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11 mai 2005
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Wednesday, May 11, 2005


Nova Scotia Gaming Corporation

Printed and Published by Nova Scotia Hansard Reporting Services


Mr. Graham Steele (Chairman)

Mr. James DeWolfe (Vice-Chairman)

Mr. Mark Parent

Mr. Gary Hines

Ms. Maureen MacDonald

Mr. David Wilson (Sackville-Cobequid)

Mr. Daniel Graham

Mr. David Wilson (Glace Bay)

Ms. Diana Whalen

[Mr. David Wilson (Sackville-Cobequid) was replaced by Mr. Jerry Pye.]

In Attendance:

Ms. Mora Stevens

Legislative Committee Coordinator

Mr. Roy Salmon

Auditor General

Mr. Claude Carter

Deputy Auditor General


Nova Scotia Gaming Corporation

Ms. Marie Mullally

President and Chief Executive Officer

Mr. Sean O'Connor

Chairman of the Board of Directors

[Page 1]



9:00 A.M.


Mr. Graham Steele


Mr. James DeWolfe

MR. CHAIRMAN (Mr. James DeWolfe): Good morning, ladies and gentlemen. I'd like to call this meeting of the Standing Committee on Public Accounts to order on this beautiful morning of May 11th. Today we have witnesses from the Nova Scotia Gaming Corporation, Ms. Marie Mullally, President and Chief Executive Officer, and Mr. Sean O'Connor, Chairman of the Board of Directors.

I would like to start off, if I may, before we hear opening comments from our guests, with the NDP, and we'll introduce ourselves.

[The committee members introduced themselves.]

MR. CHAIRMAN: We expect some more members to come in. There's another function on this morning that some of them are attending. As they come in, we will introduce them. Along with us, also, is our staff member, Mora Stevens. As usual, we have our Auditor General, Mr. Roy Salmon and Deputy Auditor General, Claude Carter. Welcome, gentlemen, and also Colleen Denomme from Hansard. Without further ado, Ms. Mullally, the floor is yours.

MS. MARIE MULLALLY: Mr. Chairman, good morning. I would like to thank you for the opportunity to speak this morning, and I look forward to answering your questions. With the release of Nova Scotia's, and in fact Canada's, first fully-integrated gaming strategy, the Nova Scotia Gaming Corporation is entering a new era. It's one we've been moving towards for some time, and we are pleased to now be going forward with the full support of government and with clear accountabilities to the people of Nova Scotia.


[Page 2]

Our renewed mandate set out in the government's gaming strategy couldn't be any more clear. We are about social responsibility first and revenue second. Let me repeat that, social responsibility first, revenue second. That means all of our decisions about gaming in Nova Scotia will now be made through the lens of social responsibility. We may lose money but it is the right thing to do, because our objective is to have less revenue from problem gamblers.

I am extremely proud to be leading this philosophical shift. I know it is the right direction for our province, our communities and, most importantly, the people of Nova Scotia. But this doesn't mean our gaming industry is perfect, it doesn't mean all of our problems will be solved overnight. There are challenges, there are addictions, there is controversy, and there is hardship. I recognize and acknowledge this. The point is, with the government's gaming strategy, Nova Scotia is taking significant steps to move in the right direction, towards a more balanced and socially responsible industry in the province.

We already have the lowest rate of problem gambling in Canada, but that's not good enough. We want to do more, and the strategy is a clear indication that we are going to do more. The government strategy launches 23 initiatives, including removing 1,000 VLTs and reducing VLT revenue by $40 million a year. It also removes the stop button features on all VLTs, reduces play hours and slows down play by 30 per cent. In addition, it earmarks an extra $3 million for problem gambling treatment and prevention, and another $1.6 million for responsible gaming initiatives.

We are leading the way in our industry, doing groundbreaking research that has never been done anywhere else in the world. For example, we've just started a research project in Windsor and Mount Uniacke to pilot a card-based system that may allow VLT players to better manage their gambling. If these features work, we will look to include them on machines across the province. We believe that a regulated, controlled, legal industry is better than an illegal, unrestricted industry with no protection for players. There's no question, gaming is a controversial industry, but it also brings many benefits to our province - 1,200 direct jobs and $187 million to build roads, schools, communities and hospitals in Nova Scotia.

Let me also be clear about the Nova Scotia Gaming Corporation's role, the government decides what to allow in the province's gaming industry, and we make sure that industry is as safe and responsible as possible, along with managing the revenues so that we generate reasonable profits. The government makes the big-picture policy decisions, and we manage those decisions. We are often unfairly painted as the bad guy. Some people have launched personal attacks and used this issue to play politics. Anything we do, they criticize, but despite this we try to stay focused on working to build a socially responsible gaming industry in this province.

[Page 3]

Do we wish the changes could be faster? Do we wish there was more research and a clear consensus on all issues? Absolutely. Our work is not perfect, but at least we are doing something. We are making positive changes, and I will not apologize for that, no matter how petty and misplaced the attacks get. Having said that, I encourage and respect the need for a full debate on this issue, and I am here today to respond to your questions, fully, openly and accountably. My hope is that we can put to rest recent false allegations so that we can focus on the more important things we should be talking about in order to build a better gaming industry in our province. Thank you.

MR. CHAIRMAN: Sean, do you have a few words as well?

MR. SEAN O'CONNOR: Thank you. Good morning, I'll be brief. This is an important juncture in Nova Scotia's gaming industry. We have, as Marie indicated, a renewed focus on social responsibility. We are looking to technology and innovation to help us build a pioneering, forward-looking industry that is balanced, socially responsible and economically sustainable. To that end, there are three key things that I wanted to say this morning in my opening remarks.

First, as the Board of NSGC, we initiated the development of the gaming strategy. We pushed for it, and we, too, are advocates for change. So that there is no doubt about that, I would like to enter into the record today a letter that I wrote to the Minister of Finance on January 31st of this year. In that letter, the Board of the Nova Scotia Gaming Corporation advocated for significant change in the gaming environment in this province. We know we need to redefine our industry. We need to raise the bar by introducing more responsible gaming safeguards, and researching new technology and practices to help reduce problem gambling. We need to be visionary in our approach. The gaming industry is changing rapidly, and we want to be at the forefront of an industry that's good for Nova Scotia.

This leads me to my second point, while the focus has been predominantly about VLTs, we cannot forget the dynamic of a rapidly-changing industry worldwide. Let me give you just one example. Texas Hold'em is a card-based poker game. Its recent explosive popularity is likely no secret to some members of this committee. Coverage on major networks, like Sportsnet, NBC and others, are evidence of this.

The popularity of this game is doing a number of things. One, it is making card-based gaming mainstream. I would also suggest to you it is also causing many people to seek out Internet sites that would allow them to compete with others around the world. This is big business. The April 11th edition of Canadian Business quotes the worldwide estimate of on-line poker in 2005 at $60 billion. My point is that while we focus on VLTs, and I'm not denying the significance and seriousness of the issues here, we cannot and should not forget that we do not operate in a vacuum. Our gaming policies and strategies must recognize the reality of the world we live in.

[Page 4]

Now I want to turn to my last point. We know that change is difficult, particularly in a controversial industry such as ours. In facilitating the development of the gaming strategy, we engaged in public dialogue and, yes, we opened ourselves up to increased public scrutiny. Unfortunately, however, not everyone is satisfied with arguing the issues. Some have decided that a good tactic is to attempt to degrade and attack the integrity of those they perceive stand in the way of their agenda. This is not only unfortunate but, in my view, degrades the value of the very arguments that they advance.

As chairman of the board, and I know I speak on behalf of the entire board in this regard, I have an obligation to tell you, in the strongest possible way, that the Board of NSGC has complete confidence in our CEO, Ms. Mullally. Allegations that have been directed at her and the NSGC are false and misleading. Marie is an honest, accountable, experienced professional who provides excellent leadership to the NSGC, taxpayers and people of this province. She is a strong advocate for making responsible decisions about gaming in Nova Scotia. Frankly, I think she deserves better.

I hope we will focus our discussions today on the real issues of gaming's importance to this province. With that, with respect, we look forward to answering your questions.

MR. CHAIRMAN: We'll begin with the NDP in, as usual, 20-minute segments.

The honourable member for Dartmouth North.

MR. JERRY PYE: Mr. Chairman, I must say that I'm extremely disappointed by some of the comments that I've heard. As an elected representative, I have never used the forum of my political arena to be critical of any particular one individual, and it's possible to be critical of an agency or an organization or a Crown Corporation of this province without being critical of individual persons. I take exception to those remarks, because myself and my political Party have tried to manage the affairs of this province, be it the Crown Corporation and particularly the Gaming Corporation, in a reasonable, sensible manner.

I want to tell you that I do have concerns, and I will continue to express those concerns on behalf of my Party in the best interests of all Nova Scotians. When I see that the Gaming Corporation tends to lead in a direction which I think is not in the best interests of Nova Scotians, then I, as a legislator, will speak out. I want to make that perfectly clear.

[9:15 a.m.]

