology has certainly opened up a number

of options worldwide. Beyond the Internet, mobility today, cell phones, playing

games on cell phone, particularly in Asia and Korea, is estimated today to be $3

billion and growing dramatically. Interactive television is also in Europe where

you can play games in the home. The competition, of course, much of it illegal

and unregulated, is where the money is leaving the Province, and our players are

not protected. Again, there is no social responsibility or codes of conduct

being applied to these organizations. Those are sort of the dynamics in the

marketplace today.

With all that growth that I have talked about, the industry has also seen a

growing controversy about gaming and, on a number or fronts, particularly about

the social impacts of gaming. I think it is important at this point if I could

briefly just talk about, why regulated gaming. It wasn't that one day in the

1970s government woke up and said: Gee, I think we should go into the gaming and

entertainment business. That was not the case at all. That gaming and

entertainment business already existed. Government became involved in it for

very specific reasons. One was that prohibition had proven itself already with

alcohol, that it is not effective in terms of protecting the public, and that

gaming will exist whether it is regulated or not. I think I have clearly

demonstrated that with the numbers I have given you about the Internet and

mobility.

When government looked at this they said: This activity needs to be regulated

to protect the players, to make sure there is integrity in the games, for one,

and secondly, to ensure those folks who have problems or who are at risk -

albeit a small percentage but there are folks who do have problems and are at

risk - were able to get the treatment they needed, and that the games could be

designed in order to be harm reduction and responsible socially. In the grey

market and unregulated market it was very uncomfortable for those with problems

to be able to speak openly about them or even seek treatment. If you look back

twenty or thirty years there probably wasn't even a lot of effort or

investment around gaming as an addiction.

Those are the three reasons the government got into the business to begin

with. The Corporation, while we are always looking for opportunities to generate

sustainable, albeit moderate, growth, we are always mindful of the balance

between protecting the player and the public, and the revenue opportunities.

While gaming is an innocent indulgence for most, it is a problem for a few.

Prevalence around the globe is between 1 per cent and 5 per cent. Just recently,

as you know, the Government of Newfoundland and Labrador conducted a prevalent

study and the numbers for Newfoundland and Labrador were right within those

global numbers. While those numbers seem small, we acknowledge that the impact

is still very significant. So, integrity and responsibility are the core values

of the organization and of our employees. Making money is not our key objective.

It is how we make it that is our most critical objective, and to have the

ability to continue to be successful.

Responsibility runs through every aspect of our business, whether it is

developing products, our marketing messages, or where our product is sold. There

are many stakeholders, however, involved in this issue of responsible gaming and

problem gaming, and the Corporation certainly is an important one but we are not

the only one.

The Atlantic Lottery Corporation is considered a world leader in the field of

responsible gaming by our industry and by well-respected researchers in this

field. Our approach is prevention-based, focusing on education, on awareness,

and on informed choice and harm reduction. Our resource commitment, like the

government's over the last couple of years, has increased. It has increased

quite significantly. Responsible gaming is part of our culture. We strongly

believe in the principles of informed player choice and community partnerships.

A recent example is, we participated in the community prevention and awareness

project in Central Newfoundland and Labrador.

ALC is a founding member of the Canadian Partnership for Responsible

Gambling. I am the founding Chair of the World Lottery Association Responsible

Gambling Committee that has advanced a worldwide commitment to principles, best

practices and standards in the area of responsible gaming and corporate social

responsibility. ALC supports academic research. We provide equipment and

technical assistance to gambling laboratories at universities in Atlantic

Canada. We consult regularly with addiction experts such as Mr. Ladouceur out of

Laval, Mr. Shaffer from Harvard University, and a number of others in Australia

and the United States. We provide training for all our site holders and our

retailers.

We also have a responsible gambling specialist who resides in Newfoundland

and Labrador and has worked very closely in the communities and met with

addiction services around the Province, as well as with problem gamblers, to go

beyond this sort of academic research and better understand the realities of the

issues within the community as they relate to gaming.

We have also provided our health regions with copies of interactive CD-ROMs

that promote youth awareness and prevention. Next month, we have a play that was

created for high school students called, Caught in the Game. That will be

introduced in Atlantic Canada in six, I think, cities and around Newfoundland

and Labrador to really educate, inform and create awareness for our youth, and

that is a preventive measure. We are currently in discussion with the Operation

ID folks, who have a very successful program here around tobacco at retail, and

incorporating our products into compliance at retail for minors.

In addition, we are currently testing player card research around video

lotteries in the province, in another province, to determine whether or not it

will have an impact on the players that we would like to have an impact on. So,

as we evolve the gaming model, the Corporation is working very closely with the

Newfoundland and Labrador Government to examine the options that best reflect

the values of this Province.

Recently, as you are aware, the government did make an announcement around

the reduction of VLTs, 15 per cent over the next five years. We conducted a

prevalence study for the first time and also, as the minister announced, there

was $3.4 million committed to addiction services which certainly included and

made gambling more a part of that than it has been in the past.

In closing, the Atlantic Lottery Corporation team is a dedicated team that

has core values of integrity and responsibility. We are very proud of the

success that we had over the last thirty years, and we are very proud to be

contributing on an ongoing basis to the economic success in Newfoundland and

Labrador as well as in Atlantic Canada.

Thank you.

CHAIR: Thank you very much.

I just want to recognize Shawn Skinner. Shawn is the Member for St. John's

Centre. Shawn, I just want to recognize that you are here at the hearings also.

Thank you very much, Ms Carinci.

I will start off, and we will just go around the table as each one finishes.

You mentioned the Atlantic Lotto Corporation. How much money does the

Corporation itself spend on the addiction counselling part?

MS CARINCI: We have increased our budget significantly over the last

couple of years, and I believe it is about $700,000 that we have committed into

our budget this year which will go into programs such as I talked about, with

youth awareness and education. It goes into training for our retailers and site

holders, into resources, and a number of other programs that were developed.

CHAIR: Is that for the four Atlantic provinces, $700,000?

MS CARINCI: Yes.

CHAIR: You mentioned the prevalence study that was done in Newfoundland

and Labrador. I don't know if you had time to go through it or not.

MS CARINCI: Well, Cynthia I know has gone through it page by page. I read

the executive

summary.

CHAIR: I will just read a part of it here and have a few questions.

Of problem gamblers, 64 per cent have experienced income loss and debt, 47

per cent experienced relationship problems, and 33 per cent experienced mental

health problems. Evelyn Tilley, Director of Additions Services for Health and

Community Services Eastern, has said that gambling has replaced cannabis and

prescription medication as the number two addiction in the Province after

alcohol. She estimates that 95 per cent of those addicted are through VLTs.

Is this disproportional in Newfoundland as compared to other provinces that

have the VLTs?

MS GOODWIN: I am sorry, you question is with respect to whether the

numbers are comparable to those across the country in other jurisdictions?

CHAIR: Yes, 95 per cent of the people who Ms Tilley has mentioned are

addicted to the VLTs. Is this disproportionate, because in Newfoundland and

Labrador VLTs is a social problem that is getting a lot of media attention. A

lot of us around the table know of personal experiences. Is this

disproportionate from her statement that 95 per cent of the people she sees are

addicted to VLTs?

MS GOODWIN: I will answer the question in two parts, the first part being

that prevalence rates again are comparable across gaming jurisdictions.

Newfoundland's prevalence rates are right on par with prevalence rates across

the country. In terms of this prevalence study - and again I don't have the

stats right in front of me - but it is my understanding that of those who play

video lottery in Newfoundland and Labrador, according to this study, 18 per cent

of those people have problems with their play, be it from a problem gambling

perspective or from a moderate risk perspective, because the numbers are

combined.

CHAIR: From this prevalence study that was done it is obvious that the

VLTs is a major problem, more so than most other gambling in Newfoundland and

Labrador.

Is there any concentrated effort from Atlantic Lottery Corporation to

concentrate on the VLTs more so than bingo or whatever other games are around,

because for VLTs - and most of the people, even in the study, say that VLTs is

their major problem and it is the greatest loss of revenues. Is the Atlantic

Lotto Corporation doing anything to concentrate on the VLTs in the Province?

MS CARINCI: Certainly. Most of the $700,000, for instance, that I talked

about earlier is concentrating in that area. That is not to say that there aren't

other areas of gaming that have problems, but you are right, the more

significant numbers do reside with the VLTs. So, we have started out, several

years ago, with putting training in our site holders to actually understand and

coach them on how they might, not intervene, but help folks and educate folks

and create awareness around the dangers, at times, of gambling.

We have also invested in collateral. We buy into the principle that the

researchers around the world have now touted, which is informed choice; that the

gambler themselves also plays a role in this. It isn't just all the other

stakeholders, education awareness can definitely have an impact. Some of the

features that we put on the VLTs, the clocks and the amount of spend over the

last several years have helped some.

We have invested, as I said earlier, in a pilot now to look at whether player

card research - and what I mean by that is, that the player themselves would

have to register and get a playing card, in fact, in order to engage in that

gaming activity. Then they would be able to set limits over a given period of

time that would come into play and also be able to see what the transactions and

the amount of the gaming that they have spent. That test so far, while it is

very early, we have had some feedback that, for those with problems, it is

helping them from an information basis.

The youth awareness programs that I have just referenced - and we have become

very involved. Scott Costen, who is our resident here in Newfoundland and

Labrador, is working closely with health and education because this isn't a

simple question and it is not a simple answer. It is a very complex issue for

us. It is difficult for us, for instance, to research the socio-impact because

addictions, generally speaking, is estimated in about 60 per cent of the cases.

There are cross addictions. So, it isn't just solely a gambling addiction.

Those who have a gambling addiction, in 60 per cent of the cases, also have some

sort of other addiction. So it is difficult just to single out gambling from

that perspective.

The other thing that we are doing is working closely with the Newfoundland

and Labrador shareholder and government on looking at what the gambling model

should be. You have seem some of the steps already that were announced in the

last budget, which is the reduction of 15 per cent over the next five years, as

well as the prevalence study to better understand and get a baseline of what the

issues really are, so that we can direct our efforts in a way that could have an

impact. Prior to this we were sort of working in the dark.

There are a number - I know it is a long-winded question but it is a complex

one - there are a number of things we are doing and learning, as well as

consulting on an ongoing basis with researchers. Next May we will be hosting the

World Lottery Association responsible gambling conference in Atlantic Canada and

bringing in experts from around the globe as well as industry CEOs and corporate

social responsibility VPs to have a better discussion about what standards and

principles we need to apply with more rigor throughout our jurisdictions.

