2 MN Lottery execs disciplined over expenses; interim chief named

A senior official at the Minnesota Lottery is serving a five-day suspension and another was reprimanded after a probe into expense practices that already led to the resignation of the agency's director.

Meanwhile, Gov. Mark Dayton announced Monday that a former lottery boss would lead the entity temporarily until a permanent replacement could be found. St. Louis Park accountant Michael Vekich, who served a similar fill-in role when the lottery faced major upheaval in 2004, was brought back to steer the agency out of a rough patch again.

The sanctions stem from investigation into questionable expense reimbursements claimed by then-Executive Director Ed Van Petten. He resigned abruptly in December on the day the Minneapolis Star Tribune disclosed that he had received $7,000 in questionable reimbursements for business travel, including billing the state when he and staff stayed at his timeshare properties.

Van Petten insisted that the arrangement saved the state money but said he resigned to save Dayton's administration more embarrassment over his apparent violations of state policy.

Disciplinary letters obtained Monday by MPR News under a government records request show that Chief Financial Officer Joe Pahl began his suspension last Wednesday and will be docked a week of vacation.

"You are being given this suspension because you approved employee expense reimbursements without ensuring compliance with state policy," the letter says. "As the Lottery's CFO, you are expected to be a role model and provide leadership on compliance with state policies. This lapse in judgment and oversight does not meet the expectations for your position."

A working home telephone number for Pahl couldn't be located. He didn't immediately respond to an email message seeking comment.

Lottery General Counsel Ben Freedland received a written reprimand on the same grounds.

Kristin Batson, the state official who signed the disciplinary letters, said Freedland was not suspended "because of your relative newness to state government at the time of the approval." Batson wrote that Freedland should "exercise more independent analysis and judgment on policy questions" going forward.

Freedland declined comment.

It's been a tough few months for the lottery. The agency is also the subject of a lawsuit by a former assistant director. Johnene Canfield was fired after several public bouts with intoxication, including during trips for the lottery. She is suing for reinstatement, claiming she was given mixed messages about her drinking and punished more severely than male managers.

The full investigative report on the Van Petten expenses was not made public by the Department of Minnesota Management and Budget.

MMB Commissioner Myron Frans said he does not anticipate further discipline to come out of the investigation. He said it's possible the state will attempt to recoup improper expense disbursements.

The lottery is an important revenue driver for the state and for natural resource programs. It generated more than $135 million for the general treasury and a dedicated environmental fund last fiscal year.

"It's an important part of state government. We want to make sure that it is run properly and that's one of the reasons why we are going to be really careful in our search to put out a request and a description to search for a really good and solid director. And that is frankly one of the reasons the governor wanted to appoint Mr. Vekich in the interim," Frans said. "Why not take the advantage of someone who has been there before? He made some really good changes back in 2004 to increase the overall productivity and to reduce the cost of the lottery."

Vekich's assignment begins Wednesday. Vekich led the lottery on an interim basis a decade ago after the suicide of then-director George Andersen just as a state audit critical of his management was due to be released. Vekich was tapped back then by Republican Gov. Tim Pawlenty and wound up staying on the job for eight months.

The 68-year-old businessman, who briefly ran for governor as a Republican in 2002, has since been drawn back to lead task forces or take other high-profile assignments in government during GOP and Democratic administrations. He's currently the chairman of the Minnesota State Colleges and Universities system Board of Trustees. Vekich said he will remain in that post during his lottery stint.

Vekich said he wants to get on a handle on the lottery's current operations before saying if major changes are required. But he said he won't be hesitant to shift course.

"I don't see my position here or anyplace else that I have worked with client businesses as a caretaker. One is to assess. The second is to stabilize. The third is to implement," Vekich said. "If there are major things that have to be handled immediately that would be done."

He will be considered a state employee and be paid at the same compensation rate as Van Petten, who earned an annual salary of roughly $121,000. The interim leader will report to Frans.

Frans said he expects Vekich to serve for a matter of months during the search for a permanent director, which has begun.