One of those very important reasons for being somewhat critical of the Gaming Corporation is that the Gaming Corporation, this year, unveiled, or was a partner in unveiling, a better balanced Nova Scotia's first gaming strategy. Now, when we balance and deliver a gaming strategy to the people of Nova Scotia, particularly those people who might

[Page 5]

be your clients, then in fairness it is utmost to make sure the information in that very first strategy is information that can be defended, that is justifiable and that the information will be, at the end of the day, in the best interests of all Nova Scotians. The important thing is, do it right. The concern I have is with respect to the financial impact of the gaming strategy. That's where I will first lead off.

My understanding of the financial impact study, the net impact of these initiatives were provided to the Gaming Corporation by the Atlantic Lottery Corporation. My concern is, why hasn't the Gaming Corporation gone out to seek professional advice and consultation with respect to determining whether these are accurate numbers? When I talk about these as accurate numbers, I'm talking about the reduction of the hours of operation, the removal of 800 VLTs and the removal of the stop button and the reductions in speed of play - all of which have components of cost to them. My understanding is this is based on assumptions and I'm wondering if it was not possible to get real factual numbers by professional people in the arena.

MS. MULLALLY: Thank you, Mr. Pye. Let me first comment on the estimates that were provided to determine the financial impact on the VL program as a result of the gaming strategy. As you properly noted, Atlantic Lottery Corporation, which is our video lottery operator in this province along with the other Atlantic Provinces, played a significant role in determining the appropriate estimates. They are experts in this program, they've been operating it for numerous years, they are familiar with the systems, they are familiar with the retailers and they're very familiar with the players. I think they're an excellent source of information.

Let me assure you we considered other pieces of information as well. I personally spoke to a number of other jurisdictions to find out if they had any information, empirical or otherwise, that would assist us in estimating these financial impacts. Notably, I spoke to Manitoba and Alberta.

In addition, we also gathered some research or information that was available within our own organization, including utilizing the information from the CRA study which was tabled by the minister on Monday of this week regarding the hours of operation or the time study. So, Mr. Pye, I would suggest there were a number of sources of information to help us come up with the best possible estimate. But let me be clear, it is an estimate. Is it a reasonable estimate? We believe it is. Are there possible ranges of outcome? Certainly. But at the end of the day, I think the direction the strategy is taking is a good one. It's a moderate, balanced approach and it's one that's going to move us in the right direction and will be one that will be closely monitored and evaluated.

MR. PYE: My question then is, in the event the numbers don't materialize - I'm sure you have a time frame in which you will be doing those evaluations and assessments, particularly after the end of this year, which will not be a complete year because this fiscal

[Page 6]

year demonstrates there will be a $19 million loss compared to the next year of 2006-07, which will be the $40 million loss. In the event that this does not materialize, what is the corporation about to do?

MS. MULLALLY: First of all, we're clearly going to monitor it and evaluate it. It's not only a question of determining the financial impact, but what we should be looking at, what are the social impacts? What is the impact of these changes on all our player groups, whether it is a no-risk player or unfortunately someone who is in the high-risk or problem-gambler category? This is not just about finances.

In fact, it's quite the opposite. This is about what impact this has to provide us with the most socially responsible industry we can. To do that we need to conduct research. We are currently developing a research plan and strategy for those four measures. I expect we're going to try to do some pre-work or baseline work as much as possible before proceeding with the measures. We're going to closely evaluate them to assess what social and economic impacts they do have on the program and on players - very important - and we'll be providing that information publicly as we develop it and as it's available.

We want this information made available to Nova Scotians. At the end of the day we could have done nothing, but I don't think that was acceptable, sustainable or appropriate. We needed to make changes in this program, measures have been put forward - I think they're the right ones to move forward as a first step - and critically, we need to evaluate and monitor it to see what the impact is on our players and in particular on a certain category of players in the VLT program.

MR. PYE: I would say to the CEO, you're absolutely correct. It's all about a social impact. If in fact the dollars don't change and the revenue continues to reflect, then there's a social issue that follows that train as well. That's the reason for watching those particular dollars. If there is no significant change, revenue continues to increase, then I think we recognize that there is a problem with respect to the social impact. I hope the corporation will take that into consideration.

I want to move on to another area that has been much talked about and that's with respect to the bill acceptors and the cost of some $16 million the corporation anticipated to remove the bill acceptors. I remember when the video lottery machines only took coins. There were a number of people who alerted the corporation and alerted the Minister of Finance through estimates, and in Hansard as well, with respect to the kind of impact the bill acceptors would have on gamblers in the province, particularly those who may have gambling addictions.

Nonetheless, the corporation continued to move forward with bill acceptors in the machines. I don't think that in itself is the total overriding factor. There was another total overriding factor that came into play as well. That was the acceptance of ATMs, automated

[Page 7]

teller machines, into establishments where video lottery machines had come into play. That in itself created a very, very bad environment because prior to that, individuals would have to leave the establishments, go to the bank, collect the money and then come back and put it in. Often, after they left two or three times, they felt embarrassed about going in and out the door and they would finally not come back again.

However, what happens now is that often the ATMs are in the establishments, in close proximity to the electronic video lottery terminals, and people don't even get off their seat, don't even stop the machine from running. They go to the ATM, collect the money and put it in the VLT. So my question to you is, why did you not recognize that in fact this was a factor in generating additional revenue to the corporation, also a contributing factor to increased addictions and, also, why did you not develop a policy that would prevent ATMs from being in the same establishment that the video lottery machines were in?

Now, I want to make a comment to that. When I first asked about this, two years ago, it was indicated that the corporation had no control over the establishment and what the establishment put in. You do have control over policy, and you do have the right to develop policy that says that where there is going to be the location of a video lottery machine in your establishment, you will refrain from having ATMs. Now, that's my question to the CEO.

MS. MULLALLY: Thank you, Mr. Pye. I think you raise some excellent points here. One of the things that I think we all recognize is that the gaming strategy is really a first step and, quite frankly, not everything could be done in the first round if you hope to be able to effectively evaluate and assess the impact these measures will have on our players. Having said that, I would be interested in any studies or research that would show the direct correlation between ATMs and increased addiction. I think that's important information if that's available. I also believe that if it is an issue and a concern, we need to evaluate it. We need to take a look at it and I would expect that it's an issue that will be brought forward in the next year as another measure that needs to be considered in terms of potentially changing the VLT program. So I take no exception to your comments in any way. I think we need to look at the research and the studies to see what they tell us. We need to look at other things associated with this VLT program and I will expect that will happen over the next year or so.

MR. PYE: When you indicate the next year, that happens to be the same year in which the social economic impact study will be brought forward . . .

MS. MULLALLY: Correct, in 2006.

MR. PYE: . . . so hopefully that will be a part of the study.

I want to go back to another announcement that you had made with respect to financial counselling. The Gaming Corporation had indicated that it was open and receptive to setting up a financial counselling structure or mechanism for those individuals who, in

[Page 8]

fact, were penalized as a result of an addiction to gambling, who have lost everything, and hopefully there would be some counselling services provided to those individuals. The unfortunate part of it is it just talked about counselling services, and it didn't indicate that in fact the counselling program that you might introduce would have some seed money, some start-up money, to help those individuals who, in fact, have lost everything because of their addiction.

My question to you is - first of all I believe that this is a conflict if it's administered by the corporation itself - will the corporation consider the financial counselling program at arm's length from the corporation, and will the corporation commit itself to putting additional dollars, seed money or start-up money, to help those individuals whose lives have been ruined through addictions?

MS. MULLALLY: On the first point regarding the potential or perception of conflict, I think what's important with this particular initiative which is contained in the gaming strategy is that it's a good program that's being offered in another jurisdiction, something that we should take a look at. I want to be very clear that the Nova Scotia Gaming Corporation will not have any direct role in the delivery of that program. I agree, I think it would be inappropriate, but does that mean we don't support it and we think it's a good idea for this province? Absolutely not. I think it's something we need to pursue because we think we all know that problem gamblers, in particular, face significant financial consequences and ruin and any help they can have in this counselling area will be beneficial to them.

So just to be clear to you, Mr. Pye, our intention is not to be in any way involved in the operation. Our role at this juncture was just to make sure that the process got started, and I'm hoping other organizations will take the lead to move this forward, including another government department, including the Office of Health Promotion, including the credit agencies that are involved in financial counselling now.

With regard to seed money, I don't have a particular view on that at this juncture. I can tell you that the program design has not yet been completed. It's something that can be considered, and I'm sure it could be considered in the overall modelling that's done for what people believe is the right program for Nova Scotia. So at this point all I can say is that I would accept that piece of information and perhaps it should be considered in the overall development of the model.

[9:30 a.m.]

MR. PYE: In the overall development of the model, I would want that if there were additional dollars coming through to the Gaming Corporation through revenue from video lottery machines, that there be new additional dollars put in. These dollars aren't dollars that are already being taken out of the money that has already gone through to the Department of Health and to the Office of Health Promotion. I want to make sure that I make this perfectly

[Page 9]

clear that when you set up the program and you're prepared to commit to helping individuals through financial counselling and if the committee decides, which rightfully it should, that there will be additional seed money to help those individuals whose lives have been ruined, then this money be at least over and above the money that's already contributed to the government. So my question to you is, will this be a new additional dollar?