CHAIR: Newfoundland and Labrador - and of course this is in the study and

I will just read it - has 2,369 VLTs or one for every 155 adults, the highest

ratio in Canada and almost double the national average of one for every 293

adults.

Is that proportionately out of whack? That is in the prevalence study itself.

MS CARINCI: One of the things I could speak to while we are looking for

those statistics is that there are two different gaming models across Canada.

The gaming model that we see here in Newfoundland and Labrador, in Atlantic

Canada, which is what we call sort of a wide area model where you find gaming

devices such as VLTs in bars and adult social setting, that is largely a result

of the fact that there was a grey market already here in Atlantic Canada and, as

I spoke to earlier, the government chose to regulate it to protect the players

and to also benefit from the revenue that would also help addictions in the

Province.

In the Province of Ontario and in the Province of British Columbia, where I

worked for nineteen years, there is a different model, and we call it

destination gaming model. What that means is that you still have electronic

gaming devices but they are in destinations such as tracks, community gaming

centres and casinos. When we look at the prevalence across Canada, the

prevalence is no different regardless of which model you have. In other words,

the prevalence in Ontario and British Columbia is basically in along the same

realm as it is in the rest of Canada where you see a wide area model. What is

different, though, is public sentiment towards gaming, significantly different.

Do I have the answer to this question?

MS GOODWIN: I have it with respect to electronic gaming devices.

MS CARINCI: Okay. I would be happy to share this with the committee. When

we look at electronic gaming devices, Newfoundland and Labrador is not out of

whack, nor is it the highest when you look at total devices.

CHAIR: In the prevalence study, the number of VLTs is extremely higher. I

am just concentrating on VLTs. In the study it says there are 2,369 in the

Province, one for every 155 adults, the highest ratio in Canada. The national

average is one for every 293 adults.

MS CARINCI: I would have to examine exactly what they are looking at, but

our numbers when I look at the provinces, for instance Saskatchewan and

Manitoba, which is VLTs, their numbers are significantly higher actually. It

depends on what numbers they are looking at. There are a number of ways to look

at this. I would be happy to come back to the committee, through the Chair, and

provide those comparisons.

CHAIR: It seems it is very disproportionate in Newfoundland and Labrador.

With the number of machines and the availability, it would cause a problem. That

is one statistic that, when I read the report, is very noticeable - saying: Geez,

we have so many. How come? Why do we have so many in Newfoundland and Labrador?

If you look at the age - and you answered part of the question in your

opening statement - over 67 per cent of the people who gamble now, who are

identified, are age twenty-five to thirty-four, and the age is getting lower.

What steps is the Atlantic Lotto Corporation taking in targeting the youth

about education with regard to the problems in gambling and VLTs and other

things?

MS CARINCI: There are a number of things we are doing. First of all, in

the discussions we have had with folks in Newfoundland and Labrador who are in

Additions Services, in health and in education, it is my understanding is that

we are looking at this with a more holistic approach to addictions, and tying

those things together from an education perspective. So, it would include

gambling, it could include tobacco, it could include drugs and other issues

where we need to be educating our youth; so, on that front, we are participating

in developing a more robust program in the education system.

What we are doing in the short term, I mentioned the operation idea at retail

in terms of intervention, and the compliance around the sale of our products to

minors. We do have a policy, by the way, that prohibits the sale to minors, and

we exercise our right to withdraw our licence to operate gaming should a

retailer not comply with that.

I mentioned the Caught in the Game drama, a play that will be

introduced in communities this year by the Canadian Council for Responsible

Gaming, and what they have discovered - I think it is hundreds of schools that

they have put that program in, in high schools in Ontario - is that it does

resonate. Eighty per cent of those students who have seen the play found it

believable, educational, and it gave them a lot of information that they needed

to dispel some of the myths that caused some of the issues, such as: people

believe there are lucky machines, or if you play long enough you will get paid

back, et cetera, so it helps to dispel a lot of those myths around gaming, and

talk about the issues of gaming.

Is there anything else you would like to add on that, Cynthia? Go ahead.

MS GOODWIN: I would add that, currently in all of Atlantic Canada, the

prohibition of lottery play amongst minors is not legislated, so perhaps there

is an opportunity for us to work with governments to see what the possibilities

might be around legislating age of majority play around lottery tickets.

CHAIR: In the study, it says problem gambling is - it describes it as

gambling behaviour that creates negative consequences for the gambler. Does the

Atlantic Lotto Corporation have the same criteria and definition in the same

realm as the problem gambler in all provinces? For example, in this study it

says problem gambler has negative consequences for the gambler, others in his or

her social network, or for the community.

MS CARINCI: The methodology that was used in the prevalence study in

Newfoundland and Labrador is the same methodology that not only is used in the

rest of Atlantic Canada but in all of Canada. In that way we are able to have

reliable and relevant comparisons across the nation. By the way, that also

extends to other continents. We are using the same methodology so that it is

comparable. Several years ago that was not the case, so it was difficult to

determine.

CHAIR: You mentioned also, and it is common knowledge here in the

Province, that the Province announced that there is going to be a 15 per cent

reduction in the VLTs. We had a few of the board members in earlier, in our

closed session with the Public Accounts, and we asked how this was going to be

done. They said it was up to the Atlantic Lotto Corporation on how this

reduction was going to take place over the fifteen years.

Can you explain to us how this reduction is going to take place, the criteria

for it?

MS CARINCI: I do not have the details on the strategy of how that will be

looked at, but we will look at it across the entire Province. There already is a

regulation in place that limits the number of VLTs per location to five. We may

look at it from - there are sites that have multiple licences, and that

certainly will be addressed so that if there is, for instance, one location that

has several different licences, that will probably be one of the first areas

that we will look at, reducing it to one licence per owner. I do not know if you

are familiar with what I mean by that.

CHAIR: I do, yes.

MS CARINCI : Okay, good.

That would probably be the first step. Then, the second step, to be fair, we

would probably look at applying some sort of percentage across the Province so

that we are treating each site holder in a fair way.

CHAIR: With this 15 per cent, because the way we were informed and, of

course, this is a great way to get it straightened out, is that if an

establishment closes down and they have ten machines, those ten machines will be

included into the 15 per cent reduction over the five year period. Is that

correct?

MS CARINCI : That is possible. I do not think there is certainly a policy

or instruction within the strategy that says that would not be the case, so that

could be an option that we would exercise, or maybe not.

CHAIR: Because the people who are involved with addictions would say that

if you are going to cut the machines by 15 per cent, and if you, for example,

have 100 machines running at 70 per cent, if you put eighty machines in, they

are only going to go at 90 per cent. The usage will not go down. The machines

may, but the usage may not.

Is there anything done on if the usage will go down if it is cut by 15 per

cent? Was there anything done by Atlantic Lotto Corporation?

MS CARINCI: Yes, we have examined other jurisdictions where there has

been a reduction. Certainly there is some merit in what you have suggested, that

the other terminals may get more play, but what we have seen is that there has

definitely been a reduction in VL play when we have reduced the access to them.

CHAIR: Since the VLTs came into Newfoundland and Labrador back in 1990, I

think it was, have you, the Atlantic Lotto Corporation, gotten any report on the

number of addictions from VLTs? Has it steadily increased since 1990, or is it

just now that it is hitting a peak?

MS CARINCI: That is a very interesting question, and we have looked at

that. The fact is, this is the first prevalence study that has ever been done in

Newfoundland and Labrador, so it is the first time we now have data to look at

that is relevant for us. I would be speculating at best to say what addictions

or what prevalence was back in 1990. One thing, though, that I will add is that

the prevalence in Newfoundland and Labrador, as Cynthia stated earlier, is

within the norms in Canada and worldwide, which in interesting.

I think, to come back to the regulated piece, when VLTs were in what we refer

to as the grey market, it wasn't a socially accepted activity, and therefore

those who had problems would not necessarily come out of hiding, if I could use

that term. What the lottery and regulated gaming did is to legitimize the

activity and create an environment that those folks who may have had problems or

people who knew they had problems or were at risk could seek out treatments, and

it was okay to do so. It also provided the government and the shareholder with

the information they needed to be able to develop addiction services and

programs within the Province. I think if we look back twenty years, there

probably was not a recognition of the issue and therefore there wasn't

funding. Once again, the regulated environment has allowed for that.

I cannot answer your question with a yes or a no, but I can say that the

numbers in this Province today are within the norms of the other provinces.

CHAIR: Is that based on the prevalence study that was just completed?

MS CARINCI: Yes.

CHAIR: Okay.

MS CARINCI: That is the only real data that we have, everything else

would be anecdotal, from communities, etc.

CHAIR: You mentioned, and I mentioned, the 15 per cent reduction, and you

mentioned that, yes, there should be a decrease in the usage.

MS CARINCI: Yes.

CHAIR: Was there any analysis done on the decrease and lose of revenue to

the Province with a 15 per cent reduction in VLTs?

MS CARINCI: We put that into our existing budget. Certainly, I should add

that the smoking ban, by the way, has had a very big impact on VLT revenue; to

the tune of close to 20 per cent the moment it was implemented. So, you will see

in the year that we are in, once it is completed you will see a reduction in

revenue from VL to the shareholder of somewhere between 18 per cent and 20 per

cent.

I will let Patrick address the projections on the 15 per cent.

MR. DAIGLE: In terms of the reduction in terminals, we prepare five-year

forecasts and we prepare them with the information that we have at the time. So,

we will take the number of terminals, we will take any environmental changes

that we know of, such as anti-smoking legislation or anything else that will be

introduced into the environment that could have an impact either way on

revenues. So, we have accounted for that.

CHAIR: Have you calculated the loss of revenue over the five years with

the 15 per cent?

MR. DAIGLE: We have. I do not have the number with me right now in terms

of the impact over five years. The number would be based on an assumed migration

rate, and that is what you were talking to before. You were talking about a

reduction of terminals. It is not straight math, unfortunately, because there is

still a distributed market of terminals out there that players will migrate to.

So, the forecast is based on assumption.

CHAIR: Okay.

Ms Carinci, you mentioned the youth. Of course, in the Province here we

target the youth for smoking - anti-smoking. Are there any such programs

specifically just for youth problem gamblers? Did you do any study to identify

potential youth gamblers that you are targeting for an education program?

