But how exactly are they cheating?

A man who sold himself a $1,000,000 winning D.C. Lottery ticket is just one of many retailers a WUSA9 investigation found winning the lottery at rates statisticians say border on impossible.

At least three retailers won the lottery around 100 times according to an analysis of D.C. Lottery records obtained under the Freedom of Information Act.

“$10,000, $5,000,” Lounes Issaad said about some of his 27 payouts that averaged $30,000 each.  “I don’t have nothing to hide.”

…Our investigation found lottery retailers make up at least three of the top five D.C. Lottery frequent winners – all with about 100 wins or more.

There is more here (the link makes some noise), via Michael Rosenwald.

Comments

He could be telling the truth when he says he doesn't have nothing to hide.

Lol, double negative... Hilarious and you are right!

Do customers check their tickets at the store? (That happens here in the UK where counter-top machines have a facility to check ticket numbers). If so, when a customer checks their tickets and wins, the clerk could lies and says it's not a win, then hand back a different ticket and claim on the winning one.

Do they do that for the scratch off tickets as well?

I got taken by that very scam in Greece--on a Greek island (I think it was Naxos) and I'm Greek. When I accused him of switching tickets (as I was sure of what I gave him), he handed me $5 euro as consolation and told me to get lost. As this store was a 'fixture' on the beachfront, there was little I could do.

You could have returned that night and burned it to the ground.

That is the spirit

I do that after I buy a lottery ticket regardless. Lucky for these guys I'm not much of a gambler...

Why were you paying the tax on stupidity? You seem smarter than that. Do all Greeks gamble?

It's only a tax on stupidity if you expect to win. I buy a ticket every year or so and hold it for six months, idly dreaming how winning the pot would reduce all sorts of financial insecurity. I buy a new ticket once I realize I've lost the old one or the claim expiry date passes.

I'm perfectly well aware that the opportunity cost of the time to check on the ticket vastly exceeds the expected return, so I don't usually bother (if I *never* bothered, then the ticket wouldn't give my dream the credibility required to kickstart it).

Of course, I've never understood buying *two* tickets...

As entertainment it can be great.

Why would customers check their tickets at the store? The winning numbers are published and claiming the prize is done at the lottery office.

Heh. Don't have a lot of interaction with your average lotto player do you?

If you've spent your entire shitty income on lotto tickets, you can't really afford a computer or internet access to check numbers. You just check your tickets the next day when you're buying your next batch of sure winners.

Also a lot of lotto players are pretty are of the type that like to talk a lot with clerks and other customers, I hate it when I am standing in line behind them, it takes for ever

The scam is that you give the ticket to the clerk, who says "you win $100, here is your money."

In actuality the ticket is worth $500.

Yeah. That's the scam. A man in Texas was convicted of that in fact.

http://www.mcclatchydc.com/news/crime/article24562891.html

It depends on how they draw the numbers - this looks like Mega Millions where the numbers are pulled by machine. That would be hard to predict. The Pennsylvania lottery scam in the 80s involved weighting the balls they did not want picked. The machine was more likely to pick the lighter balls. (Steve Sailor-ish trivia - that was the work of a largely ethnically Greek gang). I think it is beyond these people to arrange that.

When a computer is not used, as in Milan where a child pulled the numbers, they learned to keep the winning numbers in a fridge so that they would be cold and the child could feel for them. Not relevant here I am guessing.

Some guy in China noticed that after the numbers were pulled, there was a short period of time where you could still buy a ticket. So he won millions before going to prison for life. It is possible this system is that dumb. It must be based on selling the tickets after all as they are retailers.

There was a fraud in Ontario and again in Niagara where the shop owner simply stole the customers' winning tickets and replaced them with a losing one. Not quite sure how that would work but it is the most likely here I think.

For what did the Chinese guy go to prison? Maybe something unrelated - having two children?

I think they can put you in jail for shenanigans even if you haven't technically broken a law.

I recall one father and son duo who were arrested and charged for duping winners with smaller payouts and then collecting themselves. Also could be a tax dodge or police dodge by the winner, who can't come forward if he has child support warrants or whatever.

Used to see this on the docks with some frequency.

All,

In several countries, winning lottery tickets have been used for money laundering and tax evasion. The basic idea is that you have parties will large quantities of illegal cash. They use the illegal cash to buy winning lottery tickets and then cash them in. At that point they have "clean" money.

For example, say you have $100K in cocaine profits. If you spend they $100K to buy a car, the IRS might start asking questions. If you use the $100K to buy a $50K winning lottery ticket, you end up with $50K in "legitimate" profits.