MS. MULLALLY: I can't comment on that. As you know, the monies that come through the Gaming Corporation go to the government's consolidated revenue account. We don't necessarily have a role per se in terms of determining where those dollars are earmarked. I think that's a government policy decision. I think clearly, in government making that decision, they have to look at the issue of compensation or seed money for other forms of addiction and whether that's appropriate as well. I think there are a lot of policy considerations that have to be made before that kind of concept is moved forward. So I think your point is well taken. It should be considered and it should be reviewed by the individuals who are developing this model and I appreciate your comment.

MR. PYE: Mr. Chairman, the next question is, what is the Gaming Corporation's reaction to the government and its present policy with respect to the additional dollars that are coming in from the Gaming Corporation, going through to the Department of Health, and then to Health Promotion to address the issue of all addictions? When gaming revenues were first brought into this province, there was an intent to set aside 1 per cent of those gaming revenues to assist individuals with addictions. What I understand now, the government has developed a policy whereby the revenues that are brought in from the Gaming Corporation, into the Gaming Foundation I guess, and then into the Department of Health and then into Health Promotions is going to be used for all addictions.

Now, that was never the intent of the revenues that were derived from gaming in this province. It was always intended to address the very serious and real addiction issue of gambling. It is my opinion, and that's why I want to know what the corporation's thinking is behind this, that those revenues are now going to be spread out even thinner so that they cover all addictions rather than cover the real addiction which it was intended for. So my question is to you, CEO of the corporation, what are your thoughts with respect to using those revenues for all the addiction problems in the province?

MS. MULLALLY: Mr. Pye, I think firstly, obviously, this is a government policy decision that would be inappropriate for me to comment on, but having said that, I think that the foundation and monies towards problem gambling research and education is critical. The corporation has been supporting enhanced treatment programs, has fully recognized the need for more accessibility, more effective programs, and that's fully supported by the Department of Health and the Office of Health Promotion.

We also know we need to do more in education and prevention. So the concept of the foundation I think is a strong one, a good one. The decision of where the dollar goes once it

[Page 10]

is in the foundation is a decision made by government. At the end of the day, providing that money across addictions, there probably is some logic in that I would say as we know there is a strong commodity rate with regard to addictions, that there are cross addictions. Research indicates that ranges between 30 per cent to 70 per cent of problem gamblers have some other form of addiction or have addictive type personalities. So there is clearly some correlation there, but at the end of the day I think it's up to government to decide where best to place the dollars and I think where the focus of the gaming strategy is around treatment, prevention. I think if the foundation dollars are used in those areas, I think that's a very positive outcome.

MR. CHAIRMAN: The time for the NDP has been used. I will turn to the Liberal caucus, Mr. Graham, the member for Halifax Citadel.

MR. DANIEL GRAHAM: Thank you, Mr. Chairman, and thank you, witnesses, for coming this morning and for your candid opening remarks. They are nonetheless, I would suggest, disappointing in the circumstances and let me start by saying that everyone in this Chamber accepts that the final decision for these types of issues rests with government, not with the Gaming Corporation, but it is clearly on the shoulders of the Gaming Corporation, both its administration and the board, to provide complete information and you've had today an opportunity to respond repeatedly, including in the Red Chamber just this past week we've heard from the Gaming Corporation again saying, well, the evidence is perhaps mixed on a variety of fronts, that really what you're hearing is only half of what the information is.

Today was the day for a comprehensive response to the many, almost countless, allegations of failing to take into proper account the concerns of the health of Nova Scotians and I haven't yet heard a substantive response to the extraordinary number of suggestions, not by me just, not by Mr. Pye just, but by a large group of people, that the Gaming Corporation isn't properly taking account of the health concerns of Nova Scotians. So it's incredibly disappointing to get the frankly we're being picked on pitch without substance to respond to the many allegations that are out there. So let's just talk about the substance of some of this stuff.

Let's deal first with the fact that there were addictions experts in Nova Scotia, it's not just political Parties that are raising concerns, it is the people who understand this issue best in Nova Scotia - Hubert Devine, Director of Addiction Services, District Health Authorities 1, 2 and 3; Greg Purvis, Director of Addiction Services, District Health Authorities 4, 5 and 6; Everett Harris, Director of Addiction Services, District Health Authorities 7 and 8; Tom Payette, Director of Addiction Prevention and Treatment Services, District Health Authority 9; - who wrote a letter dated September 17th in which they speak about the New Directions document which was the foundation document for going forward and they say in part - it's a scathing, seven-page letter that really suggests that the New Direction strategy was a sham. In it they say, this is Page 2 "To be frank, it presents primarily as a public relations piece

[Page 11]

prepared by the gaming industry and spun vigorously to present gambling in the most positive light."

They also say on the last page, after they have exhausted many of these things, "New Directions is transparently biased in favour of representing gambling and the gaming industry in a positive light. It appears more as industry propaganda than as a sincere attempt at securing balance." Then we have GPI Atlantic, a reputable organization here in Nova Scotia, who say that when they did their assessment back in October of this year, "The recent advertisements on Responsible Gaming Awareness Week were not nearly as effective as they could have been because they had no mention of problem gambling costs. Instead, the ads pictured smiling successful people and were full of reference to the entertainment, fun, play and enjoyment of gambling as a game without mention of the costs. The ads could even lure people into gaming rather than discourage them."

Then we have the Responsible Gaming Awareness Week material which in previous years appears to have had the Nova Scotia Office of Health Promotion logo on it and in this year conspicuously doesn't. We've heard from the gambling addictions expert from Nova Scotia, Mr. LaRocque, 10 years as the vice-president of one of the most prestigious addiction agencies in the world, who has been working for the Nova Scotia Government for 10 years, come before this committee, level several allegations, and I'm sure that you may have some specifics with respect to those responses, but none of those are responded to in the assertions that you have today.

I appreciate that there's not enough time in the time that we have to get through all of this, but let's be clear. In the last number of years - until this recent announcement - in Nova Scotia we've increased the number of VLT machines; we've introduced bill acceptors which have been known to be harmful, science has suggested this; we've sped up the machines, I understand the recent proposal is to slow them down but we did that, having been advised that this would create addictions; we've moved machines systematically from low-volume locations to high-volume locations; there are questions about whether or not the addictions expert in this province has been shut down; and then today, you're raising other questions.

Frankly, there is a substantive response that is required in the circumstances. The case has been put before you and to not come before us - I appreciate you wouldn't get it out in all the time that you have - with a comprehensive document that addresses the many allegations that have been made - and I've just referenced a few of them - is disappointing. To say that you're being picked on is a matter of concern and certainly something that I genuinely want to hear you on. But let me turn to a subject that has received less attention over the last period of time.

In the March 7, 2005, National Post there is an article entitled, "Charges raise spectre of VLT Cheating", it's written by Tom Blackwell. It references three top executives of a New

[Page 12]

Brunswick company, Hi-Tech, being charged with defrauding a Las Vegas company, IGT, as well as the Atlantic Lottery Corporation. The Atlantic Lottery Corporation provides the machines for all of the Atlantic Provinces, as I understand it. In that newspaper report the allegations are that secondhand equipment was being used in machines by ALC. Secondly - and this is the more disturbing one - evidence could also emerge that other people took advantage of the modified slot machines and video lottery terminals to cheat them of their winnings, police say. "Asked if anyone used these allegedly retrofitted machines to generate winnings on command, Sgt. Ryan . . ." of the RCMP ". . . stressed the three men have not been charged with doing so. But 'something like that may come out at trial from expert witnesses.'"

The question I have off the top is whether or not any of the machines being referenced in that fraud case are machines that would have been in Nova Scotia?

MS. MULLALLY: Mr. Graham, this is a matter under investigation with the RCMP and as you noted, charges were made. Atlantic Lottery Corporation is specifically referenced in it. I don't have direct information on it, I just spoke to the chairman who I thought might have some information on this. I would be pleased to find out and answer your question in dialogue with Atlantic Lottery Corporation, it would be my pleasure to do so. My limited understanding was that these charges were laid, that they were against these three individuals. In my discussions with ALC the charges were not in any way related to the fairness, integrity and security of the system and the VLTs. I will endeavour to get more detailed information for you and provide it as soon as I can. I don't know if I should also respond to the eight or nine other points that you made before this specific question, but I'll defer it to the member.

MR. GRAHAM: Well, here's what I would invite you to do, in the interests of time and the need for us to exchange information, I welcome the possibility that you would provide a submission in response to the many allegations that have been put forward after this opportunity. I saw this as your opportunity to state your case and again, I'm disappointed that there has been very little specific response to the many things that have been laid out there.

MS. MULLALLY: Then let's do that, it would be my pleasure. Firstly, there were a number of comments made regarding . . .

MR. GRAHAM: Sorry, what I was suggesting is that filing the report would happen after today's discussion because there are many things that are out there and I want to make sure that you have an opportunity, but there are only 10 minutes left in this session and it may take 10 minutes in order to get to that point, and I wanted to really focus on these questions.

