TORONTO - The former head of the Ontario Lottery and Gaming Corp. has settled her lawsuit against the provincial government in a deal that will cost taxpayers almost a quarter of a million dollars.

Kelly McDougald, who was suing the government for wrongful dismissal, has reached an out-of-court cash settlement worth $747,925, the lottery corporation said Thursday.

The deal was negotiated with the help of Justice Coulter Osborne, a retired judge who has served on the Ontario Court of Appeal as was once the province's integrity commissioner.

Details of the settlement were not released, but in an exchange for the cash amount McDougald will withdraw her legal claim against the OLG and the government.

She had been seeking $8.4-million, claiming she was fired because she refused to terminate other executives to create public scapegoat.

McDougald, whose annual salary was $400,000, was fired with cause as CEO of OLG on Aug. 31, the same day the Liberals released thousands of pages of what were deemed "unacceptable" expense claims filed by lottery executives.

The entire OLG board resigned the same day. The government called in the auditor general to determine if any rules were broken when executives billed taxpayers for expensive dinners, memberships to Weight Watchers, gyms and golf clubs, and even a $1.12 grocery bag.

McDougald has said she tried to put the expense claims in some context, noting they covered a time period in which there had been three different CEOs at the corporation, which was already dealing with a scandal involving too many insider wins by lottery retailers.

While some of the expenses were indeed inappropriate, she said, others were business expenses "consistent with the operation of a $6.5-billion, revenue-generating corporation, or were part of the employee benefit contract, (while) others were incurred prior to my appointment."

In her suit, filed about two weeks after the termination, McDougald claimed breach of contract, moral and punitive damages, defamation and "loss of opportunity to enhance reputation."

Her firing came as a surprise to many after the government paid Sarah Kramer, the former CEO of eHealth Ontario, more than $315,000 when she left her job after the agency handed out $16 million in untendered contracts to consultants.

The eHealth scandal this summer rocked the Liberals, as angry taxpayers discovered consultants earning $2,700 a day were billing extra for minor expenses such as snacks and cups of tea.

That was considered by many to be a far more serious breach than the expense claims approved at the lottery corporation, and critics questioned whether the province acted hastily with McDougald in an attempt to contain a second spending scandal.

NDP critic Michael Prue said Thursday that taxpayers should be furious with the government over the settlement.

"I don't blame (McDougald), but I do blame the Liberals on this, because they did it improperly, they did it without cause, and now they're having to pay the price," Prue said.

"It's just the taxpayers getting ripped off again."

Duncan has never revealed the reason why McDougald was fired, Prue added, saying he doubts there ever was one.

Progressive Conservative Leader Tim Hudak called the settlement "100 per cent more" than what McDougald was entitled to under her contract.

"McGuinty's early Christmas present to McDougald appears to be paying for her silence in the OLG expense scandal," he said.

"This settlement is nothing more than hasty action by the McGuinty government to cover up another Liberal scandal."

In her notice of claim, which contains allegations that were not tested in court, McDougald outlined a series of late night meetings she said were held in August as the government scrambled to prepare its reaction to the public release of the expense claims.

She alleged Finance Minister Dwight Duncan ordered her to fire the chief financial officer of OLG and one other executive as signs the corporation was taking "significant action" to deal with the expense abuses, and left it up to her to decide who else to fire.

McDougald said she sought legal advice and told Duncan that she could not fire anyone with cause to serve as "the symbol of change" the minister was looking for.

She proposed alternatives, including offering her own resignation.

Duncan had said the government would dispute McDougald's statements in her notice of claim in court, but neither the minister, McDougald or OLG officials were available for comment Thursday.

OLG has been under fire for years, with troubles ranging from insider wins and questionable expenses to botched scratch-and-win tickets and malfunctioning slot machines.

It has been overseen by bureaucrats since August, but National Post CEO Paul Godfrey was nominated last month to oversee the corporation as its chair.

Latest From ...