MS CARINCI: First of all, the data that we have around youth and ages

within the prevalent study - the programs that I spoke to earlier around

awareness, education, prevention and harm reduction in the high schools, which

may also flow into middle school at some point - and we are working closely

again, as I said, with the Ministry of Education and Health in developing those

programs. The Operation ID is another example also.

While we have not formally discussed it, one of the options that we will be

presenting to the shareholders - as Cynthia mentioned - is legislation. We have

a policy in place, but it would give it more teeth if there was legislation with

regard to minors participating in gaming activities.

Is there anything you want to add?

MS GOODWIN: Yes, I could just add to that, that not only will youth be an

important target audience, if you will, for any kind of programs around

awareness and prevention, and retailers as Michelle has stated, but I think it

is also important that the broader community, parents for example, receive these

messages about the inappropriateness of minors gambling.

Just in speaking with some experts as McGill University, they say that not

only, in some cases, are youth and other jurisdictions receiving products from

clerks, they are receiving them from their parents and from their grandparents

who unwittingly would give a minor, say, a scratch ticket or a lottery ticket in

their stocking at Christmas, for example. That will be an important target

audience. As a matter of fact, before Christmas last year we issued a letter to

editors throughout Atlantic Canada making that very point, reminding parents and

others to not give minors lottery products as Christmas gifts.

CHAIR: You mentioned KENO. Is Newfoundland and Labrador the only place

that will introduce KENO in Atlantic Canada?

MS CARINCI: At this point in time, this is the Province that has approved

introducing KENO. That actually leads to another point, that while we have

Atlantic cooperation on many games where we need critical mass, the corporation

also, the way it is governed, allows for flexibility and diversity within

Atlantic Canada, so the gaming strategies may vary.

For instance, the focus in Prince Edward Island over the last year was to

revive the harness racing industry through gaming revenue, and we built a gaming

facility as well as a new racetrack in order to revive a very important economic

piece within Prince Edward Island. That has been their focus for the last year.

In Nova Scotia they just recently introduced a gaming strategy, last fall,

around video lotteries, but they are also looking at an initiative with regard

to bingo. It is a pilot that will be introduced, and that is really to revive

and look at how we can revive the revenue for good causes of the charities,

because bingo has been on a decline for many, many years. That has been almost

the sole source of revenue for community groups and non-profit organizations

within the province, not just in Nova Scotia but elsewhere. They have focused

their strategy on that.

The provinces haven't said they will not introduce KENO, what they have

looked at is what their priorities are within their strategy. As I say, the

corporation has that flexibility that is not necessarily a homogenous approach

in all provinces.

CHAIR: You mentioned the Province approved KENO. Is it up and running in

the Province right now, all throughout the Province of Newfoundland and

Labrador?

MS CARINCI: The KENO game that I believe you are referring to, which is

the multi-draw KENO, is not, but since back in 1990 when VLTs were regulated,

there has been a KENO game on the video lottery terminal since 1990 and it still

exists today.

We introduced KENO in the Province, actually in Atlantic Canada, back in 1989

and it is a daily game today that you see in all four provinces. The game that I

believe you are referring to is the game where there would be a multi draw. So,

the difference is, it has just evolved to, you know, from a weekly, to a

three-day, to a daily, to a game that is every five minutes within social

settings. That is part of a strategy that we have looked at, of giving players

an alternative form of gaming in social settings beyond the video lottery.

As I stated earlier, it is not our intention to go deeper into the same

pockets but to provide a variety of different types of games that are sociably

responsible within the social settings because we know that is where folks want

to play. I give you poker as an example. So, that game has not been introduced

yet but what has been introduced, as part of the long-term strategy in social

settings, is we have put our sports games in those locations and the intention

would be, at some point in time, to introduce KENO and any other types of

socially acceptable, interactive types of games.

If I could make a point, Mr. Chair, on that.

CHAIR: Sure.

MS CARINCI: Because of the different types of KENO games that already

exist in the market, it is natural that there is some confusion around what it

really is. KENO is a very passive draw. It is like Bingo or Lotto. You buy a

ticket. You pick your favorite numbers from one to ten and then you wait for

five minutes, and then the numbers come up like they would for a Lotto 649 game

and you match your numbers and away you go. That game exists in British

Columbia, Saskatchewan, Manitoba and Alberta today, and in many jurisdictions in

the United States and Europe, and, actually, its recent origins are Australia.

But, as I mentioned earlier, it started in China with the dynasties 100 BC.

So, the game that we talking about is - actually, I will pass this out later.

It is just like if you play 649, you pick your favourite numbers and you wait

for a draw. What happens, in the research that we looked at around this game, is

that it is too passive for some players, especially those who fall into more of

that at risk or problem arena. It is not fast enough, it is not interactive

enough. It is a lotto game with a more frequent draw, basically.

CHAIR: With the KENO, as you mentioned, it has been around. Have you seen

any studies where people become addicted more to KENO than any other game?

MS CARINCI: What I can say to that, is that in the jurisdictions - I

introduced it when I was the vice-president of marketing in British Columbia,

and when you look back to 1996 - so it has been there for ten years.

So, the first piece to that question is that some of our research is based on

experience in other jurisdictions, and as I have said earlier, in those

jurisdictions throughout the world that have introduced KENO, particularly those

in Canada, the prevalence rates have not gone up. We did a prevalence study in

1993, before any introduction of what I will call more interactive or fast-paced

games, in British Columba. KENO was introduced in 1996. We did subsequent

prevalence studies after that. There was no change in those prevalence studies

to speak of and no indication that this game was a socially irresponsible game,

if you will. So, that is the first thing we have done in terms of usage.

The second thing we have done is to consult with some of the experts that I

referred to, such as Ladouceur from the University of Laval, to talk about the

inherent qualities of that game and how we could ensure that we have applied the

most responsible qualities to that game, in other words, preventative and harm

reduction. The game that will be introduced is considered to be, by those

experts, as the most progressive of all the KENO games. We have altered some of

the maximum pay and play, et cetera, just to make sure that it is even more

progressive than the other games.

The other thing that we will be doing is conducting long-term research. So,

the moment the game is introduced we will conducting research so that over time

we can judge - and I will be able to answer your question much better - and

determine whether or not there has been any negative, social impact and then we

will be able to address that over the long term.

I hope that answers your question.

CHAIR: It is a difficult question to answer -

MS CARINCI: It is.

CHAIR: - because if the studies are not there, the information and the

data, it is a difficult question.

In the KENO being introduced in the Province, has there been a cost analysis

of the income that it will create for the Province of Newfoundland and Labrador?

MS CARINCI: Yes, the projected revenue - and that will sort of put it in

perspective too. When we looked at other jurisdictions, which is what we based

our revenue on and also the marketplace in Newfoundland and Labrador today, in

the first year we would look at about $1 million in profit. So it would be about

- about $6 million or $7 million in sales are projected and the profit would be

$1 million year over year.

CHAIR: Okay. In the prevalent study that you just mentioned, that was the

first one done for this Province, I take it?

MS CARINCI: Yes.

CHAIR: Will there be any criteria or can the Atlantic Lotto Corporation

ensure that there is one done every two or three years, or is that a provincial

jurisdiction to ensure that it is going to be done?

MS CARINCI: That would be determined by the shareholder. Certainly, I am

sure there will be consideration given. You would not do it year over year

because you probably would not see any statistical - it was probably too soon,

but every couple of years would be something I am sure the Province will

consider doing now that we have a base.

CHAIR: But, is it the responsibility of the Province?

MS CARINCI: Yes, the Province.

CHAIR: The Province, okay.

MS CARINCI: To give it the credibility, it is not that the corporation

could not do it. It is just from a perception perspective, if we did it we would

have a credibility perception issue.

CHAIR: Okay.

Back on the VLTs, I have two more questions. Is there any - and of course the

VLT, because of the social programs. Is there any work done on why people become

more addicted to VLTs than most other gaming, in your experience or the

corporations experience? Because VLTs seem to have more - people could spent

more in a quicker period of time and the devastation of it. Is there any reason

for that or is it just the ability to be able to spend quicker?

MS GOODWIN: There has actually been quite a bit of work and research and

debate and discussion done on this subject amongst problem gambling and

responsible gambling experts around the world, and policymakers, and it is a

very difficult question. Experts like Dr. Howard Shaffer - Michelle has

mentioned his name of Harvard Medical School - would say that: No gambling

product in and of itself causes addiction, that a number of things contribute to

addiction, and it gives a fairly clinical explanation as to why that is.

Prevalence studies do tell us that problem gambling seems to manifest more often

with video lottery terminals. There is discussion as well, and some who would

say that it is perhaps because of the continuous nature of the play that video

lottery becomes an effective method for those who may be experiencing other

problems to self-medicate if you will. Again, due to the continuous nature of

the game people are spending a lot of money and that becomes a problem, in some

cases more of a problem than they originated with. So, it is very complex.

As I said, there is a lot of discussion and debate around that, and also as

to what the possible solutions might be. Michelle references card-based

technology that is being researched in Nova Scotia. That research is not only

important to the Nova Scotia Gaming Corporation, to ALC and to the other

provinces in Atlantic Canada, that research is actually being watched worldwide,

because it could produce some very telling results as to what could actually

effectively help prevent problem gambling vis- B -vis

video lottery play.

MR. JOYCE: For some reason, and it may be the amount of money, that is

one of the concerns of the Keno, that people can spend a lot of money, every ten

minutes I think it is or every five minutes.

WITNESS: Five.

MR. JOYCE: Every five minutes you can spend a fair amount of money.

MS CARINCI: If you look at, though, the projections, and those

projections are based on experience in other jurisdictions, we are talking about

$7 million in terms of actual sales. You compare that to our traditional

products, because it is what I call a lotto product, where we are doing - how

much in traditional today in Newfoundland and Labrador?

MR. DAIGLE: One hundred and eighty million.

MS CARINCI: One hundred and eighty million in other lotto and passive

games, like the instant game, for instance, which you can play much faster than

you can play Keno. Keno is, you know, you play, you wait for a draw, which is

very different from the instant game or the break-open. It is a passive game. I

think the fact that our projections of $1 million in profit versus what you look

at overall from our other games, including 649 which is significantly higher

than that, would indicate, in itself, that is not an issue.

MR. JOYCE: Okay.

MS GOODWIN: Could I -

MR. JOYCE: Sure, go ahead.

MS GOODWIN: I would like to just add a final point on that. Again, going

back to Michelle's earlier statements about the nature of the marketplace.

