NC Lottery official on the integrity of the games
The North Carolina lottery wants you to believe we all have the same chance to win.
But some players are winning so often, and so big, that their good fortune defies logic.
Almost certainly, experts say, some are more than lucky. They are likely gaming the system. And the losers are the state’s taxpayers, single parents and those who play by the rules.
The Observer found players who beat staggering odds so consistently that statisticians said chances of being that lucky were less than one in a trillion.
“You have to ask yourself, ‘How is this happening?’ ” said Ron Wasserstein, executive director of the American Statistical Association. “It doesn’t pass the smell test.”
An Observer investigation found:
▪ Many players beat baffling odds for months at a time, raising red flags about how they won. For instance, a High Point woman hit winners nine times in a four-month span, overcoming odds of 1 in 5,000, 1 in 40,000, 1 in 70,000 and 1 in 120,000. She collected $21,000 that year from scratch-off tickets, data show.
▪ Most big-prize winners won once or twice. But the number of repeat big winners – some of whom won on 15 or more scratch-off tickets in a single year – has surged since the lottery began in 2006, far outpacing the growth in total winners.
▪ Other top winners may not be the actual winners at all. North Carolina has a lucrative secondary market. In it, players resell winning tickets to avoid automatic withholdings, such as back taxes and child support. Buyers collect the prize, sellers remain anonymous — and the lottery does little to stop it.
I’ve just decided there are lucky people in the world
N.C. lottery leader Alice Garland
Lottery officials said they aggressively pursue cheaters and do not encourage those who exploit lottery loopholes. Still, reporters found repeated instances in which the lottery touted and publicized improbable winners.
To investigate the lottery — which brought in a record $2.4 billion last fiscal year — reporters analyzed 189,000 winning claims from 2006 to late last year. Records included every win of at least $600, the minimum amount the IRS requires lotteries to report.
Alice Garland, executive director of the North Carolina Education Lottery, said she is confident that every payout is for a genuine win.
“I’ve just decided there are lucky people in this world,” she said.
How some win
Winning big just once is a triumph for most people. To claim a $1,000 prize on a scratch-off game, players typically have to beat odds greater than 1 in 1,500.
Yet the Observer found people beating those odds — and even tougher ones — several times a month, year after year.
They have not been accused of wrongdoing, and all who talked to the Observer said they did not cheat.
Lottery experts acknowledged that other tactics could not be ruled out. Players could be spending large amounts on tickets, searching for accidentally discarded winning tickets or increasing their odds by only playing games with big prizes still available, lottery officials and experts say.
People who do cheat or bend the rules typically do so in one of two ways:
▪ Some clerks or store owners steal winning tickets from customers, telling the players they didn’t win. Then, they or someone else claim the prize. This is illegal.
▪ In other cases, people buy winning tickets from players for less than the prize amount. This is called “ticket discounting.”
North Carolina does seem to make it easy for people to do the wrong thing.
Berkeley statistics professor Philip Stark, who reviewed N.C. lottery data and recognized trends that suggest fraud or reselling tickets
The buyers cash the ticket, and the sellers avoid forfeiting any money owed to the state. Typically, those withholdings are for child support or back taxes, which North Carolina automatically deducts.
In a few states, it’s a crime to resell tickets this way. Not in North Carolina.
Here, it’s simply against lottery policy for store owners or employees to buy or sell discounted winning tickets. Players are free to resell tickets, even though lottery officials acknowledge it can hurt single parents and taxpayers.
The potential losses are significant.
Since 2006, the lottery has automatically withheld nearly $11.5 million from winners who owed debts to the state or local governments, such as back taxes or delinquent child support payments. Of that total, the Department of Health and Human Services received nearly $700,000 in unpaid child support in the past five years.
Philip Stark, a statistics professor at the University of California, Berkeley, has helped investigate other lotteries. He reviewed data from North Carolina and said he recognized trends that suggest fraud or reselling tickets.
“North Carolina does seem to make it easy for people to do the wrong thing, especially if there is no enforcement against it,” Stark said.
Few people have collected more large scratch-off prizes than Ralph Havis, who has won so often that the lottery has promoted his success.
Havis says he has only won with tickets he bought himself.
The soft-spoken, longtime owner of Greensboro’s Beef Burger began playing the lottery years ago with his late wife. Alma had severe arthritis, said Havis, 73, and to pass the evenings, the couple drove from store to store buying scratch-off tickets.
His wins include three mega prizes, all claimed in the past two years. The odds for those games ranged from 1 in 816,000 to 1 in 1.5 million.
People who know me know I don’t cheat
Ralph Havis, who made more than 50 winning ticket claims
In 2014, Havis won $150,000 on a scratch-off game. Last April, he won another $150,000.