MS. MULLALLY: With all due respect, I would like to be given the opportunity to respond to your statements because they were very strong statements and very appropriately,

[Page 13]

you identified the corporation should respond to these. I would like to take the opportunity of the committee . . .

MR. CHAIRMAN: I agree that the comments were made and I agree that the witness should have the opportunity to respond to those.

MR. GRAHAM: If I could, Mr. Chairman, just comment that the opening statements were rather brief in these circumstances and one would have expected that the responses in this area, that they would have opened with a response to these many allegations. Now it's being done because they are so squarely out there, on time that's likely to eat up most of the time that we have in these circumstances when we want to move on to other subjects. So I would, at the very least, ask the witnesses to be as brief as possible in their response. What I'm specifically asking is that there would have been an opportunity before this meeting to provide a written response to these and there's an opportunity after this committee meeting to provide a written response.

[9:45 a.m.]

MR. CHAIRMAN: I'd remind, Mr. Graham, a minute has passed that could have been utilized probably better if the witness was able to respond.

MR. GRAHAM: I disagree, Mr. Chairman.

MR. CHAIRMAN: I'll let the witness respond.

MS. MULLALLY: Thank you, Mr. Chairman, I'll be as brief as possible, Mr. Graham. Firstly, your comment regarding the directors of addiction services and their letter, I think that letter is quite well known, it's not new information. Certainly, I think, the people involved in the development of the paper took it very seriously, which, of course, included in partnership, the Office of Health Promotion. We subsequently met with the directors to get their opinions understood, and the independent facilitator of Phase II also met with them. I think there was an open dialogue and understanding of their concerns. I am in no way going to question their views because those are their views. Having said that, I can tell you from discussions with the Deputy Minister of Health and CEO of Office of Health Promotion, she has had discussions with these individuals and, "They are pleased with the gaming strategy." They see that the outcome of that discussion paper whether you question the validity of it or not, but the overall outcome is the gaming strategy and they think it's the right way to go, and that it's moving in the right direction. I don't paraphrase for them, but I want to be clear that the response from those individuals has been positive with regard to the gaming strategy.

Second comment on the responsible gaming awareness material. There were some very serious allegations made, and I want to respond to those. Clearly I saw this as the opportunity here today to do so, not appropriate to do in opening remarks because opening

[Page 14]

remarks tend to be very short, and I think these are things that need to be covered. I want to do several things here, I first want to provide the members with some information and some statements that we've received from individuals regarding the Responsible Gaming Awareness Week material.

Let me assure you, when any allegation or accusation is made against the corporation, we investigate it immediately and thoroughly, so we take any of those comments to heart and we respond to them. Since those statements were made, I had discussions with staff, fully investigated all our material and documents within the corporation and in addition, spoke to consultants who were involved in the development of the Responsible Gaming Awareness Week material. I have with me sworn statements from the two research firms who make it very clear, I would suggest, and I'll provide it to the committee, that there was no falsified research made in any of the outcomes in the development of the material associated with the Responsible Gaming Awareness Week and in particular, the use of the tag line that was developed in concert with significant effort, and let me tell you the significant effort we went under to make sure we had the best material possible to reflect some important messages to Nova Scotians.

We not only participated in some mall intercept surveys - and you'll have a copy of this report from Allura Communications - we also ran the various concepts, tag lines and imagery through a focus group with another independent researcher. In addition, we went to the Responsible Gambling Council of Canada to get the reviews on the tag line, on the material and, "They thought it was excellent." It was very much in keeping with the responsible image but yet at the same time would ensure people read the material, understood what we were trying to say.

Let me now - having tabled those documents - provide you with the material that we did prepare as part of Responsible Gaming Awareness Week. I want to first refer . . .

MR. CHAIRMAN: You can provide that to the clerk, then if we can we'll move on to some more questions. I'm trying to be fair in allowing your response time to equal the comments made by Mr. Graham. So, if you can just sum up.

MR. GRAHAM: Mr. Chairman, in the interest of full disclosure I do throughout and welcome the opportunity for the Gaming Corporation to provide us with a written response because there's obviously a lot of material. In the interests of full disclosure.

MS. MULLALLY: Well we will, but I saw this as an appropriate opportunity to provide this information. I apologize if I misinterpreted the objective of the committee's meeting, but I thought it was to respond to questions or comments, and I think one of your comments or questions was regarding this material. I understand that the witnesses have full opportunity to respond to those questions and comments. If I've misinterpreted that, my apologies, Mr. Chairman, and I'll defer this material to the committee members, but I will

[Page 15]

say in closing that this material is excellent. The results from Responsible Gaming Awareness Week show a very high percentage of Nova Scotians were aware of the activities, were aware of the key messages supporting responsible gaming, generally, as something the corporation should be doing to help people be more informed and educated about responsible gambling, as well as starting to educate people more about problem gambling. So, Mr. Chairman, I table this material as well for the committee's information.

MR. CHAIRMAN: Thank you very much. We'll move on to Mr. Graham.

MR. GRAHAM: Thank you. In the interests of being as fair as possible, I want to reiterate that the Gaming Corporation is absolutely welcome and we would invite them to provide a written summary of the material that is being tabled. If there wasn't a full opportunity to express concerns about anything that was alleged - because there are many other things that are out there - then I would welcome it at the earliest opportunity.

Ms. Mullally, are you familiar with the term, "Easter eggs"?

MS. MULLALLY: Could you elaborate?

MR. GRAHAM: Are you familiar with the term "Easter eggs" as it relates to VLTs?

MS. MULLALLY: I'm not familiar with that term.

MR. GRAHAM: Are you familiar with anomalies that have been found in other jurisdictions that raise questions about the integrity of the VLT machine itself?

MS. MULLALLY: I'm not familiar with any information of that nature.

MR. GRAHAM: Have you made inquiries after these charges were laid? I'm assuming they were laid in relation to machines that were physically under your responsibility, is that correct?

MS. MULLALLY: I don't know that information specifically. As I indicated, Mr. Graham, I would have to go to our operator, the Atlantic Lottery Corporation, for the specifics. I would be happy to provide that in written form to you, but what I can advise you is that we did have questions and discussion around whether this had any impact on the fairness and integrity of the system, and ALC assured us that it didn't - but I'd be happy to provide a written report to you on this matter.

MR. GRAHAM: I want to raise questions about the integrity of these machines. You're familiar with the term "source code", are you?

MS. MULLALLY: Generally, yes.

[Page 16]

MR. GRAHAM: Okay. The source code is really the brain of VLTs - correct?

MS. MULLALLY: Well, any kind of a programming code that's done clearly is how the machines work, that's correct.

MR. GRAHAM: Right. Have you had an opportunity to read the newspaper reports with respect to the machines for which there may have been some fraud in Nova Scotia? Are you familiar with those newspaper reports?

MS. MULLALLY: Which are you referring to?

MR. GRAHAM: I refer specifically again to what was said by the RCMP officer, Sgt. Ryan. Asked if anyone used these allegedly retrofitted machines - I'm assuming that you haven't confirmed that they're in Nova Scotia, but I'm assuming they are, I haven't heard a specific response - to generate winnings on command, Sgt. Ryan stressed the three men have not been charged with doing so, and let's remember the requirement for proof in those trials is proof beyond a reasonable doubt, but something like that may come out at trial from expert witnesses. So the question is whether or not you or Mr. O'Connor, who's on the board for the Atlantic Lottery Corporation, diligently tried to determine if in fact there were problems, given there's a public report that there may be problems from the RCMP?

MS. MULLALLY: I would suggest from listening to that quote, that comment is fairly speculative at this point in time. There isn't sufficient information to know what is in the investigation. I would also suggest there was due diligence from the point of view it was a question that was clearly asked, does this have any impact on the fairness and integrity of our system, and ALC assured us that it did not.

Having said that, I would be pleased to provide a detailed report to you on this matter. I can also say, Mr. Graham, the integrity and fairness of the system is critically important to any jurisdiction that offers any gambling product, whether it be ticket lottery or video lottery or any other type. There is independent testing that is conducted on all products and systems. They go through rigorous evaluation and multiple testing processes to ensure they require an independent tester to provide confirmation that they do comply with the product specifications and with the regulations within each jurisdiction. So there is a process in place.

With regard to this specific issue I would again offer and be pleased to do so, to provide a full written report on the matter, as much as can be made available, given that it's currently under a prosecution process. There's some information that I assume will be confidential on that basis. Again, I would be happy to provide it.

Am I satisfied in the current environment, that we have high integrity, that there are strong focuses on security and fairness? Absolutely. Atlantic Lottery Corporation, who is an expert in this field, has vast experience in the area of ensuring integrity of systems. They

[Page 17]

constantly monitor and evaluate the products and the overall main system. They do so, not only in Nova Scotia, but also in the other three Atlantic Provinces. It is something that is of mission critical importance to that corporation and they watch it very closely.

MR. CHAIRMAN: The time has expired for the Liberal caucus. We will now turn to the PC caucus.

The honourable member for Kings North.

MR. MARK PARENT: I apologize that I wasn't here at the beginning so I didn't hear your opening remarks. I was involved in a radio interview.

