Several members of the Tennessee Education Lottery (TEL) Corporation’s Board of Directors, while driving in their vehicles, decided to temporarily take away Action 24/7’s operating license.
Some board members were on spring break.
And TEL board members took this action while taking the word of an investigator who said the company didn’t follow through on the necessary security protocols.
This, according to a transcript of the meeting.
At the beginning of last week’s meeting, Chair Susan Lanigan said “we’re all gonna do the best we can here.”
TEL Sports Gaming Investigator Danny Dirienzo then spoke to board members.
“Um, I will caution ya’ll that I have not had the time yet to uh, do a deep dive into all of these records,” Dirienzo said.
“Um, the transaction volume is very large, and it’s gonna take quite a bit of time to, uh, analyze all of the data. But, I’ll give you a snapshot of what I saw immediately.”
Dirienzo then described what he said was “clearly a case of credit card fraud, uh, clearly a case of money laundering, um, clearly a case of what could be charged under federal statutes as aggravated identity theft.”
“Um, clearly a case of wire fraud. Uh, you name the charge and there’s a litany of them. Um, they did serious, serious criminal activity,” Dirienzo said.
“Probably in the tens if not hundreds of thousands of dollars’ worth of damages done. With multiple, uh, real individuals and business victims. Now, I’m gonna take a step back a minute unless anybody wants more details about the actual activity that was going on.”
Dirienzo went on to say that staff at Action 24/7 “did catch it.”
“And they did report it to us. Um, I am, I am not suggesting an unreasonable standard where 100 percent of all criminal activity is prevented. That will never happen. It’s an impossibility. But what I am saying is that if the minimal internal control standards, uh, have been met, or implemented by Action 24/7,” Dirienzo said.
“If they had implemented the internal controls that they represented to TEL that they had in place, uh, as part of their application prior to launch, this very activity would have been stopped very early on and we would have many less victims and far less of a dollar amount in losses.”
Board member John Crosslin, meanwhile, pointed out that Action 24/7 staff “self-reported” the problem and “fixed the controls so it doesn’t happen again.”
“I think we owe it to our licensee that, you know, that we gave a license to try to fix any mistakes that have been made, whether it’s their mistake or not, or a vendor’s, I don’t know,” Crosslin said.
“It doesn’t sound like we even know with clarity yet.”
TEL suspended Action 24/7’s license late last week.
As The Tennessee Star reported this week, Action 24/7 officials filed a lawsuit seeking a temporary injunction that would require TEL members to reinstate the company’s sports gaming operator license.
The suit lays out the TEL’s mishandling of one of its first attempts at disciplinary action failing to follow its own established guidelines and denying Action 24/7 due process. Action 24/7 officials filed the suit in the 20th Judicial District Chancery Court in Nashville. Company officials, in the suit, called the TEL’s indefinite suspension “unlawful.”
And during the National Collegiate Athletic Association’s “March Madness” basketball tournament, the TEL’s actions “will have catastrophic effects on Action’s ability to continue as a business,” the lawsuit said.
The lawsuit said that TEL members acted after Action 24/7 reported suspicious activity had been identified and stopped earlier this month. Action officials said they detected the suspicious activity, involving a limited number of players, mostly occurring during overnight hours.
“Rather than contacting Action to discuss, the Investigator, by his own admission, on March 18 reviewed only three or four of the incident reports. Then, based on what he has called a ‘guess’ about the total scope and magnitude of the suspicious activity, the Investigator leapt to the conclusion that the suspicious activity was much broader in scope than it really was, and informed TEL’s General Counsel, CEO , and Chair of TEL’s board of directors (the ‘Board’) of that hasty conclusion,” according to Action’s lawsuit.
“Later that same day (March 18), the Chair of TEL’s Board, based on the knee-jerk conclusions of the Investigator, informed Action that its license was suspended immediately without notice or the opportunity for a hearing. Even though under TEL’s own statute and regulations a suspension can be made only by the Board or the Board’s Sports Wagering Committee, the Chair made this decision alone without convening the Board or the Sports Wagering Committee. Even worse, this suspension occurred late in the afternoon on the first day of the single largest sports betting event of the year – the National Collegiate Athletic Association’s (“NCAA”) ‘March Madness’ basketball tournament.’”
The lawsuit went on to say that Action officials contacted the TEL’s general counsel last Friday and said the suspension violated the agency’s own procedures and denied them due process afforded in the Sports Gaming Act and subsequent Rules.
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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected].
Editor’s Note: Action 24/7, which is regulated by the TEL, has advertised with The Tennessee Star and Tennessee Star Report.