Could the same thing be happening in the U.S.? Not clear to me.

Why not walk into your local Indian casino, and buy $100,000 worth of chips. Do a slow walk around the gaming tables, being nice to the waitresses and dealers as you go, maybe stopping for dinner or a drink. Then walking out the front door after cashing in your chips - and, of course, asking for a receipt?

This might have worked 40 years ago or so but I believe under current law that any cash transaction at a casino of more than $10,000 has to be reported to FinCEN by the casino.

Relatedly, casinos have to file W-2Gs if a player wins more than a certain amount of money, and may have to also do income tax withholding. The limits are well under the $10K the Treasury Department wants to be informed on, e.g. $1200 on a slot machine. In theory, it could be as low as $3 (at least 300 times the amount of the wager), though that seems unlikely.

Oops, misread W-2G, the minimum would be $600.

They don't care if they have to pay taxes. They have laundered the money.

Can you buy that many chips, though?

@ Dan Weber
Casino Cashiers and Tables are under all the same Title 31 requirements as Banks, basically, with the added fillip of cameras and staff that are watching you as you move around the facility. I'd say that it's probably a WORSE place to launder money than others I can think of, because pretty much every financial transaction in a casino is tracked VERY tightly by both the company and the on-site regulators (generally in the form of state troopers from the state gaming commission).

Because lawmakers and regulators are well aware of the volume of small transactions that take place in casinos, ALL of a player's transactions are tracked in aggregate, not just individually. So, hit a TOTAL of 10K and you generate a CTR. Hit 3K and you generate a MTL (multiple transaction log, requiring a description, social, and a time log of all the transactions). Furthermore, you have the whole "Suspicious Activity Report" thing, and pretty much everyone in a casino who handles money is trained to get VERY nervous/suspicious when they see things like lots of small transactions, mismatches between cash-in/cash-out and actual play, lots of money changing hands between guests (and since security and state police are generally on hand in every casino with heavy video surveillance, that sort of thing DOES get noticed), etc etc.

There's a more elaborate strategy in which you buy both a winning ticket and a bunch of losing tickets. Sure, you won $100K, but you have offsetting losses of $100K, so you really didn't make any money at all.

Bingo! A celebre one is spanish politician Carlos Fabra, who claimed to the tax agency to have won the lottery seven times. They contact real winners of a lottery prize an buy the winning ticket for a quantity in black money greater than the prize.

An anonymous person, than the authorities don't even know has won the lottery, raises no suspicion and can spend the black money in a house reform or whatever.

The politician declares having cashed the lottery prize to the tax agency and his money is laundered. The advantage against other laundering schemes is that lottery prizes are free of taxing. (If you set up, say, a shop you'd have to declare the fake sales and pay taxes for them)

http://www.levante-emv.com/comunitat-valenciana/2012/02/19/carlos-fabra-tendra-aclarar-juicio-siete-veces-le-tocado-loteria/882672.html

Thank goodness for the vibrancy brought to America by immigrant convenience store clerks. They're doing the jobs Americans just won't do.

In fairness if you have a state-sponsored lottery you're already on your way to becoming a low trust society without any outside help.

The article mentioned one man with foreign name. This is significant why?

Because it's Steve Sailer.

Are you sure it isn't the joooz?

Scratch cards? It's probably similar to this http://www.theatlantic.com/personal/archive/2011/02/how-i-beat-scratch-off-lottery-tickets/70686 where boxes have "guaranteed" prices. Take out the last card, if you see people scratching the other 99 and no price you "buy" it and scratch it for an assured price, if you see someone win something you put it back in the box and sell it. Lottery houses seem to know about it and not care much, as long as most of their customers can't do math (and that is a given) the cash will be coming in.

Or this: http://www.wired.com/2011/01/ff_lottery/all/1 . When lotteries have to choose between being fair and being enticing, they must choose the latter as that is what brings the money in. It means some can game the system, so be it.

The statistical "analysis" the story offers doesn't seem to account for the fact that retail clerks have more access to lottery games than others, which could account for at least part of their propensity to win. The article does point out it is impossible to say how often these frequent winners are losing.

All that said, the convenience store in my high rise office building probably gets half its revenue, maybe more, from lottery sales. A clerk ringing up that many sales could easily come up with a way to game the system.

