$2.8 bn China lottery money routed to fake projects, foreign funds

China has uncovered a scam involving widespread misappropriation of nearly $3 billion generated from the state-run lottery programme with the money siphoned off through fake projects and illegal foreign investments. 

More than 16.9 bn yuan ($2.8 bn) raised through China’s lotteries was embezzled or misused by lottery management and sellers between 2012 and 2014, the National Audit Office (NAO) said. Funds were misappropriated through the buying and building of office buildings and hotels, NAO said. The “problematic” money constituted more than a quarter of the 65.8 bn yuan (about $11 bn) of lottery funds reviewed in an audit conducted in November and December last year, the report said.

Gambling is illegal in China except where it is run by the government or the proceeds donated to charity, and official lotteries - which sometimes also offer sports betting - are popular. A total of 854 public welfare programs supported by lottery funds were audited. More than 4.2 bn yuan was embezzled through fake projects, illegal foreign investments or business operations, and nine billion yuan was used for the illegitimate purchase of equipment and services, or was spent on shady off-the-book purposes, state-run Global Times reported on Friday.

More than 290 organisations were found to have misused 3.6 billion yuan through the construction of office buildings, distributing allowances to employees, buying luxury government vehicles and organising unnecessary overseas trips. Several officials from lottery companies’ supervision departments were found to have abused their power and embezzled lottery funds or to have illegally run betting shops.

The NAO has listed 90 cases in which officials are suspected of violating laws and regulations. More than 20.4 billion yuan was left unused by financial departments or organisations for more than one year and 34 programs funded by lotteries were unable to operate for various reasons, which led to 268 million yuan being unused in 2014. The authorities recovered 14.51 bn yuan ($2.4 bn) of the misused money by May 31 and will publish updates when unresolved issues have been corrected, the report said.