I guess I just want to preface my comments by stating that since 1999, when I was elected as MLA, there have been four points that I have wanted to make about gambling. Two of them I feel are starting to be addressed because back in 1999, the addictions expert who was really centering mainly upon alcohol addiction for a good friend of mine, a former classmate at Divinity College, came to me and said he was overwhelmed with all the gambling addictions he was having to deal with that wasn't part of his mandate. His mandate was mainly alcohol addiction. So, in 1999, and prior to that, David Morse and myself, were introduced to the problem of VLTs which, to us, had been fairly new and we began to research it.

Ever since then I've been trying to get government and the Gaming Corporation to admit there is a problem with VLTs. So, Mr. O'Connor, in your letter, I appreciate the comments you made to Minister Christie. I think I take some measure of satisfaction - we may differ in terms of how the problem should be addressed - that at least everyone's acknowledging that there is a problem with VLTs, electronic gaming machines, that we do have a serious problem here.

The second thing I wanted to get out there was that the revenue that we kept touting was balanced by socio-economic costs - costs to our justice system, costs to our community services system and that will be addressed with the socio-economic study that's coming up. I have written numerous letters to, not to you Ms. Mullally, but to the regulating person saying, listen, when the figures are reported for revenue generated by gambling, we need to at least acknowledge in some sort of tag or something at the tail end that there are costs associated with this as well.

This is what really began to turn the tide in dealing with the smoking and we wouldn't have the legislation that we have now on smoking in public places, unless people had begun to make the corollary that smoking doesn't just bring in revenue to government, it actually costs government. I know with gambling, it's a far harder task to get a handle on those costs than it is with smoking where you just add up your lung cancer cases and the ones that are attributable to smoking. Nonetheless, I think we've made some progress, there is a

[Page 18]

problem with electronic gaming machines - everyone admits that, no one denies that any longer.

Number two, we know there are costs involved, that it's not all revenue and we're going to try and get a handle on that.

[10:00 a.m.]

Number three is a problem, something I've been trying to get admitted to, not so much by yourselves but perhaps by the general population, because the third problem I have in getting people to understand that we need to do something about this, is that people find it easy to see that you can have an addiction to something you ingest, alcohol, tobacco, et cetera, but they find it very hard to get a handle that you can actually be addicted to a VLT. I find it hard, to tell you the truth, but I know from my friends who are in the addictions fields, I know from my counselling as a minister, I know from my work as an MLA that this addiction is very strong, that it's an addiction that's stronger than other types of addictions.

How it happens, we have speculations on how it changes the brain chemistry, et cetera, but that's a third thing that we need to get across. I've had conversations with Dr. Strang about that, that the health community has to come to the fore here in this regard. They're the ones who have the expertise to educate the public that you can be addicted to something that you don't ingest. So that's a third thing. I think, really, that's mainly the health community that has to take the lead in that regard because they're the ones who will have the expertise and the community support to get that message out.

The fourth one - and I'm leading up to some questions - is that I haven't been successful, at all, in getting anybody to talk about or to recognize deals with more than the VLTs. It really touches more upon the lotteries than it does upon the VLTs. I'm quite annoyed with the federal government in this regard, on this issue, because I really think you can draw a correlation between the federal government passing off control of gambling to the provinces and downsizing and dealing with their debt by putting the burden for health care education costs on the provincial governments, and saying, well, you take care of this.

Then the provinces are sort of left trying - where do we find the money to take care of all these things that we have to deal with. So gambling revenue was a growing phenomenon, it was money that was seen that could deal with the very important issues of how to meet health budgets when the federal government was downsizing, trying to deal with its debt on the backs of the provinces. So this is a problem across Canada, that's what I'm saying.

What I'm leading up to here is that there is a larger philosophical question which I think, in the long run, is every bit as deleterious toward society, and that is that we are establishing, in the minds of people, I think, the feeling that they can get something for

[Page 19]

nothing. We are undermining the work ethic. Now people may think I'm being over-reactive here, but when you think about it, not that long ago, in any of the social community organizations I belong to, when they wanted money, they came for a donation. Now every single one of them, and I'm involved, too, as a member of Rotary Lions, we sell tickets on lotteries to win prizes. School kids, doing the same thing.

Gambling has become such an insidious part of our culture, and what it does, besides the electronic gaming machines, which I think are a separate problem that we've recognized, the addiction, is it begins to create, in the minds of people, this feeling that they can get something for nothing, which has the effect of undermining the work ethic. That's something that I really think, as a wider society, all of us, and certainly not the Gaming Corporation by itself, that's really not your mandate, have to get some sort of handle on that and what that's doing. I really do think that the work ethic is being undermined.

Now it's not just gambling that's been undermining it, there have been other factors as well. But when the work ethic gets undermined, society begins to crumble. It's interesting, I was in Cuba just recently on holidays, and I was reading Che Guevara's work. I'm quite fascinated with the man, since I grew up in Bolivia and he was killed in Bolivia. In his work, too, he comes back time and time again, trying to build up the work ethic, because unless people have a strong work ethic, you're not going to have a strong society, you're not going to have a good economy.

Anyway, those are four things, just as background. They're not really questions, but I have an opportunity to put them out there and I wanted to put them out, because I do think one and two are being looked at. Number three, I think the health community has to step up to the plate, and help us understand, as a society, how these things can be addictive. But number four is a philosophical question that really governments of all stripes have to deal with, what are we doing to the work ethic, are we undermining it and if we're undermining it, how can we stop that? Anyway, to some specific questions right now.

In terms of cross addictions you raised the issue, Ms. Mullally, that cross addictions - 30 per cent, I think, was the figure you threw out. I guess this is one of the things that I find time and time again in government action - which is almost why I feel that it is better to do as little as possible when you're in government because the ironic comes into play - you make a change to make something better and you make it worse. I'm wondering, by taking them out of corner convenience stores, which we did, in order to restrict access to the VLTs - we've put them in bars and lounges - is the cross addiction a cross addiction with alcohol and did we make that problem worse, or is the cross addiction an addiction with something else? Do you have any statistics on that?

MS. MULLALLY: I don't have any specific statistics on alcohol versus other forms of addiction for a problem gambler. I think the decision in the early 1990s to reduce accessibility of the VLTs to a certain type of establishment, I think, was a good one. I think

[Page 20]

having the VLTs in convenience stores and that broad accessibility, that was probably not in the best interests of the province. We also recognize that accessibility is now limited to those licenced establishments and the question is, of course, does that correlate that the establishment has both alcohol and the machine and does that somehow perpetuate or create even a greater problem? That I don't know.

I know there are some studies about alcohol consumption and gambling but there are not any clear studies that say alcohol versus drug versus other forms of addiction are more likely to be connected to a problem gambler. But I think your point is well taken, I think accessibility and availability is a big issue and that's why the gaming strategy is focused on reducing the accessibility and availability through the reduction of 30 per cent of the machines under the Gaming Corporation's responsibility and through the reduction in the hours of operation. It's a starting point and I think we need to continue to evaluate and monitor it to see what is the right model for Nova Scotia that mitigates the harm as much as possible.

MR. PARENT: In terms of accessibility, I think it is in Australia where they have quite a number of machines but in fewer locations so that you'd have mini-casinos, mini-VLT malls or whatever, but you wouldn't have them in as many locations across the province. Did you look at that model and evaluate that?

MR. CHAIRMAN: Mr. O'Connor.

MR. O'CONNOR: In the interests of answering a question, yes, I think that the Gaming Corporation would certainly be interested in looking at a model - we call it community-based gaming centres - for the very reason that you've just mentioned which is it might be a mechanism that further reduces accessibility. You raised in your earlier question an interesting issue which is really the crux of this who thing from my perspective, and that is that you have to be careful and balanced. You don't want to reduce accessibility to such an extent that you create a void in the environment that others would - less desirable, organized crime and so on - endeavour to fill. That's kind of the trick in the whole thing, that's what you try to do, but the Gaming Corporation, the board has had discussions around this and we would like to look at that model sometime in the future because we think it has some potential.

MR. PARENT: The benefit I could see of it, besides limiting accessibility, is that if we could get - and I think I asked this question before - staff who are trained to be able to differentiate who is a problem gambler from who isn't. With fewer locations you might be able to get that. I raised that issue before because a bartender, for example, if someone is drinking excessively and becomes drunk, they are to cut them off for fear that they might get in a car and have an accident, they would be held accountable. Why does the same thing not hold true with someone who's gambling excessively? Is there some problem in them monitoring that?

[Page 21]

MS. MULLALLY: I think from my experience and discussions with retailers and the operators, sometimes it's difficult to identify - not always, I'll be very clear but sometimes maybe it's not as easy to identify as it is for someone who's showing the physical characteristics of having over-consumed alcohol. It's very clear when you see those characteristics and the bar staff recognize that and that's part of the program.

I think when it comes to gambling, we need to look at similar kinds of programs, we need to know that people who are delivering these programs, who are on the front line, are well trained and we do that through a Video Lottery Retailer Training Program now. Could we do more? I think we need to look at that. I think we need to look at it in light of maybe a potentially different model or a new model that will reduce accessibility and availability and have staff who are solely focused in ensuring that program is running as safely and as responsibly as possible. So I think those are excellent points that we need to look at in the future.

