Loto-Québec Unveils KPMG Report On Prize Payment
and Will Implement All of the Report’s Recommendations

Montréal, October 23, 2007- Loto-Québec unveiled the contents today of a report produced by the KPMG consulting firm, which was commissioned in April 2007 to conduct an independent and exhaustive review of the public corporation’s processes and procedures related to the payment of prizes.

Loto-Québec welcomes KPMG’s report and is committed to implementing all the recommendations contained therein. While the timetable for putting these recommendations into place will take into account the required computer-based developments, certain measures proposed in the report have already been applied or are in the process of being put into application.

It was after the issuance of a call for tenders by invitation that Loto-Québec selected KPMG to examine its prize payment operations in order to assure that all risks were being appropriately managed and, where applicable, to recommend specific improvements to be made. The 28-page document prepared by the consulting firm is available in its entirety on the Corporation’s Web site at lotoquebec.com.

“The release of this report and our commitment to follow up on its findings as rapidly as possible is a clear demonstration of the fact that we will spare no effort to maintain the public confidence we have earned over the past 37 years,” underlined Mr. Alain Cousineau, President and Chief Executive Officer of Loto-Québec. “Everything related to the integrity of our operations calls for the adoption of strict precautions and our constant vigilance.”

Consumer Awareness Program
One of the main areas of improvement suggested in the report involves the sensitization of lottery enthusiasts to the importance of developing careful habits as a reflex. Consequently, Loto-Québec will soon be launching an extensive campaign whose primary objective will be to prompt consumers to endorse their lottery tickets upon purchase. They will also be urged to pay careful attention to the messages on the customer displays on game terminals when validating their tickets, particularly to the sound emitted by the terminal when it validates a winning ticket.

The operation of Loto-Québec's 1-800 customer service line will also be revised so as to more effectively serve consumers with questions or complaints. In addition, various measures recommended by KPMG are to be implemented in early 2008. For example, whether it is a winner or not, the ticket will be returned to the consumer, along with the validation coupon.

Self-Service Ticket Verification
Some of the improvements advocated in the KPMG report have already been put into place. For instance, online lottery tickets now bear a message encouraging consumers to endorse the back of their tickets upon purchase. As well, a second musical tone was added to game terminals in order to distinguish the size of prizes, and Loto-Québec's Security Department now conducts certain checks when a prize is claimed by a retailer, a retailer’s employee, a wholesaler, or a member of the Corporation’s personnel.

Among the report recommendations in the process of being realized is the implementation of self-service ticket verification systems. Ordered in July, installation of these systems should begin in autumn 2008 at all computerized points of sale. These systems will serve to reduce the workload of retailers, while offering a secure alternative to current verification methods.

The new units will be able to verify both online and instant lottery tickets. Once these devices are installed throughout the computerized lottery retailer network, consumers will be able to verify for themselves if they hold a winning ticket.

“Whether it be these future self-serve verification systems, or the various additions made recently to game terminals, customer displays and to the tickets themselves,” added Mr. Cousineau, “we are offering retailers new ways to assure their customers that they receive all amounts they are entitled to.”

Origins of the KPMG Report Mandate
The origins of the mandate entrusted to KPMG date back to March 2007 and the publication of a report by the Ontario Ombudsman. This report was prepared in response to a feature aired on October 25, 2006 by the CBC public affairs program, The Fifth Estate, during which it was revealed that Ontario Lottery and Gaming Corporation retailers were showing an abnormally high number of wins. The program focused attention on the case of one convenience store owner who fraudulently claimed a prize of $250,000 actually won by one of his customers.

Following the report by The Fifth Estate, Loto-Québec undertook an effort to determine how many of its retailers had won prizes of $50,000 or more over the previous five years. Based on its findings, the Corporation concluded that these retailers were not winning any more often than other lottery players , according to estimates of their respective ticket consumption.

This conclusion was validated by the auditing firm of Samson Bélair / Deloitte & Touche on the basis of the hypotheses provided and probability calculations in accordance with statistical norms. For the purposes of their validation, the auditing firm called upon the services of a qualified mathematician teaching at Université du Québec à Montréal.

In March, upon the publication of the Ontario Ombudsman’s report confirming the vulnerability of that province’s lottery consumers to fraudulent activity on the part of retailers and their employees, Loto-Québec agreed to commission an independent firm to produce a report on its own processes and procedures. The firm mandated to prepare the report (KPMG) has already received similar commissions from lottery corporations in Ontario, British Columbia and the Atlantic provinces.

Report Follow-Up
As it had committed to do, Loto-Québec has forwarded the KPMG report to the Auditor General of Québec for review. Starting this November, the Corporation's President and Chief Executive Officer will be submitting a detailed action plan to the Board of Directors for each of the areas of improvement recommended by the consulting firm in its report.

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Information:

Jean-Pierre Roy
Media Relations Department
514-499-5151

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