Then in May, he won $1 million.
“When I scratched the ticket, I thought, ‘Good God almighty, I won again,’ ” Havis told lottery officials. “No one’s going to believe it.”
The next day, he received an oversized check as local TV crews recorded the event.
It takes a lot of luck to win a big prize from the lottery, Garland, the agency’s executive director, said at the time. “So to see someone win three big prizes like Mr. Havis is amazing.”
Actually, since 2008, Havis has cashed in 55 winning tickets worth at least $600 each.
The odds of him winning that often: “Less than 1 in 1 trillion, trillion, trillion,” said George Rooney, a Virginia Tech statistician.
“People who know me know I don’t cheat,” said Havis, adding that lottery officials have never challenged him on his numerous wins or accused him of any wrongdoing.
‘That’s a lot of money’
Statistically, Jan Hannig can account for players beating improbable odds. By knowing how much the lottery pays out on average and how much it collects each year in sales, the UNC-Chapel Hill statistics professor can use math to determine how a person could win that much.
Hannig reviewed data provided by the Observer and calculated the absolute minimum some people would have to spend on games to even have a chance of winning as frequently as they did. The amounts can be enormous. And he said his formula is so conservative, that, in reality, the totals could be a fraction of what people would have to spend.
Even before his big prizes this year, Havis would have to spend a minimum of $716,000 to win so many times, Hannig said.
Havis dismissed the finding, saying he didn’t have that kind of money to play.
Others would have to have spent even more. They include:
▪ Ricky Vanzant of Lexington, who won 46 times on scratch-off tickets from 2008-15. He would have to spend at least $883,000 to claim the $56,000 he took home, Hannig found.
“I guess I just play a lot,” said Vanzant, who wouldn’t comment further.
▪ Ramin Karimpour of Raleigh, who would have to spend $806,000 to win the $58,500 he collected, Hannig said. Karimpour could not be reached for comment.
▪ Betty Manning is the High Point woman who claimed 21 scratch-off wins in 2014 and another 17 a year later. She averaged about one big win every month over the past five years, and, according to Hannig, would have to spend more than $756,000 to do so.
“As a statistician, you can’t tell if the lady cheated or not,” Hannig said. “Maybe she’s wasting an inheritance. That’s a lot of money.”
It’s even a lot, Hannig said, if Manning used all her winnings, including smaller prizes, to buy more tickets.
Manning did not respond to repeated requests for comment.
None of the players identified by the Observer have been accused of wrongdoing.
‘It doesn’t seem feasible’
Some 330 people claimed 12 or more winning scratch-off tickets worth at least $600 each, with many collecting multiple prizes at the same time. Their winnings totaled more than $35 million, the Observer found.
Rooney, the Virginia Tech grad student and statistics analyst, also reviewed data for the Observer and calculated the probability of some people winning as often as they did.
Rooney said everyone in the United States would have to play the lottery nearly seven times a day for several years just to have a 1 percent chance that a single person would win as often as Havis.
For Manning, every resident would have to play 11 times a day, said Rooney, who acknowledged that people’s odds could change the more they play.
With Rooney’s help, the Observer found others who’d have to buy a dozen or more tickets every day for years at a time to have a 1 percent chance that they’d win as often as they did.
“In my mind, it doesn’t seem feasible they would have won this many times,” he said.
Repeat winners rising
Most people who collected the larger prizes won just once or twice. But the number who won big multiple times has surged.
N.C. lottery leaders have few explanations for repeat winners. Officials said they are likely some of the games’ most avid players.
In 2009, 59 people claimed five or more scratch-off tickets. That number jumped to 163 in 2014 and 223 last year — far outpacing the growth in total winners.
One explanation could be that people have learned how to deceive the lottery — possibly by reselling tickets to avoid withholdings, said Dawn Nettles, who’s been a watchdog of the Texas lottery since 1992.
“The lottery knows that these people are not winning that many times,” she said. “They know it, and they’re just turning their noses the other way.”
People who buy winning tickets from players are often lottery clerks or retailers, especially those who run the only store in town and word spreads about their activities, said Bill Hertoghe, former director of security for California’s lottery.
Other times, Hertoghe said, they can be people in the neighborhood who have a lot of cash on hand. “You know where to get your pot, you know where to get your guns. And you often know who has the money to buy your lottery tickets.”
Hertoghe said California kept a list of its 100 most frequent and highest volume winners during his tenure and launched an investigation when someone on the list claimed a prize.
The scrutiny seemed to deter players from circumventing the rules, he said.
North Carolina lottery leaders have few explanations for repeat winners. Officials said they are likely some of the games’ most avid players.
“It comes down to frequency of play and luck,” Garland said.
There is no way to track how often someone plays, or to tell for sure if winners have cheated.