Whether gaming is regulated or not, it is going to exist. If you look at the

prevalence study here in Newfoundland and Labrador - poker, for example - it is

showing, in that study and the results, 14 per cent of poker players experience

problems with their play as well. So, perhaps the challenge is striking the

right balance, acknowledging that gaming exists, that human nature is what it

is, and that people like to play games of chance, and what is the best way to

ensure that is offered fairly and with integrity, and ensuring that the harm

minimization components are added to gaming, and that is sort of the role that

we play at ALC.

MS CARINCI: If I could add to that, when we went, I will call it on-line,

in offering the convenience of being able to buy 649, Atlantic 49 and Super 7,

our passive traditional games, over the Internet, we applied a great deal of

rigor and worked with researchers and experts to ensure that all of those, as

Cynthia referred to, harm minimization and prevention, were on there. What we

are able to do on-line is create a maximum amount that you can play in any given

week. The player determines that. You can self-exclude, and we have had - not

many, but we have had - a few players who have said: I do not want to be able to

play on this, so exclude me over this period of time.

When you are in that environment, it is a lot easier to be able to apply

prevention and responsible gaming features as well for the player.

CHAIR: Does the Atlantic Lotto Corporation have any statistics on the

amount of addiction counsellors, new addiction counsellors, hired per province

pertaining to addictions to gambling?

MS CARINCI: A comparison across provincially? I don't think, off the

top of our heads. I know that in the Budget Speech the minister announced the

increase in contribution. There was also a mention in that particular release of

additional resources - I believe it was five additional resources in this

Province - that would be dedicated to gambling addictions, but I do not have the

number on a per cap. I don't even know if we could get that number easily, but

we certainly could in Atlantic Canada. I don't know if -

CHAIR: That is what I mean, just for Atlantic Canada.

MS CARINCI: Yes, we could try. We could try.

CHAIR: Okay.

Mr. Harding.

MR. HARDING: Thank you, Sir.

CHAIR: Thank you very much.

MS CARINCI: Thank you.

MR. HARDING: As Vice-Chair of the Committee, I would like to take the

opportunity as well to welcome Ms Carinci and your officials, and also the

members of the media and the general public, and the Chairman has already

pointed out my colleague, Mr. Skinner, from St. John's Centre.

Some time ago, our Committee received a request from an individual expressing

concern with respect to the level of gambling in the Province, specifically with

respect to the number of VLTs, as the Chairman has already pointed out.

Gambling, as we all know, has been with us for many, many years, and even VLTs

have been with us now for fourteen or fifteen years. My understanding is that

they were permitted in the Province by the government back in 1991, and they

have grown now to the point, as the Chairman has already pointed out as well,

whereby the number of these machines in the Province has increased to the point

where we have more per adult population than any other province in the country.

Having said that, it is something that we, as a government, have inherited now.

It is something that we are concerned about, and certainly we are taking steps

to deal with it.

With respect to questions, now, after the information that you have already

given, I don't know if the Chairman stole my questions of not, but I had

pretty well every one that he had there, I think. Anyway, you made reference to

gaming prevalence, or the gambling prevalence study. Our Province, as pointed

out, had our study done just last year and we were the last Province in Canada

to do that. Anyway, at least it gives us a base now to work from.

I am just wondering, I know you have looked at the study but I don't know

how much in detail, and I don't know if there were any things in that study

that sort of stood out, that the Corporation may incorporate into any future

gaming policies that they might -

MS CARINCI: I will let Cynthia also speak to this, but when I looked at

the study I did not see anything unusual. What I mean by that, in other studies

that I have read extensively throughout Canada as well as in the United States,

there wasn't anything that really, from my perspective, popped out that said

there was something extraordinarily different here than there is elsewhere.

Having said that, it certainly - some of the highlights you spoke to around VLTs,

and Cynthia spoke to with respect to poker - is excellent information in helping

us to evolve the strategy in our discussions with the Government of Newfoundland

and Labrador and it will certainly play a role, I believe, in the decisions that

we make going forward about the gaming model of the future, for certain.

MR HARDING: This current budget now, 2005-2006, our government allocated

$3.4 million to deal with addictions of all types in the Province. Do you have

any idea how this might compare with other smaller provinces in Canada with

respect to this problem?

MS GOODWIN: We currently do not have the numbers in terms of overall

addictions across Canada. We would typically look at just monies spent on

problem gambling treatment and prevention, and things of that nature.

I would also mention, that as a result of our participation in the Canadian

Partnership for Responsible Gambling, there is a very useful tool. It is called

the Canadian Gambling Digest. It has all of those stats across Canada;

comparative stats on all aspects of gambling and treatment within that document.

I would be happy to share with you the document and the Web address so that any

of you can reference it whenever you wish. It is a very good document.

MR. HARDING: The game of KENO, I was going to mention that as well but

you have already explained that. I am not familiar with it at all. I have heard

talk of it, but you have explained what it is and how it works. You may have

already answered this, but is there any concrete evidence at all to suggest that

game may be more harmful than any of the other types of games that are out

there?

MS CARINCI: There is concrete evidence in terms of the experience that

other jurisdictions have when we look at the revenue coming from KENO and the

prevalence in each of those jurisdictions, which is no different than the

jurisdictions that don't have it. So, we have not seen an increase in

prevalence or issues, and most of those jurisdictions have had KENO, as we are

speaking about it, for a decade or more. So it is not like it is too early to

tell. That is a pretty good experience.

Also, when we look at our revenue projections, I mean if this was to appeal

to the masses or to those who have a propensity to spend a lot of money, our

projections would not be $1 million in profits going forward. So, I think that

speaks to it.

We are confident in the exploration we have done in focus groups, in a

simulation - even with people who are at risk, the problem gamblers - that when

we put this game before them it did not have the qualities. It is too passive

often for them.

You spoke earlier in your speculation - and Cynthia talked about all the

research that is done - of what makes one game more addictive or dangerous, and

we are saying the game in itself does not. There are a number of things that

come together. Certainly KENO, when you look at its passivity versus some of the

other games we have, if we felt there were any issues with that, as an agent of

the Crown representing the shareholder, we would not be recommending, even

considering, a game to go ahead because our issue, as I said earlier, is not how

much but how. In order for gaming to sustain itself in the future, you

absolutely have to apply integrity and responsibility to that.

MR. HARDING: Just a general question: How many employees does the

corporation have? Somewhere around 500?

MS CARINCI: As we speak, about 494 employees throughout Atlantic Canada.

MR. HARDING: Okay. How many of these are in the Province of Newfoundland

and Labrador?

MS CARINCI: Newfoundland and Labrador, there are sixty-eight, with a

payroll of $3.6 million.

MR. HARDING: Okay.

Thank you.

MS GOODWIN: If I could just add to that, there are about 125 or so more

employees at the Charlottetown Driving Park Entertainment Centre, which was

opened just last August.

MS CARINCI: That is right.

MR. HARDING: Okay, thanks.

MS CARINCI: And, of course, we have our 100-plus at British Bazaar, that

is directly related to (inaudible).

MR. HARDING: Thank you.

CHAIR: Mr. Young.

MR. YOUNG: Thank you.

I suppose I just have, sort of, one question, because VLTs has been a big

concern in the Province. I guess that is what really got us here today, VLTs.

In controlling the settings of those games, can you go out there - you speak

of competition from the Internet and poker and whatever, so I am assuming

competition is a big factor in how you make the settings. You know, from the

settings for the payouts and the settings for the sounds, and things like that

to make it. Do those games have to be more to the point of maximum, or they

would be more addictive or less addictive? Is there research there that would -

are you following me?

MS CARINCI: Are you asking if we would link the payout to the actual

behaviour of a player?

MR. YOUNG: Yes, if you have a certain payout, you pay out at a certain

scale and a certain percentage. Is the science there as such, that you will have

more payouts that may appeal more to a problem gambler or less to a problem

gambler? Is the research there?

MS CARINCI: Actually, that is an interesting question, and it is also one

of the things that, when we look at options within the gaming model, we could

consider. The payouts in Atlantic Canada are pretty consistent on VLTs. They are

between 93 per cent and 95 per cent, and I believe the regulations are such that

they can't go below 80 per cent. We, in fact, have reduced the payout in some

jurisdictions and it has not impacted the play, and we have also increased it in

some games. I guess, when you look at games that are very popular versus games

that are less popular, as payout related, it is not consistent across the board.

It is usually about the experience of that particular game. Did I answer your

question?

MR. YOUNG: Sort of, because the other part of it is the sound. Those

games, at one point I think, first when they came in, owners just turned the

sound off. It became an issue, the sound came on and it came on very loud.

MS CARINCI: It is part of the experience.

MR. YOUNG: It is part of the experience. Does that make it part of the

addictive experience as well?

MS CARINCI: Again, I go back to - and I am not trying to dodge the

question, but I don't think there is a straightforward answer in all the

studies. As Cynthia referred to, the complexity around - because there are so

many things. There is the sound, there is the pay, there is the way the game

plays itself, and there is the setting that the game is in. There are a number

of different factors that come into play, that create the experience. We have

never been able, to this point, to isolate any one specific thing. Now, within

the gaming strategy in other provinces they have started to look at: Can we

alter one thing and see if it has an impact? For instance, it could be slowing

down play or it could be the hours of operation. We are starting to isolate

those things, because if you do more than one at once you can't get the

answers. It is really looking at these things independently.

When you go back to the prevalence study and the things we are doing, those

are the kinds of things that we are having discussions about, in terms of what

would have the most impact timing-wise.

MR. YOUNG: I think it is out there. If you look, or you are talking in a

community, it seems to be that the problem gambler is there. You wonder if we

are doing something to catch them, to help with becoming a problem gambler, or

are we doing something to help them not become a problem gambler, within the

machines themselves?

MS CARINCI: I think the steps that we took in Atlantic Canada led the way

on this a couple of years ago in putting the gaming features on the video

lotteries, like, for instance, the clock timing out after a certain period,

which causes the player to stop and have to reconsider if they really wanted -

because that was considered to be something important, that there was a break in

play, and showing the actual dollars that are being spent versus credit so that

it would resonate exactly what you are spending. We really led the way on that.

By the way, those features are now introduced in most jurisdictions across

Canada. Have they had an impact? Hard to say, very hard to say, but there are a

number of things that we look at doing in order to be preventative.

Do you have anything you want to add?

