Minn. lottery director resigns after timeshare inquiry

Minnesota State Lottery Director Ed Van Petten abruptly resigned Friday after a Star Tribune inquiry found that taxpayers had reimbursed Van Petten for staying in his own timeshare unit when traveling.

"He's resigned. That speaks for itself," said Gov. Mark Dayton, who added that he would have asked for the resignation if Van Petten had not offered it.

Van Petten had been reimbursed for more than $7,000 after he and his staff stayed at his personal timeshare units during conferences in Las Vegas, Atlantic City and New Orleans, lottery travel records show.

The reimbursements appear to violate a state policy that forbids employees from being "reimbursed for staying at the house of a relative, friend, or personally owned property," according to Minnesota Management and Budget, the state's budget office.

Van Petten initially defended the timeshare arrangement in an interview, but he reversed course Friday morning after a meeting with Dayton's chief of staff.

"I made a mistake. I don't want to embarrass the governor," said Van Petten, who made $117,721 a year. "He's been wonderful to work with. So I submitted my resignation and they accepted."

In a brief resignation letter, he praised his lottery colleagues and said he was proud to work with them.

The Minnesota State Lottery is already facing scrutiny in court and by legislators after a wrongful termination lawsuit by a former top official raised the issue of excessive alcohol use at out-of-state conferences and meetings.

House Speaker Kurt Daudt, R-Crown, said in a statement that Dayton "needs to prove to Minnesotans that [he] has controls in place to prevent hand-picked department heads from inappropriately spending taxpayer dollars."

A visibly angry Dayton defended his administration at a news conference, saying the resignation was deflecting attention from the good work of the vast majority of state employees.

"Is this an indication of some systematic failure of fiscal oversight in the state of Minnesota? I would say absolutely not." He added that, "99.99 percent" of state workers are doing a fine job and upholding the state's rigorous ethical standards.

The lottery is one of the smallest departments in state government, yet Van Petten typically spent more on out-of-state travel than the leaders of the state's largest and most complex agencies, according to data from the budget office. In 2014, Van Petten spent $6,126 on travel, nearly $2,000 more than Minnesota Human Services Commissioner Lucinda Jesson and nearly $2,500 more than Tom Landwehr, Department of Natural Resources commissioner. In 2015, he topped each of them again.

When he and his staff attended out-of-state meetings, they often stayed at upscale venues like Miami's Trump International Beach Resort and the Marriott Marquis in New York City, according to travel records. When a lottery official traveled to Los Angeles, he stayed at the Sunset Marquis in West Hollywood, where the first night stay topped $400.

Van Petten said lottery staffers usually book rooms at the hotels where the conference is being held, so the costs are not really within their control.

He said the conferences and meetings give lottery staff a chance to get new ideas and see the latest research about marketing, technology and other issues from industry experts.

"There's no substitute for face-to-face meetings," Van Petten said in an earlier interview. "I think it's very beneficial. I don't know any industry that doesn't have a trade conference."

The lottery is an unusual creation of the state that must return a large share of profit to the general fund budget. Since its inception about 25 years ago, the lottery has poured about $2.5 billion into the budget for state services, everything from transportation, to parks, to state nursing homes.

Van Petten highlighted that lottery profits sent to state coffers keep increasing even though sales are flat or down slightly — indicating the lottery is operating more efficiently than ever.

The fresh concerns about lottery spending come as many state legislators have been relentlessly targeting what they call government waste and loose oversight. In 2013, a state audit criticized the lottery for allowing three employees to accumulate frequent flier miles on personal accounts without ensuring rewarded miles were used to reduce the cost of future state-paid business travel.

Johnene Canfield, interim lottery director who was fired earlier this year for being intoxicated on the job, says in her lawsuit that she was wrongfully terminated because Van Petten encouraged her to drink during work-related travel even though she was ordered not to by other state officials. Dayton's former chief of staff, Lt. Gov. Tina Smith, suspended Canfield for two weeks for being publicly drunk at out-of-state conferences and meetings.

Canfield has also alleged gender discrimination, saying she was treated differently from male colleagues accused of other kinds of misconduct who kept their jobs.

The lawsuit cites Don Feeney, the lottery's research and planning director. Feeney has traveled out of state 16 times in the past two years or so, with trips to Vancouver and Seattle, Myrtle Beach, Orlando and San Francisco, among other cities, according to airline and hotel receipts. In recent years, he has stayed at expensive hotels including the Helmsley Park Lane on Central Park South in New York City, the Mayflower in Washington, D.C., and the Venetian in Las Vegas.

Feeney, who declined to comment through a lottery attorney, has frequently traveled to conferences aimed at curbing gambling addiction, including a stint as board president of National Council on Problem Gambling.

"I firmly believe we have an obligation to support organizations such as that and we do, quite vigorously," Van Petten said about Feeney's travel.

The lottery has a state mandate to address gambling addiction, every year giving the Department of Human Services up to $2 million to address the issue.

The lottery is a relatively small agency, employing 154 people. In fiscal year 2015, the lottery took in about $535 million from selling such games of chance as scratch-off tickets and Powerball.

Dayton said a search to replace Van Petten will begin immediately. He cautioned that finding someone in the public sector with experience in the gambling industry can be challenging.

"It's an important position, and it's important to have someone with the highest integrity," he said.

J. Patrick Coolican • 651-925-5042