Garland said agency investigators look into repeat winners but wouldn’t discuss specific security measures. Doing so would decrease their effectiveness, she said.
“I feel strongly that we have one of the most stringent security procedures of any lottery in the country,” Garland said.
But North Carolina is not as tough on reselling tickets as some other states, the Observer found. Florida and Indiana, for example, have made it a misdemeanor.
Garland acknowledged that reselling winning tickets can hurt the games’ integrity and those who are due back taxes or child support. But the lottery’s security policies that prohibit retailers from reselling tickets have kept the practice to a minimum, she said.
State Rep. Paul Stam, speaker pro tem of the House and a long-time lottery foe, said he was unaware of the problems caused by reselling tickets before the Observer raised them with him. Stam, R-Wake, liked the idea of criminalizing what he called “a bad practice.”
Rep. Jason Saine, R-Lincolnton, co-chair of the legislature’s lottery oversight committee, said the panel should review what other states are doing and look into ways to prevent reselling tickets here.
“Shirking (tax or child support) responsibilities, whether you are the retailer or the player or whomever, we really can’t have that,” he said.
Nobody knows how much revenue goes uncollected because of ticket reselling. Stam asked the General Assembly’s Fiscal Research Division to try to find out.
Cashing tickets from multiple stores could suggest the tickets were resold by people who wanted to avoid withholdings, experts and lottery investigators say. They note that even repeat lottery winners tend to frequent the same shops.
About 40 percent of the lottery’s most prolific winners claimed tickets sold at 10 or more stores, the Observer’s analysis found. Some brought in tickets sold at more than two dozen stores.
Garland said winning at many stores does not raise concerns. Others disagree.
Hertoghe called it a red flag. Nettles, the Texas watchdog, called it highly suspicious.
“They’re not that lucky in the lottery,” Nettles said. “She (Garland) knows it. And I know it.”
Observer researcher Maria David contributed
Gavin Off: 704-358-6038
2015-16 lottery by the numbers:
Sales: $2.4 billion*
Prizes won: $1.5 billion*
Retail outlets: About 6,850
Retailer commissions: $167 million*
Money to counties for education: $634 million*
* A record total
Source: North Carolina Education Lottery, for the fiscal year from July 2015 through June 2016.
How we did the series
As the 10-year anniversary of the N.C. Education Lottery approached, The Charlotte Observer started the most in-depth review of lottery winners ever conducted outside of the agency.
Observer reporters analyzed a spreadsheet of 189,000 claims of at least $600 from 2006 through late 2015. That’s the minimum amount the IRS requires lotteries to disclose.
Reporters investigated lottery winners who repeatedly beat high odds. These players made dozens of trips to lottery claims centers. Some of them were licensed retailers, who sell tickets and are entrusted to serve as gatekeepers to potential riches.
Reporters paid particular attention to winners of scratch-off games. Unlike draw games such as the Pick 4, where a player can place multiple bets on a single number, one scratch-off ticket can result in only one win.
The Observer reviewed retailer disciplinary records, interviewed more than 60 players, store owners, lottery officials, experts and others, and sent data to statisticians at several universities.
Money laundering — using lottery winnings to hide the source of dirty money — has been documented in at least nine states, including a Massachusetts case involving notorious gangster James “Whitey” Bulger. It was mentioned briefly in “Black Mass,” a recent movie about Bulger’s life starring Johnny Depp.
In 2008, two Michigan brothers were sentenced for leading a major drug ring and money laundering. Gang members hid proceeds from cocaine sales by buying winning lottery tickets worth more than $1 million from legitimate winners, federal officials said.
North Carolina prosecutors and lottery officials said they were unaware of any money laundering cases here.
S.C. lottery seals records
The Charlotte Observer sought to analyze data from the South Carolina lottery, but winners’ names are not public records.
The information South Carolina did provide — aggregate data by ZIP code — is not detailed enough for reporters to identify possible ticket discounting or theft.
Last year, N.C. Rep. Darren Jackson, D-Wake, sponsored a bill to conceal winners’ names if they do not consent to the release. The bill never made it to the House floor.
Alice Garland, executive director of North Carolina’s lottery, said keeping North Carolina’s records open was important. “It goes to the integrity of the lottery,” Garland said. “It lets our players know that there really were winners.”
Tips for players
Here are ways to avoid getting cheated:
▪ Immediately sign the back of the ticket after you buy it. Tickets are “bearer instruments,” meaning whoever presents them is deemed the owner.
▪ If a retail outlet has a self-check machine, scan your ticket to see if it’s a winner.
▪ The lottery terminal will play a brief musical tune for prizes $50 and higher.
▪ Call the lottery’s customer service line at 877-962-7529 if you need information on how to play the games.