MS GOODWIN: I would just add again that the card-based research that we

are conducting in partnership with the Nova Scotia Gaming Corporation in

Windsor, Nova Scotia, will be very, very telling as to what could work in terms

of helping to prevent problem gambling. Through this card, for example, that is

currently being tested, everybody in the pilot community or test community needs

to have a card if they are going to play a video lottery terminal. Then they

have the option to set limits, they have the options to check into their account

to see how much they have been spending, they have the options to self-exclude,

so it gives the people the tools that they may need or that may be helpful vis- B -vis

controlling their play and preventing problem gambling.

The second point that I wanted to mention as well is with respect to working

closely with video lottery retailers. We are actually working very closely with

various representatives of video lottery retailer associations across Atlantic

Canada to see what we can be doing even more so in partnership with them to

promote awareness, education and prevention right on site. The great news is

that they approached us and they are very, very interested in making a

difference.

I would also mention that we recently appointed somebody within the company

to be a responsible gambling specialist dedicated to our social channel. Again,

social channel, by that I mean we refer to video lottery sites. That is another

example of how we are taking this very seriously to see what we can do to make a

difference.

MR. YOUNG: Today, if someone with video lottery terminals chose to not

start their games until a certain point, is it quite easy for them to do that?

Because I know at one time your games had to be on at all times because you did

your accounting at a certain time in the morning. Is that still the case? Or, if

someone decided that they were not going to open their games until 7:00 in the

evening and they were going to close them at 11:00, would that be possible?

MS CARINCI: Well, you could manually go and do it, but that wouldn't be

something - we would wonder what you were doing.

MR. YOUNG: What you were up to.

MS CARINCI: What you were up to, if you did that.

We can do that. From a system's standpoint - I don't think I have had

this request, actually - for instance, if you wanted to change your hours, et

cetera, we could likely do that through our new central system that we are

introducing. With the existing system I don't believe we could do that today,

but we will be able to over the next several weeks. Hours of operation is

certainly one of the things to consider.

MR. YOUNG: I know that in the past, first when they got on the market,

when they came out there, lounge owners were trying to manage them and we had to

fit - they didn't fit us; we had to fit the games kind of thing (inaudible).

MS CARINCI: Absolutely. It was an older and more archaic legacy system

that we had in place.

We are in the throes right now of introducing a system that will be much more

flexible in terms of what we can do, and also better for our site holders in

terms of being able to validate winning tickets and those types of things, so

there will be some advantages for us with the new system.

MR. YOUNG: In the project that you are doing now in tracking, will you be

compiling the information so that you will be able to say that, of the

percentage of people who fall into the gambling problem, this is the amount of

revenue that comes from this particular group versus the occasional person who

passes by? Would you have that information (inaudible)?

MS CARINCI: The new system will allow us to track, but, of course, there

are privacy laws and things that come into play as well. Even in the pilot that

Cynthia spoke to, we do not know who you are once you are put in the system, but

we would know your play. Because you are spending a lot of money does not

necessarily mean you have a problem. Even just looking at the revenue, or the

spend, is more difficult.

What you can do, as an individual, if you want to control that spending,

through that technology, is set maximums on a weekly, monthly, daily basis so

that - and, once you are done, you are done, if all players had to play with the

card. You have the ability to do that, as well as the ability to see the record

of what you have actually spent. We know that has some impact for folks, when

the reality sets in of what you are actually doing.

MR. YOUNG: At the end of this study you will know how many people set

maximums for themselves, which will be an indication -

MS CARINCI: Yes, we will know that.

MR. YOUNG: - and you will know -

MS CARINCI: How many self-exclude? Yes.

MR. YOUNG: You know, if the top 5 per cent are putting 50 per cent of the

revenue going through, you will know that as well so that (inaudible).

MS CARINCI: That is the challenge in the wide area network, albeit the

prevalences are different regardless of the model, but if you are just dealing

with destination it is a lot easier to self-exclude and do those kinds of things

than when you have 500 sites to deal with, and then whose responsibility is it?

That is why the player card technology is actually interesting for us because it

takes the intervention issue away from the site holder. Really, it is not their

responsibility. It is their responsibility to be aware and educated, but to

intervene is difficult, so the card allows for the player to do that themselves.

MR. YOUNG: I just look at it as being important that we find a way of

dealing with gambling problems and VLTs as such, because in Newfoundland and

Labrador they are all throughout the Province. They are creating employment all

throughout the Province, versus having a casino in St. John's or whatever the

employment is here once again versus all throughout the Province. By finding

that solution, we do not lose it to a casino or we do not lose it to the

Internet so the dollars are going elsewhere, that it is helping to bring

stability, like the lounge industry with the non-smoking, I suppose, the factor

you mentioned, but even the drinking and driving laws over the past number of

years, those operations have become very dependent on the video lottery to be

able to make ends meet. So, if we shut those down, we are having a massive

impact on the rural places once again, and our society is moving to be more

urban. Only the opportunities are in the urban setting, and that is unfortunate.

MS CARINCI: We couldn't agree more. When we look at the gaming model we

have today, and we look at the concerns, we know we need more knowledge about

impacts, and it goes back to finding that balance, as you say, between - you

know, the reality is, there will be gaming. The reality also is that if you do

not regulate it then you will not even have these discussions around protecting

the player, and you certainly will not have the benefit of the revenue for good

causes, and you will not have the ability to be able to identify those with

problems and be able to treat them. So it is critical for us, on a go-forward

basis, to not only address the issue around video lottery but also, as I said

earlier, to look at alternative forms of gaming from an entertainment

perspective that will appeal to the groups coming up, in their twenties and

their thirties and their forties, so that we can sustain the revenue.

That isn't necessarily going to be an appeal through video lottery. We

suspect that video lottery definitely will go down. What do we have to replace

that, that is entertaining but is also socially responsible? That is why we

started to look at things like KENO in a social setting, and a number of other

aspects that we are always testing, to say: Is poker an opportunity or does it

have the inherent qualities that could create issues that will abandon that?

Having said that, we know it is not going to be abandoned by the players.

We have that issue right now in bricks and mortar, and within our bars and

within our community poker is being played. It is unregulated and it is a game,

by the way, where it is not difficult to cheat, so it requires surveillance and

all kinds of things to ensure that the player is protected, and that is not

happened today. Those are the issues that I think all shareholders are sort of

debating and struggling with to come up with what is the best model, because it

is an activity that is going to happen anyway.

MR. YOUNG: I would think so, when we see the age groups that are at the

video terminals. I have to assume that the kids who were playing their games

when they were five or six are not still playing those games, they have gone on

to other things, and on the Internet they are finding ways to gamble. So it is

not really appealing to the younger set.

MS CARINCI: The other thing we look at is, are there games on the video

lottery that have more appeal to those who are at risk or have a problem,

because there are a number of different games to play. They have everything from

the Little Green Men to Texas Tea to your basic real games. We are taking a hard

look at that too, because we do have different types of players. We have casual

recreational players who will go and have x amount to spend, and that is their

form of entertainment and they go home. Then, of course, we have those who may

be more at risk and then we have a problem. What we are trying to determine is,

can some of those games be altered to make them less of an escape, as - what did

you call it?

MS GOODWIN: Escape is good.

MS CARINCI: You called it medicated something, I am not sure everybody

got that - a.k.a escape, right?

MS GOODWIN: Yes.

MR. YOUNG: Very good. Thanks.

CHAIR: Ms Goudie.

MS GOUDIE: Thank you.

I think we are starting to run out of questions here actually. First, I would

like to thank you, as a member of the Public Accounts Committee, for coming

here.

Wally alluded to, just then, the benefits to local businesses. You talked

about the benefit to the shareholder and how much revenue was received by the

shareholder in the past year, and you talked about the benefits to the employees

that you have here, the contribution of $3.6 million. What other benefits -

like, we don't necessarily see it in the community - do the Atlantic Lottery

Corporation provide to our Province?

MS CARINCI: Well, there are a number of them. First of all, the

commissions that go to our site holders and retailers, there are over $500

million, accumulatively, that has gone in. What is that on an annual basis,

Patrick?

MR. DAIGLE: About $50 million.

MS CARINCI: About $50 million a year in commissions to those who are

selling our products. Well, if you divide that among the 1,200 retailers and

site holders that we have, that is probably the equivalent of a salary for each

location. So, I think that is important.

We are very involved in community events and sponsorship and looking for

always opportunities where we can give back to the community in a meaningful

way. It is not always by writing cheques. Sometimes it is, but other times it is

actually participating in various activities. I know that our employees, for

instance, are involved in the United Way. We are getting more involved in

literacy all the time as well because that is something you can do on a one to

one for adult learners, and we are always looking for opportunities around that

from goods and services. Over $6.5 million is being spent in this Province in

goods and services. A fair amount of that is with British Bazaar; about 25 per

cent or 30 per cent of that.

Can you think of anything else that I missed?

MR. DAIGLE: In fact, the number that we work off that has a direct

economic impact, for the year 2004-2005, is about $280 million. The interesting

thing about that number is it is a direct economic impact. It is the spinoff

benefits from that, in terms of subsequent employment and then subsequent spend

within the community and then the reinvestment that those vendors are making,

and British Bazaar is a great example.

Michelle referenced the $6 million that we spend with our vendors in

Newfoundland. In addition, $100 million was awarded in prizes, and we certainly

do not want to forget our players. What our players do with their winnings,

because they are Atlantic Canadians and they have the same values that we all

have, they tend to keep their money in their community and they spread it around

with siblings. They purchase vehicles from the local car dealership. So, it has

a good spinoff then as well.

The last comment I would make on economic benefit, is the profit that we

return to the shareholder in order for the Province to fund programs like

education and health. For 2004-2005 it was $117 million.

MS GOUDIE: You mentioned about the smoking ban. Since the smoking ban

came in we know there has been a decrease in VLT use, and you talked about a

decrease in revenue. Do you have numbers on that yet? How much decrease there

has been due to the smoking ban?

MS CARINCI: There was a direct impact of 18 per cent to 20 per cent as

soon as it was introduced. What would that equate to in revenue?

MR. DAIGLE: Twenty-eight million.

MS CARINCI: For a twelve-month period, that would be $28 million. So,

along that line. What we do in our mandate to look for revenue from gaming

entertainment, as we say: How do we replace that with games that will appeal to

our players and at the same time be socially responsible? That is one of the

reasons we have entertained KENO and we will look at other types of gaming,

knowing that policy decision of government is going to take a direct hit.

In the Province of New Brunswick, we have not seen that revenue bounce back -

and they are in their second year -

whereas in other provinces we have seen it.

But where there is a complete ban, like in New Brunswick and Newfoundland and

Labrador - and soon to be in Nova Scotia - that is a direct impact that does not

necessarily recover, at least not in the short term.