MR. PARENT: I want to talk about on-reserve VLTs, because when Bill No. 17 was brought forward by the Opposition, accepted by the government, they excluded the moratorium on machines on reserves. There was a moratorium placed on machines off-reserve, but not on-reserve machines because the Liberal Government of the day, I understand, did not want that moratorium placed there. So do you have any statistics on the increase in machines once the moratorium was put in? I think it was put in in 1998?

MS. MULLALLY: I don't have any specific stats here, but I can tell you that there are currently approximately 600 VLTs on-reserve, that the number of machines that are on-reserve and authorized to be on-reserve is contained within the individual band gaming agreements which are administered by the Office of Aboriginal Affairs. I do understand there has been an increase in the number in circulation since 1998, but I don't have the specific number.

MR. PARENT: Do you have any statistics on the amount wagered on those machines versus off-reserve machines?

MS. MULLALLY: I don't have the amount wagered, but I do know that in the fiscal year 2004-05, I believe the total revenue from the 600 machines was approximately $35 million.

MR. PARENT: Okay, because one of the problems we face is with the ban on smoking in public places. I have my Lions Club members coming to me saying, we're going to be disadvantaged in our bingo game because you can't have smoking, when they have a bingo on the reserve where they can have smoking - and that's, of course, the same argument you get here. Those agreements are not handled through the Gaming Corporation, they're handled through the Office of Aboriginal Affairs?

[Page 22]

MS. MULLALLY: We are a signatory to the agreement because our role through our operator - Atlantic Lottery Corporation provides the machines, and they have to be an Atlantic Lottery Corporation-approved device in order to be on-reserve, and that's specifically referenced in the band gaming agreement - is largely providing the machines through our operator and, in addition, providing any technical and operating support to ensure that the machines are operating as they should be operating.

MR. PARENT: Okay. I want to touch on grey machines very quickly - but then turn it to my colleague who wants to continue on that issue - because I think that is a key issue, the illegal machines. I have phoned B.C. and Ontario, talking to the constable there, and the constable in British Columbia with the RCMP quoted 6,000 to 10,000 to me over the phone; the OPP officer said that he couldn't give me a figure but they were a factor. They're all very defensive when you ask them the question - well the one guy joked with me and said there are no illegal machines in B.C. because if they were there we would close them all down, Mark. I guess you are sort of, in a sense, when you ask that question, criticizing them or they take it as a criticism.

But why can't we get a better handle on this? It would seem to me the police can put forward statistics. I asked them to put that in writing, and they won't do that, but they'll have reports on the amount of drugs and many different things - so why can't they do that? You must find the same frustration. I asked if they could give me a letter stating that there are 6,000 to 10,000 illegal machines and he refused to do it. Why can't we get better statistics on that? I guess that's not really a fair question to ask you, it's a question for the law enforcement officials, but it's something that I find frustrating.

MR. CHAIRMAN: Mr. O'Connor.

MR. O'CONNOR: Yes, the issue of numbers is a difficult one. I spent a day with the organized crime section of the Ontario Provincial Police. I asked the same questions around numbers because I wanted to understand the issue of organized crime in VLTs in a jurisdiction where VLTs are not legal. They gave me a number and a slide presentation that showed 10,000 to 15,000 machines, but quite frankly they were reluctant to be pinned down to a specific number for the very reasons that you've articulated, which is that it's run by organized crime and, as a consequence, it's very difficult to get a fix on it. I can tell you, however, that I'm absolutely convinced it's a significant problem. They have a 30-some person force in Ontario that works specifically on illegal gambling. We went out with a couple of undercover officers and I will just give you a little example because I think it describes sort of the insidious nature of how this works.

[10:15 a.m.]

I went into one spot to get a cup of coffee and there were two VLTs sitting right there by the cash register which were clearly illegal. Beside them was an ATM machine, to speak

[Page 23]

to your point, Mr. Pye. After I came out I asked about it and, of course, they said, yes, we're aware of that and they're not, quite frankly, that interested in the operator, they're after the distributors which is organized crime. The issue around the ATM was very interesting to me because the way they explained it is, of course, an ATM machine is not there for the purpose of that shop because it's only a 400 square foot shop that I was in, it's there to feed the VLT business. This detective sergeant said to me, you know, when you put your debit card in the ATM machine, you've just given your banking information to organized crime. So that's sort of an indicator of the insidious nature of that business as it relates to VLTs and those folks that I spent the day with are unequivocal when they say that VLTs in that jurisdiction are about organized crime. So it does exist if there's a sufficient void created.

MR. CHAIRMAN: Your time has expired. I'll now turn to the NDP caucus.

The honourable member for Halifax Needham.

MS. MAUREEN MACDONALD: Mr. Chairman, I will be sharing my time with my colleague. I have one specific question, but before I get to my question, I just want to say that prior to being elected I was a social worker. I have worked with families impacted by gambling addictions. Earlier this week the Nova Scotia Association of Social Workers, an organization I'm not a member of but have great respect for, called for a full ban on VLTs in the Province of Nova Scotia. These are folks who I'm sure deal, on a regular basis with the horrendous impact of gambling addictions.

I have some difficulty I have to admit with the corporation being so directly involved in defining what responsible gambling is and, for example, promoting Responsible Gambling Week. In some ways I see this as putting DuMaurier in charge of promoting Weedless Wednesday. I think that there must be some conflict there in terms of your role. I don't expect you to respond to this necessarily right now because our time is limited. I did want to say that because I do have this conflict myself, when I look at the information that has been coming out and it's something that I'm trying to come to grips with and I would be very interested in knowing how you view this.

You speak with obvious knowledge about studies that are occurring about problem gambling and VLT use, but I hear very little information about people who play the VLTs who don't become addicted and what the aspects of their situations are that we might learn from. I don't know if there are studies or research that is attempting to look at this. My own background as a researcher tells me that we often study the most vulnerable and we fail to look at the resilient. There's a lot to be gained by looking at resilience. We tend to study the poor, but we never study people who don't fall into poverty, mostly because they won't give us access to studying them, but, nevertheless, I think it's important to try to also focus on resilience.

[Page 24]

The specific question I have is with respect to the Atlantic Lottery Corporation's recent venture into the Star Wars scratch ticket. There's been information in the news this week that there's a new lottery ticket, it's featuring Star Wars. It's obvious to me that this is not a ticket that is focused on a senior citizen's market, it's focused on young people. The addiction counsellors say that gambling in youth tends to be around scratch tickets, in some respects. It's a way to get people into, I think, that cycle that my colleague, the member for Kings North, talked about, that you can get something for nothing. These games of chance are very enticing.

I would like to know what the corporation's position is with respect to the Star Wars scratch ticket, and what steps you might be taking to address concerns around the enticement of youth, in particular, into the arena of gambling.

MR. CHAIRMAN: Mr. O'Connor, are you going to field that question?

MR. O'CONNOR: I'll start and maybe turn it to Marie to finish off the answer. I would just like, if possible, to address your earlier comment about conflict. I think that's emerged time and time again as an issue of substance. Frankly, it's an issue that we struggle with all the time, as well. Having said that, I guess two points I'd like to make, one is that we certainly don't own the issue of social responsibility. There are a number of other government departments, agencies and entities that also have a shared responsibility in that.

But, and this is my second point, having said that, I can't imagine not having it part of what we need to turn our mind to on a regular basis. With respect, I suspect you couldn't either if you sort of look at it from the other angle. You would not want the Gaming Corporation to act in a manner devoid of any concern for social responsibility. It's a conflict, I like to call it a balance, rather than a conflict, but it's inherent in the business we do, it's something that we deal with every single day.

MR. CHAIRMAN: Ms. Mullally, do you have some comments?

MS. MULLALLY: I think the issue of tickets and youth gambling is a serious one. I know that in developing products, the Atlantic Lottery Corporation has a standard around responsible gaming, in determining themes, in determining the appropriate products. I will address this particular product with the Altantic Lottery Corporation. I'm not specifically familiar with it, but I will and I take your point very seriously. Clearly, we don't want to promote youth gambling.

Quite frankly, that's the last thing we want in this province or anywhere in the world. The reality is, though, they're getting exposed to it. I think we all know that through Internet gambling. Whether we like it or not, these pop-up screens are coming on all our computers. This generation of youth are probably the most exposed and most familiar with using technology than any of us would be. One of the things I think we do need to focus on,

[Page 25]

because of that reality, is education and information. Again, it's not just the Gaming Corporation that should be concerned with that. We should be, but also the Office of Health Promotion, Community Services, other organizations in government.

We need to make sure that our youth are getting informed and educated about problem gambling, and if they're not we could be potentially, not through any fault of anything that's being done by government, because Internet gambling is not government sanctioned or operated, but the reality is they're being exposed to it, and we could have a whole new generation of problem gamblers, with actually nothing that the government has done that caused it.

