Employees were fired for questioning two jackpot payouts

The California State Lottery has paid more than $500,000 to settle lawsuits filed by two former investigators who claimed they were fired for calling attention to jackpots they believed the lottery improperly awarded to recipients who could not prove they were winners.

The two ousted lottery cops had flagged a $2 million jackpot in 2015 and a $750,000 prize in 2016 that they argued should not have been paid.

"It was a travesty the way they were both handled," said Steve Tacchini, a retired San Francisco police captain and former lottery deputy director. A third and related lawsuit from another former investigator is still in play.

The ongoing costs to taxpayers stem from discipline the lottery handed down two years ago when a group of investigators grew frustrated by what they considered to be preventable fraud among lottery retailers as well as questionable payouts.

Between Tacchini and three subordinates, the former employees attempted to raise concerns about the payouts with the attorney general, state auditor and a reporter at the CBS station in Los Angeles.

They say their punishment sent a chilling message to other employees.

"I don't regret doing what was right, but there are so many people who just don't say anything," said Gary Reid Galbreath, one of the employees who sued the department after his dismissal in 2017.

The four worked in the lottery's Security and Law Enforcement Division, a branch of the department charged with conducting background checks on employees and lottery retailers, as well as investigating lottery-related crimes. Under Tacchini, the division favored an attention-grabbing approach to enforcement, including stings against retailers.

"They didn't like us because we arrested people," said Helen Brean, a former chief lottery agent who sued the department after her dismissal. "We put them in handcuffs. We got in the news, and that told people that retailers were crooked."

In written statements, the lottery declined to discuss personnel disputes. It said the totality of evidence in the cases the former employees contested supported the department's decisions to pay the jackpots. 

A ticketless winner

The case that most severely split the the lottery's law enforcement arm under Tacchini and its executive staff involved a Beverly Hills man who lost a Powerball ticket but believed he was the winner of a $2 million prize.

Investigative records show the man bought a ticket in January 2015. No one claimed the prize. The lottery contacted the gas station where the man bought the ticket to figure out who deserved the jackpot.

After looking at surveillance footage, the retailer and lottery officials identified one of the store's regular customers as the winner.

In June 2015, the gas station owner told the man he won the Powerball. He filed a claim to obtain it as a "ticketless" winner.

Images from surveillance video were not sufficient because the camera's timing was not set correctly and other people bought tickets within minutes of his purchase. That meant the presumptive winner had to present additional evidence to demonstrate he bought the ticket.

Brean conducted the lottery's final interview with him in July 2015. He told her he paid for his usual $6 bet when he bought his lottery ticket that day, according to a report The Bee obtained through the California Public Records Act. Lottery records showed that the winning ticket was a $20 wager.

"There was nothing. If the information he gave was accurate, there was no way he could be the winner," Brean said.

Against her recommendation, the lottery paid the jackpot and said it stands by its decision.

Brean was suspended soon after her report. The lottery moved to fire her in June 2016.

Brean filed her lawsuit on Aug. 11, 2016. The Lottery settled with her within a week. She received 18 months pay, about $150,000.

Tacchini, too, opposed paying the man. The governor's office ended Tacchini's appointment as a deputy director in May 2016 and brought in a new law enforcement team led by California Highway Patrol officers.

Down the ranks

The departures of Brean and Tacchini alarmed at least two of their subordinates.

By then, Galbreath and fellow investigator Jim Jeffra had grown frustrated by what they viewed as preventable fraud among retailers. They wanted the lottery to invest in new technology that might give the department an early warning if retailers turned in a suspicious number of winning tickets, which could signal that they were finding winning Scratchers and keeping them for themselves.

Galbreath also was disturbed, although there was no evidence of fraud, by a lottery decision to pay a $750,000 prize to a San Francisco small business owner who had given money to an employee for lottery tickets.

The worker bought the ticket, scratched it and checked that it was a winner at retail stores. By lottery rules, he "exercised the acts of ownership" and could have claimed the prize. The worker was an undocumented immigrant who did not want to claim the winnings, according to documents The Bee obtained through the Public Records Act.

The business owner gave conflicting statements to the lottery about claiming the prize, according to a lottery investigation. Ultimately, he and his employee suggested that they wanted the owner to claim it. The lottery agreed to pay the owner despite an initial recommendation from a lottery investigator against awarding him the money.

About that time, Galbreath and Jeffra each separately called the state auditor. They talked, and decided to write a joint complaint to the auditor urging an investigation into the lottery itself. 

They knew Brean had contacted the state auditor and Tacchini had reached out to the attorney general prior to losing their lottery jobs. They worried they'd be dismissed, too, if word got out that they were calling for an investigation, according to court records.

Galbreath downloaded lottery investigations to give to the auditors. Then, he decided to contact a reporter at KCAL in Los Angeles who had covered lottery fraud in the past.

'Bringing embarrassment to your employer'

The KCAL pieces aired in October 2016. Brean and Tacchini spoke on camera, alleging that the lottery was paying prizes inappropriately. 

Galbreath and Jeffra spoke, too. The news program concealed their identities by disguising their faces and voices.

CHP Assistant Chief James Libby opened an investigation into the CBS report and placed Galbreath and Jeffra on administrative leave. The department checked who had looked at the files; records pointed to the two investigators.

Both sat for interviews with Kelly Dixon, Libby's special assistant, in November 2016. Galbreath and Jeffra denied handing records to the reporter; they said they downloaded the reports for the auditor.

"You clearly accessed data owned by the lottery that you were directed not to access. In addition to that, both of you appeared on a news program in which you make some allegations that members of the lottery are doing things that are in violation of law, regulation statute. Why did you do this?" Dixon said when he interviewed Jeffra.

Jeffra replied, "For three and a half years, I've been told, 'Oh they're working on it.' I've been lied to. They're not working on anything."

Dixon asked both former investigators whether they intended to discredit or embarrass the lottery by appearing on the news program. "We have a policy about bringing embarrassment to your employer," he said, citing a state law that permits discipline of public employees.

"My intention was not to damage the reputation of the lottery in any way," Galbreath said, according to the 2016 transcript. "My intention was to simply try to go back to having that sense of pride that I had in my employer when I first started."

Dixon at the hearings said the investigators did not have the full picture of evidence available to lottery executives.

"While he has an opinion, and everybody's entitled to opinion, that opinion isn't based on all of the facts when that decision at the executive management level was made to pay or not pay a client," he said.

'The risk I took'

Shortly after his interview with Dixon, Jeffra submitted retirement paperwork. Galbreath remained on administrative leave until April 2017, when the department served him with a dismissal notice. It accused him of conducting an "unauthorized investigation" and disseminating confidential information to the public.

Galbreath appealed his dismissal and filed a lawsuit contesting it in August 2017. The department settled with him two months later. He received $375,000, a sum equivalent to about five years of his salary.

Jeffra filed his lawsuit in January of this year with the same attorney who represented Galbreath. The attorney did not respond to requests for comment. The case has not settled and the department has moved to dismiss it.

Galbreath now works as an investigator for a health insurance company. Brean is retired in Rosevelle.

Galbreath acknowledged he received a substantial settlement to drop his lawsuit, but he's had trouble breaking into another law enforcement job since he left the lottery. He discloses on his applications that he was the subject of a whistleblower investigation.

"You're definitely labeled when you put it out there, and that was the risk I took," he said.