MS GOUDIE: Okay. That brings me to my next question, I guess. The debate

that is going on now regarding VLT use here in the Province - and the simple

answer would be to go out and ban VLTs. I have had this debate, and we all have

had this debate as members of Public Accounts and as Members of the House of

Assembly. We have all had the debate with individuals and our colleagues

regarding banning VLTs. That would be the simple answer. How would you respond

to that?

MS CARINCI: I do not think there is a simple answer. Prohibition has

never proven to have worked in any jurisdiction that we have looked at. Our

experience, and I guess the most obvious one is the experience we have had with

alcohol. We know gaming will exist, either regulated or unregulated. The

question that we are, I think, trying to answer is: Under what condition should

it exist that would make it acceptable? We have managed to do that with the

alcohol business over the last several decades. I think we are in a transition

period of determining what those conditions need to be.

What prohibition does is it drives the activity underground. The activity

will happen. We do not have enough law enforcers, courts and police to actually

be able to control that, and I am sure they have much better things to do. So,

it is a difficult thing to even administer. What we do is we drive the activity

underground and then several things happen. Players are not protected. The

integrity of the game is in question. We have that on the Internet today. Are

you going to get paid? Who is at the other end managing that game? You can

manipulate price payouts. There are a number of things that can happen. So, the

player is not protected. The public is not protected. As importantly, you drive

those who have issues and problems underground and we are back in the boat of

not being able to determine what the impact is and how to treat them. Then, of

course, the fourth thing is you do not have the benefit of the revenue. It is

going into somebody's pocket, or in a place like Antigua, so that we do not

have the benefit also, in this Province, of being able to put it towards good

causes and the priorities of the government. That is the reality. There are

jurisdictions that have tried to prohibit it and it does not work.

MS GOUDIE: You mentioned regulation of gambling and video lottery, or

whatever games. What about the government looking at playing a role in, like,

bingo, poker play, computerized gambling? We know on the Internet - if they are

not going to get it at a VLT they are going to go to the Internet.

MS CARINCI: That is an interesting question. It is, sort of, a two or

three-part question. If I could, let me deal with the bingo one first.

I had the experience in British Columbia, for instance, where we recognized

that charitable revenue was on the decline and there were so many non-profit

organizations that were reliant upon revenue from bingo for their good causes.

It is a bit of, if they would have stayed in the dark ages with their daubers

and their smoke-filled rooms - actually, the bingo demographic is dying as well,

because it appeals to a certain demographic. What we did is we applied

technology and raised the level of creative community gaming centres that

offered bingo in a regulated setting with the technology that has the integrity

that we have with our games of 649. It had an incredible impact on the

charitable sector, and the shareholder then has the opportunity to be able to

say: We will come in and operate and manage and conduct, and we will earmark

that revenue back to the non-profit sector under certain conditions.

That is certainly an opportunity. We are pursuing it today as part of a

strategy in another province in Atlantic Canada. We are piloting it, so there is

a great opportunity for the shareholder to make an impact and make a difference

for non-profit organizations, just as we have done with the harness racing

industry in P.E.I.

The other part of your question was about: Why not on the Internet? We are on

the Internet now with our traditional games. I spoke of, earlier, the rigour we

put around, you can self-exclude. We manage the maximum you can play on a weekly

basis. The player manages that, but we have a limit that we set so there is a

lot of rigour put in that. Certainly, there are opportunities. The question is,

in some of these cases, like on-line poker, you need critical mass. So, you

know, the population of Atlantic Canada, which is where we operate, may not

offer us the same opportunity as these guys in Antigua or Gibraltar have, where

they have the globe; and they have, by the way, over 33,000 players at any given

time in their poker rooms. You need about 300 at any given time, so the things

we have to look at are:

a) Could we? Then, of course, the question is: Should

we? To try and enforce or prohibit or stop it is a long shot, so it is back to

the old: Okay, then, should we regulate it, and under what conditions?

There are opportunities, for sure, but there needs to be a business case and

then we also have to look at the social impact.

The other question about poker, I think I have addressed the on-line piece,

but in the bricks and mortar, so to speak, certainly we could look at, and we

are examining, what it is we could do as the operator and those who manage and

conduct games for poker in those sites. The challenge for that is, to have that

game have all the integrity it needs - it is easy in casinos, because they have

the cameras and surveillance, and they know about marked cards and all of that

kind of stuff - how do we, from a practical perspective, offer it?

I think there is a solution. Certainly, the non-profit organizations are

asking for a solution because they see it as an opportunity for revenue. It

could be that perhaps it is not in many sites, but it could be several sites

where it is operated with integrity and then it is shared revenue among a number

of non-profit organizations or a number of site holders, so there are

opportunities, certainly, there.

MS GOUDIE: There is certainly difficulty with regulating the Internet

gambling, is there?

MS CARINCI: Yes, it is. So, what government has done in the past - that

is why we are in the VLT market. There was a grey market. It was established.

They did not feel it was going to be practical to prohibit it. It was regulated.

If you go back to when lotteries begin in 1976 in Atlantic Canada, the reason

they got involved in it, for the most part, is because Atlantic Canada was, I

think, the only jurisdiction that didn't have lotteries in Canada at that

time. There were mail order operations and things, so the money was leaving

Atlantic Canada, because people wanted to play.

We have always come into gaming sort of on the backs of unregulated, or grey

and regulated. This one is a much different challenge because it is not a simple

answer of regulating it, because you have folks operating offshore and the globe

is their market. So, it is now: How do we compete?

I believe, based on the research we have done in Atlantic Canada, that people

will play on our site if we were to offer these things, because we would have

the Good Housekeeping seal of approval. They would know the game has integrity,

and that they are going to get their prizes, et cetera, so there is certainly

indication, although there also is some healthy respect for the dangers around

that, too, from the public's perspective.

MS GOUDIE: We talk about the balance between responsibility in providing

this service, I guess, is what we call it. I come from a nursing background,

actually. We were taught - we spend several years in research, talking about the

prevalence of addictive behavior in society. We know there is a certain

percentage in society that have a tendency towards addictive behaviour. With the

increase in VLTs here in the Province, has there been an increase in that

percentage? I know that was kind of asked earlier.

MS CARINCI: Unfortunately, because we didn't have any prevalence

studies or hard data prior to this study, it is difficult, other than

anecdotally, to answer that question. If we had done the prevalence before, you

would probably, in discussions with addiction services, the limited amount that

was available in communities, you could maybe determine by talking to those

folks and saying: Have they had an increase?

MS GOUDIE: In our last discussions, I think - I have worked in the health

care system for the last ten years, before I entered into this profession, and I

keep thinking that, okay, we are going to remove the gambling here but they

still have the tendency towards addictive behaviour and they are going to find

something else to replace that addiction. I guess underlying the addictions are

other problems in society, so I think it has to be looked at in a -

MS CARINCI: Holistically.

MS GOUDIE: - holistic way, and you mentioned that earlier.

MS CARINCI: The researchers and the scientists and the academics around

this have really evolved to that, that it is complex; there are

cross-addictions. They are now saying the game, in and of itself, is not the

issue. It is just like, the problem isn't in the bottle.

MS GOUDIE: No, exactly.

MS CARINCI: That is not what you are treating. You are treating a number

of other more complex issues, and that is why it is a difficult thing for us to

be able to give straight answers on. You are right; you take gaming away - back

to your last question - that addictive behaviour is still there, and therefore

those people are vulnerable to a grey market.

MS GOUDIE: Exactly.

Okay, those are my questions.

Thank you.

CHAIR: A few members want to take about a ten minute break, just to have

a cup of coffee, so if we can get back in ten minutes for the proceedings.

Thank you very much.

Recess

CHAIR: We will continue with the proceedings.

Mr. Hunter.

MR. HUNTER: Thank you, Mr. Chair.

First of all, I would just like to say how glad I am today that this

interview is going on, because I certainly learned a lot. A lot of the questions

that I did have in mind were already asked and some good answers to them, I must

say.

There are some things, at least two there, that I really am concerned about

and probably did not understand. The concerned

part is the illegal and

unregulated gambling with respect to the Internet and on-line gambling, but you

have just answered a lot of the questions that I had on that. But it is a

growing problem and it must be a big concern for not only your corporation, but

I guess all the other corporations across Canada and around the world. One

question that I did have in mind, I guess, would be a national question with

respect to your corporation and others that you work with and your association

with them, with respect to what part of the national government, the federal

government. I mean they must be concerned, because we are all concerned about

money leaving our communities, our homes and our Province, and I guess the

national government must be concerned about the money leaving the nation. Are

there any steps now, that you are aware of, not only through your association

and your corporation but as a national concern? Which way is the federal

government trying to address this problem?

MS CARINCI: It is an excellent question. Thank you.

The Atlantic Lottery Corporation is a part of the Interprovincial Lottery

Corporation. We refer to it as ILC. It is a joint corporation where all the

members are the ten provinces of Canada, and under that umbrella we mark it

national games, such as 649 and Super 7 and some instant games. Wherever we need

that sort of critical mass, that marketplace, to offer larger prizes, we join

together. We also work very closely on other aspects such as the corporate

social responsibility we talked about in responsible gaming, et cetera.

We have recently met over the last several months to address two things. One

is, what options from a legal and enforcement perspective do we have, and that

specifically got some momentum when Bowman, which you may or may not be familiar

with - if you follow the CFL then you would be. Bowman's is a sports betting

company offshore, a very large one, that takes sports betting over the Internet,

and they are using Canada as their entree into North America, because they are

confident that the US Wire Act and Internet laws will end up being deregulated

over time. Canada, by the way, is viewed as sort of the entree into North

America for these Internet companies.

Bowman's made a deal with our very own CFL as a sponsor. There we have the

spectacle, the Grey Cup last year, of looking at Bowman's, an illegal - well I

should be hesitant to say that - an unregulated sports betting company

sponsoring our CFL. That really raised an awareness for everybody that this,

over time, is certainly going to impact us. We are now pursuing, from a legal

perspective, what is legal and what is not, what our enforcement opportunities

are, where the CRTC fits in, because these folks are advertising as well, not

just sports but poker, and what impact can we have there. The reality is, while

do have opinions saying that even the advertising of this activity is not legal,

the enforcement of it is something else, that is a challenge.

That is one piece of it. We are working with the authorities in a couple of

provinces who are providing information to give us the background information

that we need to go forward to the federal government should there be something

of substance there to go forward with. We need our homework done first, and we

expect that will happen over the next couple of months.