So our key here is we have to give as much education and information to this group. There is a curriculum supplement that you may be aware of in the schools that was developed by the Departments of Education and Health. I think it's excellent material, very frank, very clear. It speaks to that age group. We also brought forward, again, not for purposes of promoting the corporation, because we didn't, but we spearheaded bringing a play called Caught in the Game. It was piloted at two high schools, Grades 11 and 12, 500 students saw this play. It was delivered and developed through the Responsible Gambling Council of Canada. I'll have to say it was hugely powerful and the results and the feedback from the students that independently provided their comments to the Responsible Gambling Council, showed that it had a measurable impact. In fact, over 90 per cent of the respondents said that they learned something new and that they would share this information about problem gambling to others. In addition, over 85 per cent of them said, we now know where to go for help because one of the pieces of information that was provided was the local district health authority information and counsellor.

I think we have a long way to go, but I think we're moving in the right direction, and it's not solely for the corporation for a variety of reasons. It's something that a number of organizations need to be concerned with and involved in.

MR. CHAIRMAN: The honourable member for Dartmouth North. You have about a minute left.

MR. PYE: Mr. Chairman, that's unfortunate. I wanted to put my time around the possible introduction of electronic bingo in the Province of Nova Scotia. The Gaming Corporation recognized, to some extent, because of video lottery machines, that bingo operations have seen a significant reduction in their revenues that come through bingo facilities. As a matter of fact, they have recognized that even some bingo operations have closed down because it's no longer feasible. Many of these bingo operations were run by charities and organizations that contributed to the community. My question is, is electronic bingo going to be managed by the Gaming Corporation, and if electronic bingo is going to be managed by the Gaming Corporation, have there been any studies placed with the respect to the potential to create new addictions in this province as a result of electronic bingo?

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MR. CHAIRMAN: Perhaps the witness could deal with that question during their closing comments, and we'll allow some time for that. I'll turn to the Liberal caucus, Mr. Graham.

MR. GRAHAM: Thank you, Mr. Chairman. I know this is a complex issue, given the amount of time that we have, unfortunately, and the length of the answers, I'm not sure if we're going to be able to get out a meaningful exchange of questions and answers, given the volume of material that's in front of us. Let me start just with a comment at first. The comment relates to the laying of charges. Nova Scotia machines are the subject of fraud charges, and this Gaming Corporation, I don't think, has ever publicly stated that. The Atlantic Lottery Corporation, we hear today, has provided assurances to the Nova Scotia Gaming Corporation that there's been no breach of integrity or fairness in relation to those fraud charges for Nova Scotia machines.

One has to raise questions, as my colleagues did, on an earlier question about, and I don't question ALC's specific orientation, whether or not that puts the fox in the henhouse to a certain extent. Taking the word of ALC and not doing some type of independent assessment, because it is this Gaming Corporation's responsibility to look after the people of Nova Scotia. If there are suggestions around this highly-secretive industry, around these highly-secretive machines, that there may be these things called Easter eggs, or some other elements that could be creating anomalies or problems and it would be coming out of the evidence in trials. I would suggest, Mr. Chairman, that it is incumbent on the Gaming Corporation of Nova Scotia to know more than it appears to know, or to do more than just accept the word of the Atlantic Lottery Corporation.

Let me turn to the second subject that I'd like to briefly comment on. It relates to the assertions with respect to the number of machines in Ontario and British Columbia, from my friend, I would reiterate what I've said on several other occasions. Through sources, both policing and gaming, our indication is that the nature of the problem at its worst, in Ontario, would be at the high hundreds, low thousands, in total numbers. In British Columbia, it's 200-300, but what I find to be of interest is that is the only research that appears to have been done in this area, the only Party that's prepared to actually study the issue and determine how great is the problem, because the proof, the acid test, in all of this, is whether or not it helps the citizens who are using these machines. There has only been one, well actually there have been two studies done in this, but the most reliable one because it was a more comprehensive period of time, came out of South Carolina, and I note with interest what came out in the Red Room last week, there was an indication that Ms. Mullally, after the gaming strategy was announced, went to South Carolina presumably to determine what happened and I would like to file with the committee a letter signed by Dr. Frank Quinn, a researcher in South Carolina, who I understand met with Ms. Mullally, and provided in this letter certainly a clear indication of the overwhelming success that has happened in South Carolina.

[10:30 a.m.]

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I know that she met with police officials and we know that the police officials who have responded so far have given contradictory indications of what the number of machines are that are seized. I understand that there's a warehouse of 4,000 machines and they seize about 1,000 per month, but nonetheless it's certainly in these circumstances curious that the government has not responded to repeated requests to have an independent assessment done, not just by Mr. O'Connor who goes to Ontario, or Ms. Mullally who might go down to South Carolina after the initiative is announced, but actually something that's independent on a go-forward basis.

I'm sure that there will be opportunity to respond with respect to those issues. I think in the time that we have I would like to turn to the Windsor situation. It was referenced by Ms. Mullally earlier as something that they intend to go forward with. In the Red Room last week there was an indication and, in fact, it's contained in the briefing note to the minister concerning the groceries-for-gambling deals, that participants are chosen randomly at VLT sites by the researchers.

Now, Mr. Chairman, when I asked questions about this in the Red Room, it was conceded by the minister that if the people who are involved in that study were not in front of the machines at the time that they were recruited into the study, then that isn't consistent with the model that the government has advanced. I specifically would like to reference, that was the testimony if I understand it, the direct quote, or something close to a direct quote from the Minister of Finance.

Ms. Mullally, if we have somebody in the gallery today who's prepared to say that they were recruited or they entered that program and they were not in front of a machine at the time that they entered the program and they simply walked in and made an inquiry without being before the machine, would you agree that that would be a breach of the model that you've put forward?

MS. MULLALLY: Thank you, Mr. Graham. I would like to first comment on your first point regarding South Carolina. With all due respect, I think you've made some statements that I need to respond to. I want to be very clear that the whole issue of banning VLTs was certainly an option that was looked at very seriously because there is information and, quite frankly, conflicting information regarding the impact of banning VLTs.

The Steering Committee for the Gaming Strategy would have gathered a number of pieces of information. I won't speak to that specifically because at the end of the day it is a government policy decision of what is going to be offered in this province, but I will tell you that my rationale for going to South Carolina was not because I felt we didn't have sufficient information or knowledge prior to developing the gaming strategy, but rather there had been so much conflicting information, namely from yourself, that I thought it was incumbent upon me to go there personally and spend several days meeting with these individuals to see if I could get a clear answer and I'll be frank, there is no clear answer. It is a complex issue and

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I think if people try to simplify it down to the most basic equation, I think they're missing some very fundamental important elements.

I did, in fact, meet with the Illegal Gambling Enforcement Unit. You quoted numbers - 1,000 illegal VLTs confiscated each year, the 800 calls that are not able to be responded to by that unit. The 4,000 illegal machines in the warehouse, I personally saw the 40,000 square foot warehouse where these machines are currently staying and, in fact, some of them have been there for years because they haven't been able to effectively prosecute the cases, not because of the illegal machines, but rather the court system and some of the challenges that quite frankly we've seen in Nova Scotia as well.

I met with the problem gambling helpline people who are part of the Department of Alcohol and Other Drug Abuse Services. I met with three individuals who work in that. They get approximately 130 calls per month for a variety of reasons, I want to be clear, not specifically related to VLTs, but the problem gambling helpline was reinstituted in March 2004 and has been utilized by a number of individuals. I did, in fact, meet with Dr. Frank Quinn whom I have to say is a fine individual. I respect him as someone who is familiar with the issue of problem gambling. I had a number of comments, a number of which you've noted in your letter, which is not new information. He made some other statements that I don't think it would necessarily be appropriate for me to make, but I would suggest those statements, largely because I haven't asked if I could use them, but statements that would suggest that he wasn't familiar with the level of illegal machines being confiscated, and that he suggested, by what that number was, that the number is probably even higher, in terms of how many are in circulation.

I will in no way question Dr. Quinn's comments, his letter, he's a fine individual. I thoroughly enjoyed meeting with him and his wife, and we had an excellent discussion on this issue. The bottom line for me is that it's complex, there is no easy answer, I wish there was. At the end of the day, decisions had to be made, we had to do something about this program. We have a gaming strategy that's moving in the right direction, I think, a significant first step, but more will be done.

With regard to your other item, if you might recall what it related to, and I apologize.

MR. GRAHAM: Windsor.

MS. MULLALLY: Windsor, right. Mr. Graham, I want to answer that question. I can't speak for the minister, because I wasn't speaking for the minister in the Red Chamber. It's not an opportunity to be heard by myself or the Gaming Corporation. So let me clarify, and I received this information from Omnifacts Bristol Research, to make sure we fully understood the process they undertook to recruit these players. I, firstly, would note that there was a criteria used in order to select the 120 individuals. They had to be individuals who played VLTs at least monthly, had to be 19 or over, and also assessed whether they had

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participated in a lot of research projects, because that can impact on the quality of their involvement, if they've been quite involved in these kinds of studies in the past.

I understand that the recruitment process was done under three different models. They recruited on-site at various licensed establishments in the Windsor area, specifically referenced here. The person could have been either playing a machine or at the bar, but the criteria was that they had to be a player. So while they may not have been in front of the machine when they were specifically recruited, they had to have likely been in the establishment and been asked those questions to ensure they met the criteria.

