Yellowknife (Feb 04/05) - City Hall is investigating the Yellowknife Royal Canadian Legion to find out whether the organization is holding back on lottery proceeds intended for charities.

Last week, the city charged the Legion with conducting lottery games without a licence. The previous licence lapsed June 30 and wasn't renewed until sometime in November or December.

Mayor Gord Van Tighem said the city is also investigating allegations made against Legion branch manager Lorne Power, who won a $5,900 jackpot during a wheel of fortune game at the Legion last October.

"In a couple of days you might even have more excitement to deal with, maybe," said Van Tighem. "Stay tuned.

"It's a challenging thing because you're dealing with a group that does a lot of good, but you still have to follow the rules."

Questions about the Legion lottery licence didn't become public until former branch executive member Jim Kipling began circulating e-mails and letters to the media two weeks ago.

Van Tighem said an investigation into Legion lottery practices began last year after the Legion and the Elk's Lodge asked the city to allow them to keep 85 per cent of the proceeds from lotteries.

The Legion complained that the city's smoking bylaw was causing them economic hardship because fewer people were coming to the club.

Under city bylaw, organizations like the Legion can only keep 45 per cent of lottery proceeds. The rest must go to charity.

Both clubs' requests were declined, but not before they were asked to provide the city with financial statements.

According to council minutes from July 26, 2004, administration found "inconsistencies" that prompted them to "question whether or not the organizations were complying with the conditions attached to their licences in terms of how net lottery proceeds were being disbursed."

The city, in co-operation with the department of Municipal and Community Affairs, ordered a preliminary audit of the Legion's finances, which confirmed that City Hall had "valid compliance concerns."

The minutes state an audit of the Elk's Lodge was expected in the near future.

Elk's manager Dave Hurley said the city conducted an audit last fall and didn't find any problems. Van Tighem confirmed that the club is in full compliance with its lottery licence.

Neither Power nor Legion president Lloyd Lush could be reached for comment, but vice-president Dave Paul said the lottery crisis is nothing more than a misunderstanding.

"This operating without a licence was an administrative error," said Paul. "It's not like the city refused our licence and we went ahead and kept gambling anyway."

Paul said the Legion obtained a licence soon after the city informed them they didn't have one. The starting fee for a six-month lottery licence is $50.

As well, Paul said Power didn't do anything illegal by playing the wheel of fortune game, although he admitted it didn't look good.

"It's not good policy in my mind," said Paul. "It's something we're certainly going to fix."

Because Power wasn't the authorized agent listed on the club's lottery licence, Paul said Power was eligible to play the game.

As for the discrepancies the city found with the club's lottery pay-outs to charities, Paul said it's because not enough community groups have come forward to apply for funding.

"It's not like the money has been spent or used. It's waiting for people to apply for it."

Paul said the Legion is now trying to determine how to pay out the money and comply with the bylaw. He said he wasn't sure how much the Legion has in surplus right now.

The first-offence penalty for violating the city's lottery licence bylaw is a fine for up to $500, and up to $2,000 for each subsequent offence.