The second thing is, looking at, overall, what would need to be done to allow

us to compete if that indeed was an option, on a go forward basis.

I might add, this is not just a Canadian issue. The Europeans, who have an

association as well, are looking at this very seriously. The World Trade

Organization actually ruled in favour of Antigua, when the U.S. took them on as

saying this is an illegal activity. Antigua challenged that, and the WTO

actually ruled to some extent in favour, so there are a number of worrisome

things that are happening worldwide.

MR. HUNTER: I think on-line gambling is contributing a lot to family

violence. I know every MHA deals a lot with their constituents, and when you

bring it right in the home it creates a lot of problems, especially for people

who cannot get to local clubs or local bars where VLTs are available, so they

use the Internet to gamble. I know a lot personally who have big problems. It is

sad when you see illegal, unregulated gambling, and we know that it is growing

out of proportion. It has to be a concern not only for you but for everybody,

because it is easy to get access to the Internet now, and it is growing so fast.

One of the others things that I am not quite clear on is, when you mentioned

the problem area for Newfoundland and Labrador it was within relatively the same

percentages of the other provinces, and a global percentage between 1 per cent

and 5 per cent. Was that based on the overall per capita population of a

province, or was that based on a percentage of users within the Province? Is

there any distinction between the overall population, or do you know how many

users and that percentage was based on the users?

MS CARINCI: That was based on those who gamed, was it not?

MS GOODWIN: Actually, prevalence studies - the Canadian Problem Gambling

Index was the methodology used in Newfoundland and Labrador, and that is what is

pretty much used across the country. The methodology for that research would be

through surveys of the adult population.

MR. HUNTER: The general population, not asked if you were a user, or -

MS GOODWIN: They do ask that question.

MR. HUNTER: So, is it broken down between yes, there is a percentage of

users, 1 per cent to 5 per cent -

MS GOODWIN: Yes.

MR. HUNTER: - or just overall? Okay.

Out of that, was there a survey on the category of income - like different

incomes, low, middle, and high income? Because, the way I see a lot of my

friends and, of course, people I deal with, they are middle income people who

have the biggest problems. When they should be buying new cars and houses, they

are out gambling. We know the lower income people cannot afford to buy the new

cars and houses, but these people are in the $60,000 or $70,000 a year bracket.

I think my preference would be to see them buy new cars and products so that we

can get taxes from that, not gambling, because it benefits the communities and

their families a lot more in my point of view.

MS CARINCI: You raise a good point, because there is a myth about the

poor and playing, and there is a disproportionate amount. That is a good point.

Typically, when we look at income, although it varies somewhat by game, it is

not the low income - they don't play disproportionately - nor is it the high

income. It is in that middle group that the bulk of our participation resides.

There is some skewing. With our sports games, that would skew more to the higher

income male,

whereas something else would skew another way. Overall, your

observations are pretty accurate.

MR. HUNTER: So that is pretty well normal for gambling right across the

country?

MS CARINCI: Yes, player profiles don't vary by game very much across

the country or around the world for that matter.

MR. HUNTER: Those are the only two things that I was really concerned

about or not clear on. All the other questions were asked.

MS CARINCI: I could make a point on your observations around the Internet

and your concern about controls. In a regulated environment it is actually much

easier to control on the Internet than it is in retail or in bars or anywhere

else. We have set limits.

MR. HUNTER: That is why I ask, because the federal government can

regulate it more.

MS CARINCI: Yes, if you go on our site to play, which you can play all of

our online games on, you know, LOTTO 649 and SUPER7, you can set your limit up

to a maximum and then we don't allow you to go beyond that. You can

self-exclude, and once you do that - and we have had players do that and then

change their mind, but we don't let you back in.

There are a number of things that you can do more effectively. Somebody said,

when we were taking our break: So, you are sort of like the nanny. There is the

ability to be able to offer that activity in a controlled environment in a

responsible way.

MR. HUNTER: Lots of times I get questions on gambling. Some people are

saying: Why don't you mind your own business? It is my money, if I want to

gamble it then leave us alone. Then I have other people who are saying: I am

addicted, I need help. We need government to regulate it, to slow it down and

help us control our spending and gambling. There are two points of view. We have

a lot of cases where businesses are saying: This is a business, we are surviving

because of this. There are so many different views about the gambling. It is a

big social problem. I find in Central where I am from it is a big problem,

especially with the middle income people.

MS CARINCI: Public opinion is that gaming should be regulated. The vast

majority of people want that freedom of choice, but they strongly believe that

we need to play a greater role in addiction services and responsible gaming.

They want to see us doing that, as well as government, and they want to know

where the money goes. Those are the conditions. I think it needs to be regulated

and controlled and I want the freedom to do that, but there are two things I

want. I want to know where that money is going and I want to make sure you are

investing heavily in taking care of the folks who do have problems.

CHAIR: Mr. Barrett.

MR. BARRETT: Thank you.

I want to welcome you to the great Province of Newfoundland and Labrador, and

today is no indication of our weather. It is normally around 25 degrees Celsius

and sunny. So this is unique.

MS CARINCI: But I did experience that yesterday.

MR. BARRETT: Okay, good.

Anyway, I guess the discussions we are having today are not too different

than the discussions we had in 1990. I sat around a caucus table, and at that

particular time I was a part of the government that brought in the VLTs to

Newfoundland and Labrador. We had a great deal of discussion at that particular

time in terms of the problems associated with what we were doing. It was a very

trying experience, I can assure you, in terms of a caucus trying to get a

consensus on this.

As a matter of fact, we participated - in the House of Assembly at that

particular time - in an all night sitting. This particular issue in Newfoundland

and Labrador was a very controversial issue at that particular time. It was, I

think, probably one of my first sessions. I got elected in 1989, and it was one

of the first sessions that I had to experience spending all night in the House

of Assembly. As a matter of fact, I was Deputy Speaker of the House of Assembly

at that particular time. So, I not only had to participate in the debate I

guess, but I listened to most of the debate. As a matter of fact, we had three

people in the Opposition that kept the House open the whole night because we

were in Committee of the Whole House and the debate was going back and forth,

ten and ten and ten. The reason the government used at that particular time, for

bringing it in, is because if we did not bring it in the underground was going

to participate. I do not think that this has changed anything today. The debate

is the same today, but I guess the focus of the debate today is more in terms of

the addictions and the problems it is causing.

I mean, alcohol has caused us untold problems in our society. Those of us who

are MHAs see the problems of addiction in alcohol. We also see the problem of

addictions in terms of gambling. I guess, right now, is: How do we control? That

is the problem. We have the Internet. Back in 1990, we were only thinking about

the person who was going to have a backroom in a club and was going to have

machines; that people were going to go in and they were going to play, and

people would get ripped off. But, today, I guess, we have the problem of the

Internet. So, it is not just the Atlantic Lottery Corporation, but it is also

the other avenues that people can access in terms of gambling.

The disturbing thing about it is, from Atlantic Lottery Corporation, that the

message out there is to make it consumer friendly. Some of your advertising does

bother me, all right? Some of it does really bother me in terms of your

advertising. As a matter of fact, one of these nights I am, probably, going to

beat up my TV because when I see people on television getting excited that they

just won $10. One of your advertisements, these people who come on -

MS CARINCI: The winners, yes.

MR. BARRETT: - and they get so excited that they just won, I do not know

if it is $5 or $10. I am sitting there and expecting that they just won $10

million, but the big excitement is that they have just won $10. To me, it is

disgusting. That particular advertisement itself is disgusting because it does

indicate to people, I guess, in terms if you are trying to attract people. I

think our government, at one time, prohibited advertising. We would not let you,

under the Clyde Wells government - as a matter of fact, one of the conditions in

our caucus, I think, at that particular time in terms of bringing in this whole

system, the decision was that we would not promote it. It would not be a

promotion thing, that we would not make it nice to gamble; that it was almost

like it was forbidden or taboo or what have you. In other words, we should place

the same restrictions on gambling as we do on advertising in terms of

cigarettes, in terms of addiction to tobacco, and I guess alcohol the same way.

Right now you spend a lot of money on advertising. I am not a television watcher

very much, but there is a lot of advertising to encourage people.

It was very interesting in terms of your statements today that we need to

make it more fun and we need to make it more entertainment wise, because you are

in a double role. Your role is to attract people to play; but, at the same time,

the other young women here, your role, I guess, is to discourage people from

playing, so you are in a double roles in terms of trying to get more people to

play the games that you have out there, which is causing a problem. The more

people you attract to the thing, and make it more attractive, then more serious

the problem becomes.

It is very interesting; you are profit driven, because in 2002 the payouts on

those machines was 95 per cent, 93 per cent. You reduced it down to 93 per cent

in 2002. What was the reason why, in 2002, you lowered the payouts from 95 per

cent to 93 per cent in the VLTs?

MS CARINCI: You had a number of statements there.

MR. BARRETT: Yes.

MS CARINCI: I will answer the last question. I can comment on all of it,

or - I will answer the last one first?

MR. BARRETT: Yes, okay.

I have another dozen or so that I want to ask you, but I just wanted to give

you some history in terms of where I am coming from in terms of this, and the

history of VLTs and the whole situation within the Province.

MS CARINCI: On the video lottery game payouts there is a range. Not every

game is at the same percentage. It varies by game, and there is a range between

93 per cent and 95 per cent, and I believe the regulation does not allow us to

go over 96 per cent. We stay within that range because that seems to be

conventional wisdom for specific games that, that is the payout that you need in

order to have those games be games that the players want to play. We didn't

wholesale lower our payouts on the games. Those games are all different and they

do range. I don't think there is anything below 93 per cent - no.

To answer that question, we have not -

MR. BARRETT: No, no, if we could follow up there, the payouts on these

machines were lowered from 95 per cent to 93 per cent. Why did you lower the

payouts in 2003?

MS CARINCI: There are still games that pay out 95 per cent.

MR. BARRETT: No, I am talking about on an average. Your average in terms

of your payouts went from 95 per cent to 93 per cent.

MS CARINCI: I don't believe it was ever at 95 per cent, the average. If

they average at 95 per cent, that would mean there had to be a lot at 96 per

cent. I will get back to you on that, if you will, because there wasn't a

wholesale across-the-board lowering of payouts. The games do vary, as I say,

between 93 per cent and 95 per cent.

