California Lottery gave away $212,500 in Scratchers on ‘Ellen.’ Some call it a misuse of funds

SACRAMENTO —  Comedian Ellen DeGeneres drew wild cheers from the studio audience of her television talk show in December when she announced each person in attendance would receive a $500 bundle of Scratchers tickets from the California State Lottery.

Lottery officials saw it as a publicity boon, but a whistleblower complaint filed by some lottery employees argues the agency’s giveaway of the tickets — which have a combined face value of $212,500 — should be investigated as a “misuse of funds,” according to documents obtained by the Los Angeles Times.

The controversy comes just weeks before a state audit is scheduled to be released on lottery finances in response to a string of recent scandals that included allegations of wasteful spending, improper gifts and nepotism. State Sen. Ling Ling Chang (R-Diamond Bar) requested the audit last year to determine whether money is going as promised to public schools. California voters approved the lottery in 1984 with an understanding that 34% of sales revenue would go toward education, though the Legislature in 2010 relaxed that requirement to give managers discretion to follow “best practices.”

Chang is concerned that the amount of money reserved for schools is not growing at the same rate as lottery revenue. She said the auditor should also look at the giveaway of Scratchers on the Dec. 3 episode of the “The Ellen DeGeneres Show.”

“This concerns me because, bottom line, the mission of the California Lottery is to provide supplemental funding to California public schools,” Chang said. “I want to know how this contribution affects supplemental funding to California public schools. Does it help? I don’t think so.”

Chang said the California State Lottery should have been reimbursed by DeGeneres’ show for the tickets provided. She has also questioned the handling of the tickets after a YouTube blogger who was not in the studio audience said she was given a $500 packet of Scratchers by someone affiliated with the show.

The whistleblower complaint was sent to the state auditor and Gov. Gavin Newsom by a group of lottery employees, who alleged that some gift packs that did not go to the audience were improperly left with show staff and not accounted for.

A spokesperson for the governor did not provide a comment, but officials with the California Lottery confirmed producers of the show were given at no cost 425 packets that each included 72 Scratchers tickets with a face value of $500 per packet.

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The promotional act giving away more than 30,000 Scratchers tickets was done to create positive publicity for the games with the intent to increase sales, said Russ Lopez, a spokesman for the lottery. The value of having the game touted by DeGeneres on her show was worth far more than the revenue lost by giving the tickets away, Lopez said.

He said the “total media value” received in California from the promotional segment on the national show was about $1.6 million, as calculated by Horizon Media, a consultant firm advising the lottery that based the valuation on standard industry-media rates. The lottery also buys advertising for its games.

“The Ellen Show offered a unique opportunity to increase consumer awareness of California Lottery’s contributions to public education while helping to drive sales of Holiday Scratchers,” Lopez said. “This promotional opportunity allowed the lottery to achieve significant cost savings compared to buying the equivalent in media exposure via a traditional ad buy.”

Chang disputed Lopez’s claims.

“I don’t think giving away lottery tickets generates more sales,” she said, adding that the giveaway may result in some audience members winning prizes into the millions of dollars, which would take money away from schools.

Lopez said that providing the tickets for free “complied with all state regulations” regarding the use of promotional tickets to build awareness of lottery products.

“Ellen DeGeneres is a beloved television personality and she is also a huge supporter of public schools and public education,” Lopez said. “Her philanthropic efforts to education are widely known and we appreciated the opportunity to share the lottery’s work and its mission on-air during her show. “

The giveaway was part of DeGeneres’ “12 Days of Giveaways” holiday promotion, during which she announced the audience gifts with late-night talk show host Jimmy Kimmel. The pair also gave the audience at the Dec. 3 show a $500 Visa gift card, $500 in beauty products, $300 in new clothes and a trip to a beach resort, and all of the products were plugged by the two comedians.

“Maybe you could make one of our audience members a millionaire,” DeGeneres told Kimmel before they unveiled the lottery gift. “Would that be amazing?”

Kimmel then made a pitch to viewers to buy holiday-themed Scratchers tickets from the California Lottery.

“I know something that can make them absolutely filthy rich this holiday season,” Kimmel said. “Give the gift of Scratchers from the California Lottery. Their mission is to provide funding to California schools for programs like music, reading art, technology — all that kind of stuff.”

DeGeneres then turned to the audience and announced: “You are all getting a $500 package of Lottery Scratchers.”

When the audience cheers subsided, DeGeneres joked, “You have to let me know if any of you hit it big. I get half.”

Representatives for DeGeneres did not respond to requests for comment on the giveaway and whether any of the show’s staff received packets of Scratchers.

Retired lottery sales representative Charlotte Belasco said past promotions have required ticket giveaways to be conditioned on the purchase of other tickets.

“I think somebody needs to take a very close look at how the lottery is distributing their Scratchers tickets,” said Belasco, who retired from the lottery last year. “This is money taken right out of education.”

In a Dec. 24 video, YouTube personality and comedian Colleen Ballinger said that a friend affiliated with “The Ellen DeGeneres Show” gave her a $500 packet of Scratchers as she held up a pile of cards.

“He gave us $500 worth of Scratchers,” she said. “It’s going to take an entire day to scratch them all.” So far, the video has 434,000 views.

Ballinger did not respond to a request for comment from a representative.

Lopez said lottery officials were not told after the show how many Scratchers packets were provided to members of the studio audience and how many were left over and given to other people, but he said that the packet that ended up in the YouTube video is the only one lottery officials know of that did not go to the audience.

“It was Lottery’s understanding that all gift boxes were to be distributed,” Lopez said. “We subsequently learned that an extra gift box was supplied to a popular influencer which provided additional media exposure, endorsement and promotional value for Holiday Scratchers games at no extra cost to Lottery.”

In addition to a state audit, Chang said there should be a legislative investigation into the giveaway.

“It seems like it was handled improperly,” the senator said.

The giveaway is just the latest in a series of controversies over the use of lottery resources.

Hugo Lopez stepped down as director of the California Lottery in June after a previous state audit questioned agency spending.

The audit in April by Controller Betty Yee alleged that there had been more than $305,000 in improper or questionable spending over the previous four years that included travel, food, gifts to employees and entertainment expenses.

Improper expenses included $21,666 to give staff logo-branded swag such as T-shirts, backpacks, lip balm and iPad cases, with the agency saying the purchases were “learning aids” and “training tools,” the audit said.

“The lottery was created to fund schools and nothing more,” Chang said. “Unfortunately, media reports over the past year have painted a negative picture of the California State Lottery as an agency under fire for wasteful spending and nepotism.”