In addition, there were approximately 20 of the panellists recruited by telephone, using a random selection process, and the same screener or the same criteria. These were people who might have participated in other research work related to gaming, but not to the extent that it would somehow impact their participation.

MR. CHAIRMAN: Excuse me, but we're going to have to ask you to wrap up, because we're well past the time allotment.

MS. MULLALLY: I just wanted to clarify there was a recruitment process, it was well documented. There were criteria used to ensure that the type of candidates who were selected were consistent across the board.

MR. CHAIRMAN: The honourable member for Waverley-Fall River.

MR. GARY HINES: Beaver Bank.

MR. CHAIRMAN: Beaver Bank, sorry.

MR. HINES: Thank you, Mr. Chairman. I would be widely criticized if I didn't get that whole name in. Thank you, Mr. O'Connor and Ms. Mullally for coming in here today - it's a complex situation - a lot of research has been done, a lot of requests for expert witnesses. It had been said at one time that an expert is a person who knows more and more about less and less, who soon knows so much about everything, he knows nothing about anything. Sometimes that's the case.

I've seen vast sums of money spent on research, when, really, if you get to the root of it, where you're dealing with people who have real life experiences, you can find out a lot, so I'm going to go to the grey areas. Nobody can convince me that a university professor, professorial, can do the research that tells you something about the grey areas, like the police force can. The police will not come out and give you written statements about where they stand on these issues, because it's suggests, somewhat, that maybe they're failing to do their duties.

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Originally I spent some time in the Collingwood Mountains with individuals who I grew up with and spent a lot of time with, who were very familiar with the grey machines back in their era. I'm kind of dating myself in terms of making that statement. The suggestion to me was, should we dig out the grey machines, we've still got them in the basement with the dust on them. How many of those are still in the basement with the dust on them that they are ready to dig out? It was probably said in jest, but I'm sure it was quite serious that they would dig those out.

But, in investigating crime and investigating grey areas such as the Hell's Angels movement and so on, you cannot get an expert witness that will tell you the magnitude of their operations. That's why it's so difficult to find out something to verify the magnitude of the grey area that may come into play should these VLTs be totally banned.

An example, you can get conflicting interest within political Parties. Yesterday in the Red Room, one member told us that grey machines were not a risk. We changed ministers, approached another subject and we got to a member of the Liberal Party telling us his fear is that if we commit people to using these cards that limit our play and so on, the gray machines will abound, especially in Cape Breton. So you can find conflicting interest all over the place. I think the thing that's important is that this government, and you, have recognized the problem, you've taken steps to handle the problem and so I'm going to allocate some time now for you to tell us a little more about the gaming strategy that you've developed. We do have a TV audience who deserve to know that, I think that's important information we need to get out - what you are doing, where you're going. Tell us something about the awareness research treatment and the addiction services that presently exist so people know what's there for immediate help.

MS. MULLALLY: My pleasure. The gaming strategy - I don't want to repeat myself but yet I think it's so important to do so - that is that the strategy is a significant first step. One could argue that it's not perfect, but I don't think our objective was to find the perfect model because, quite frankly, no one knows the perfect model anywhere in the world as it relates to gambling.

Having said that, I am confident that the right analysis, research and information was readily available to all the decision makers, that, at the end of the day, the focus is on three parts of the strategy. Firstly, as you appropriately noted, ensuring there is increased treatment efforts for those who have a problem gambling addiction. I think we've all recognized that it's important that programs be accessible, that they be effective, that the services be available when people want them and need them. I am confident that commitment has been made and it's reflective in the additional $3 million that has now been dedicated to problem gambling treatment and prevention. I know this government supports that. It recognizes that if there are people in our society who have this problem, we have to have treatment and help for them.

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The second part of this strategy is around enhanced prevention efforts. As I already noted, it is so important that people be educated and informed. We have seen other things in our society where education and information has significantly impacted on people's behaviour. You look at seat belt usage, drinking and driving, even sunscreen. People, through education and awareness and information have learned about the signs and the risks, have learned how to do these things responsibly.

Gambling is no different. We need to have a comprehensive and a broad array of prevention programs - not just through the Gaming Corporation, but through a number of organizations within government and outside of government to make sure people are encouraged and promoted to be responsible players, if they are going to play, that they are well informed about the signs of problem gambling and they know where to get help.

The third part of the strategy which I am particularly pleased with is the commitment to monitor, evaluate and adjust. As we get new information, evidence-based information, research, information from other jurisdictions, that we use that information to assess our decisions, to see if adjustments need to be made. I think the commitment has been well articulated that this is a first step, an important one, but that we need to continue to monitor and evaluate. There will be adjustments, I'll be quite shocked if there aren't changes along the way as we get new information and become more informed on all aspects of this sector.

I can tell you that there's been some positive comments from a variety of individuals. If I might take this time, I will table this document, but there are three individuals in particular and I'm sure you know, perhaps other members can find people that might say something different, but I do want to be on record to be very proud of this strategy. I have before the committee a copy of this document and I have three individuals - a Mr. Stan Sadinski who's the former chair of the Ontario Lottery and Gaming Corporation and also who's been tasked by the provincial Government of Ontario to develop their problem gambling strategy.

He notes in his quote, "The most important principle that has been adopted relates to the policy that social responsibility is the first priority and trumps the generation of revenue. This constitutes leading-edge policy in the field of government-owned and operated gaming and Nova Scotia is to be congratulated for its courage of conviction. Overall, the report provides a sound first step in an evolutionary process. The government deserves much credit for taking this proactive step in dealing with the problem gambling issue."

The second individual, David Hodgins, he's a professor in the Department of Psychology at the University of Calgary and does a lot of research on addictive behaviours and gambling. He notes, "The overall strategy is sound and the people of Nova Scotia should be proud that their government is taking a leadership role in addressing concerns about gambling regulation." Finally, if I may, Mr. Chairman, Dr. Harold Wynne, who is a PhD., a skilled social scientist who conducts scores of social research projects, including on

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gambling research, he notes, "I am very impressed with this initiative and the direction you are taking. In my closing summary at the recent Alberta Gaming Research Institution in Edmonton, I referred to Nova Scotia as the bellwether province when it comes to gaming policy and responsible gaming initiatives. Most importantly, no one disagreed with me!" He congratulated the government for its effort.

I only table this, Mr. Chairman, because I want to make sure it's known that there are some people outside of this jurisdiction who think we are doing the right thing. Is it perfect, have we done everything that's possible at this juncture? Well, I think we have done what's needed to be done to move in the right direction to assess, to evaluate over the next couple of years to ensure that we have the most balanced, socially responsible gaming industry in this province.

MR. HINES: Certainly to gain that information through your strategy and to recognize the need for other changes would suggest that the strategy is working. Mr. O'Connor, I'm going to leave a question with you, why did you decide to write that letter on behalf of the board and to suggest that a gaming strategy was needed?

MR. O'CONNOR: I'm sorry, I'm not sure I . . .

MR. HINES: What prompted you to make that decision to put the strategy in place?

MR. O'CONNOR: Well, maybe I'll speak to two things there, I guess. Firstly, you know, we were in a situation in the Gaming Corporation where frankly we couldn't move any initiatives forward. The climate was such that initiatives that generated revenue, initiatives that were about responsible gaming, no initiatives could go forward and, quite frankly, I think that's because the government didn't have its own comprehensive gaming strategy. It inherited essentially a strategy that had been developed by previous governments and didn't have one of its own and that context was necessary to make good decisions to move forward.

The reason for writing the letter was that we felt it was important that the government, who ultimately makes the final decision on this strategy, was aware that the board had strong views. We're completely confident that Marie, as CEO, was carrying that message, but we thought it needed the extra reinforcement at what we thought was a critical time in making some of those decisions. We felt that the government needed to be bold and it needed to do something substantive which is, in essence, the substance of the letter. So we didn't want there to be any misunderstanding about the perspective of the board and the members on that board because we all live here and we all feel very strongly about making this a better place and making the industry a better industry.

MR. HINES: I asked the question as a back-handed compliment because I appreciate what the board does.

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MR. CHAIRMAN: Sorry, the time has expired and we'll now allow Ms. Mullally and Mr. O'Connor, if you would like to have some closing comments and perhaps address some of the issues that were brought to the table today, please, go ahead.

MS. MULLALLY: Mr. Chairman, I just want to thank very much the committee for the opportunity to respond to your questions. Again I apologize if I misinterpreted this as an opportunity for me to respond to those questions in the most full and accountable and open way. I look forward to the opportunity to answer more questions and to provide additional information that I didn't have an opportunity to provide today as per the questions that were asked. I appreciate the role that this committee plays within our system and I think it's a very important part of the model. So I thank you for your time today.

MR. CHAIRMAN: Mr. O'Connor, are there any other closing comments?


MR. CHAIRMAN: Thank you. The next meeting is on Wednesday, May 18th, at the Legislative Committees Office. CCAF and FCVI will be with us and we will be meeting at 9:30 a.m., on Wednesday morning.

The meeting is adjourned.

[The committee adjourned at 10:51 a.m.]