MR. BARRETT: What I am saying is, when you look at the parallel in terms

of entertainment - you talked about entertainment. Let's face it, the role of

the Atlantic Lottery Corporation is not to provide entertainment, right? I mean,

if you are going to provide entertainment, I can think of governments setting up

all kinds of other things to provide entertainment, so forget the entertainment

part of it. Entertainment is not a part of it. The role is to make a profit.

MS CARINCI: Let me go back. You are asking a philosophical question and

then another question to that, if I may answer it, whether profit and

entertainment are not linked.

The philosophical question, I think, and it is a good one, is: Is government

involved in gaming because it will be an activity that happens anyway, so we are

there to protect the public? - which is why your government, in 1990, made a

decision to regulate VLTs. That is one.

The other philosophical question, on the other side of the coin, is: Is

government in this business to maximize revenue through gaming?

Depending on where you look around the world, you will get different answers.

There are some who are there to maximize revenue within a socially responsible

framework, and there are others who seriously say: We are only here to regulate

what the market would do anyway, and it is for the greater good. So, that is the

philosophical thing and it is a good debate.

Are we in the entertainment business or are we in the business of making a

profit? I think the picture I was trying to paint earlier is that if we are

going to continue to sustain the existing revenue that we have today - all

indications are from the marketplace is that we must be providing products that

are different than we have in the past, that are just passive - you know, where

you buy and you wait for a draw - because winning isn't now the only

motivator. We are saying people want, and they are telling us that, it is the

experience. We see that beyond gaming. We see that in many areas, that I do not

just want to buy a cup of coffee. I want to have the Starbucks feeling, you

know.

So, for us to continue to sustain revenue, what I was suggesting, based on

what we are seeing in the marketplace, is that we would need to look at products

that provided more of that experience; whether that is an entertaining

experience or whether it is just an experience of other types in interactive,

social, entertaining, esthetic. When we see the products that the players are

migrating to in the unregulated market, those are the inherent qualities of

those types of products. So, I wasn't suggesting that we should go into the

entertainment business. I am merely suggesting that if we are going to continue

to sustain revenue, we will have to consider different types of gaming products.

MR. BARRETT: Yes. You are in the role, I guess, in terms of - your role

is to provide this service to people. I do not know if I should call it a

service or not - but the role, at the end of the day, is that your role is to

make a profit and you make a profit for your shareholders, which is the four

provincial governments in Atlantic Canada.

MS CARINCI: That is definitely the result of our activities.

MR. BARRETT: Yes. We, as politicians now, are seeing that gambling is

becoming a problem, and I think it is increasing. There is no doubt about it,

that gambling is increasing and it is becoming a problem. So, how do we put

controls on it right now, in terms of people?

I have been in politics. I have been a member for seventeen years and I have

seen the affects of alcohol on families. I have seen the affects of gambling on

families. I guess, those of us who are elected to serve and to make laws, we

have to come up with some ways to protect people from themselves, unfortunately.

It is not everybody today who is going to go into a club and get drinking and go

out and get behind the wheel of a car and drive. We have responsible people who

drink. We have responsible who gamble, but we have people who are not

responsible drinkers and we have people who are not responsible smokers and we

have people who are not responsible gamblers. So, as a society, we have to come

to some kind of a way to protect people from themselves.

I like the study that you are doing in terms of the limited access to the

machines because in today's technology, if you can go on-line and you can use

the system to gamble and do whatever you want on-line, with our technology

today, every individual should have a gambling card. Right? And it is possible.

In our technology today - as a matter of fact, you people in Moncton can almost

tell right now, if you give me a card, when I am going to breathe and when I am

going to smile. The technology is there. If you want to limit people's

gambling, you can do it. There is no doubt whatsoever that you can do it. There

is a card available. Of course, if you give people a card, it is going to have

to be a card that has their picture on it, if you are going to limit it, because

then we are going to get into - for example, if both of us have a card to gamble

and once I have reached my limit in terms of my gambling, I am going to pay him

so I can use his card. Therefore, there are going to have to be controls on

that.

MS CARINCI: If I could comment on that.

MR. BARRETT: Yes.

MS CARINCI: I do not think we are going to find a system that is going to

guarantee, 100 per cent, that we can limit activity. Because if you have a

problem, and you do not want to solve that problem, even though we have provided

you with the tools, the information, the education, then you will find a way

around it. We are not fooling ourselves into saying that we will be able to

effectively solve a problem that you do not want to solve yourself. It is no

different than the alcohol issue. What we are doing is saying that we care

enough and are responsible enough to provide you with the tools and all the

information you need to know to make an informed choice of what you do with your

life. As an operator, we see that as our role among the many stakeholders. I

could not look you in the eye and say that we have the technology that could

stop you from continuing problem behaviour if you did not want to stop. I don't

think we can do that. What we can do is give you everything you need to make an

informed choice.

MR. BARRETT: You can discourage people from doing it.

MS CARINCI: Yes, absolutely, and there are many things. We talked about

them here today. We can give you the tools to self-exclude. We can give you the

tools to limit your expenditure, if you really want to. We can give you all the

information you need to make an informed choice. We can look at the options that

we talked about earlier, whether that is hours of play and the types of game and

the payouts, and those things - and we should, and we are doing that - but, at

the end of the day, if you don't want to solve the problem then we are not

going to be able to help you.

MR. BARRETT: We talk about the Internet. In terms of technology today, if

governments were serious and they did not want people to participate in Internet

gambling, and they wanted to make it only the legalized government, people could

participate, right? It is possible today, for example - I guess, if you have to

gamble on the Internet, then you have to use some kind of a card to pay your

debts, right?

MS CARINCI: Yes. In the unregulated market they are using credit cards

and bank transfers.

MR. BARRETT: But the government could regulate it.

MS CARINCI: There is a way to do that. You would have to go after the

credit card companies.

MR. BARRETT: That is what I mean.

MS CARINCI: You would have to go to the supply chain, because these

organizations are operating out of Antigua, Malta, Gibraltar, countries that

have said: It is legal for you to do that here. By the way, don't sell into

our country but we will let you reside here.

Some of these companies are traded on the UK Stock Exchange. There are gold

chip, blue chip buyers, companies coming in and investing. The last IPO for

party poker went to $10 million in two days. It is difficult to go to Antigua

and stop that, but what you can do, perhaps, is to look at the supply chain,

those who are supplying, like the credit cards, the telecommunications

companies, but I do not know if that is a practical solution. Do you know that

the gateway into North America for the Internet resides in Gananoque. There are

thirty-two servers that sit on First Nations land, and they have a huge part of

this market, so it is right in our own backyard.

MR. BARRETT: There is no doubt about it that, if governments wanted to,

they could say to the credit card companies: You cannot, and it is illegal to do

it.

MS CARINCI: In the U.S., they have taken some action -

MR. BARRETT: They should probably also indicate to the credit cards

companies that it is illegal to charge the interest you are charging, too, but -

MS CARINCI: Wouldn't that be nice?

WITNESS: Criminal.

MR. BARRETT: It is criminal to charge the interest you are charging; but,

let's face it, the only way the transactions can be done on the Internet is

with some kind of a card, right?

MS CARINCI: Credit or a bank transfer, debit, money order (inaudible).

MR. BARRETT: Yes, but, let's face it, if somebody is going to sit down

and -

MS CARINCI: It is a credit card if you are talking about gaming, pretty

well.

MR. BARRETT: Yes, it is credit card or debit card from a bank or what

have you. I mean, it is easy to be able to identify all these sorts of things,

and it would limit it in terms of what you can do with your card.

MS CARINCI: As has been pointed out earlier, there has to be a will,

either at the federal level or at the provincial level, to do that; because, for

one province to act on its own, it is not going to be effective. This is

government to government, and it isn't just for Canada.

MR. BARRETT: But governments, when they want to, can control it.

MS CARINCI: Absolutely.

MR. BARRETT: Right now, for example, if I am in the States, I have

difficulty bringing back any more than a carton of cigarettes, or I cannot bring

back any more than forty ounces of liquor. So, governments in the past have

already come up with mechanisms to be able to control behaviour, or things that

we should not do. Therefore, they cannot say that governments cannot come up

with the controls or make -

MS CARINCI: Oh, no, I wouldn't say that.

MR. BARRETT: - with the credit cards, the controls on the credit cards.

MS CARINCI: It is definitely policy decisions, and certainly those things

are doable.

MR. BARRETT: But I think in terms of, right now, there has to be some -

the payback system, KENO. I just want to mention KENO. KENO is the one game in

the world where the person who sponsors the game has the greatest control. In

bingo you are always left to luck, but the person who comes up with the KENO

game regulates if there is a winner or a loser.

MS CARINCI: I don't know what you mean, Sir.

MR. BARRETT: Because it is the only game in the world where you buy the

numbers and, before the numbers are drawn, the agency knows what numbers they

should not draw because it is already - it is one of the games that can be

easily rigged.

MS CARINCI: Absolutely not true. Absolutely not true.

MR. BARRETT: I can assure you right now that in Las Vegas, Nevada, or

anywhere where there is a KENO game, all the numbers are in the system before

that machine calls the numbers.

MS CARINCI: Yes.

MR. BARRETT: In a bingo game, it is not.

MS CARINCI: Let's go back.

If you look at the -

MR. BARRETT: The numbers are already entered into the system. When they

put that card in, the system knows what numbers have been bought, and the

combinations of the numbers, and it can be all programmed to make -

MS CARINCI: Let me backtrack.

If you look at our 649 game today, our Atlantic 49, our Payday game, if you

look at any one of our on-line games, we have a period of time that you can buy

and then we stop you from being able to buy at a specific time. What is it, ten

o'clock at night, for instance, in Atlantic Canada? After all the number are

in what we will call the tank, sort to speak, in the central system, then the

draw is held. It is no different for 649 than it is for KENO. It has all of the

integrity -

I don't know about Las Vegas - I won't comment on that - but I can assure

you that this game is no different than any other lotto game. All the numbers

are in the draw and then we make the draw. There is no other way to do it.

MR. DAIGLE: Can I just make a comment on the integrity around the draw

process? Because it is the cornerstone of our business. It is obviously one of

the core values of the Corporation.

First of all, the draw is performed by our security department. It is

witnessed by our internal audit department, and it is also witnessed by external

auditors. Right now, we are using KPMG. So, we have built in numerous controls

to avoid any form of conspicuous activity or any form of wrongdoing or any

fraudulent or any kind of negative activity like that.

I just want to make that very clear, because it is an important point.

MS CARINCI: I think the other check for that is -

MR. BA