I think I read somewhere about a scam where someone somehow found out that you could tell winning ticket by the lottery number of the scratch card without scratching it. Basically the lottery had used a very weak encryption mechanism to generate the ticket number.
Another scheme I've heard of involved exploiting a weakness in how ticket purchase registering was set up. Basically retailers could sell themself all leftover tickets just before the draw. Then they would go thru them and find the winners. After that they would deregister the purchase of all losing ticket as if those sells had been punched in erroneously. Basically utilising a flaw in the timing between sale, time window available to correct erroneous sales and the draw.
One would think that these type of obvious weaknesses would not exist but apparently they do. Smart people don't buy lottery tickets, after all it is a tax on stupidity. But then maybe smart people also sometimes pay a little to little attention to them. I mean lotteries don't really cares who wins, and the vast majority of their customers are literally losers, so why put an expensive effort into making sure that it is truly a random person who wins? Regulation often stipulate that they must pay out some percentage out in winning so it is necessarily that the lottery looses any money by a lack of randomness. As long as it is kept in the dark that it is not random. Cheapest way to do that is simply not to look into it.

Here's the Wired article about identifying winning scratch offs from their serial numbers: http://www.wired.com/2011/01/ff_lottery/

Best set of comments in ages. I think I must go out and buy a convenience store.

You don't know the half of it. In the USA, at least, you can also make a killing off of food stamp fraud. We've got a lot of "needy" people here who will gladly turn in their $50 in food stamps for $25 worth of alcohol.

Ka-ching, baby!

Maybe clerks switch and steal winning tickets.

Or maybe winners sell their tickets to clerks to avoid tax issues.

Or maybe lucky people are naturally attracted to convenience store jobs. :-)

I've read more than one newspaper article about multiple lottery winners (who have nothing to do with the outlets that sell lottery tickets). No, it can't be because they buy lots of lottery ticket: the odds of winning are increased by such a minuscule amount with each additional purchase that they would have to buy thousands, millions of tickets to significantly increase the odds (no, the odds of winning aren't doubled by buying two tickets, the fallacy that hooks many buyers of lottery tickets). Is it divine intervention? When I buy a lottery ticket I fantasize about the many charitable purposes for which I will spend the winnings. It hasn't helped.

"the odds of winning aren’t doubled by buying two tickets"

Hmm?

The math here is just wrong. You do of course double your chances of winning by buying twice as many tickets. This is very nearly true even for a lottery where the single winning ticket is drawn from the pool of tickets, as long as you're not buying some appreciable fraction of the total pool - but we're talking about state lotteries here.

The convenience store makes a profit when they sell a lottery ticket. When they sell lottery tickets to themselves, they are effectively paying a lower price for their ticket than everyone else. So, the odds of winner per dollar spent on lottery tickets is better for convenience store owners than for everyone else (although it is still probably a money losing proposition).

well it must be a money losing proposition, because you've just described the economics of the lottery itself: they sell the tickets at wholesale to the retailer, and pay winnings from that wholesale revenue.

The statistician's analysis is pretty cursory here. As far as I can tell he's just assumed that all occupations purchase lottery tickets at similar rates. Without knowing how many tickets the store owners bought, it's very hard to know if this is surprising at all.

But if you own the store you essentially get a substantial discount on your gambling habit (because you keep the 5-10% commission on the ticket), so is it really that surprising that there are a disproportionate number of wins among subsidized gamblers.

Also, once gamblers win one big jackpot they often feel like they are "playing with the house's money" which increases the level of gambling and therefore the likelihood of another win.

Finally, working in retail is pretty dull so buying lottery tickets from yourself might be an easily available distraction.

"Finally, working in retail is pretty dull so buying lottery tickets from yourself might be an easily available distraction."

Bingo!

“With the computer software available to lotteries, these statistical red flags should have alerted lottery regulators as far back as 2012.”

"Nationally, lotteries immediately investigate win anomalies like ticket theft, game rigging and retailers illegally cashing tickets aiding others avoiding taxes or laundering money."

"D.C. Lottery said it immediately launched an internal review when it learned of the WUSA9 investigation."

The culture that is D.C....the federal government operates Medicare the same way.

This is old news in Canada (Ontario):
http://www.cbc.ca/news/canada/toronto/police-probe-in-lottery-scandal-not-over-yet-1.671793

They changed the lottery machines to automatically play a special sound when you win, to avoid at least some of the fraud (though ticket switching could still be used to change the winning amount).

Well, you could give up the practice of attempting to get supplemental revenue from a numbers racket.

Knowing what numbers are sold is valuable information. Don't pick the popular ones.

Paying the sales commission to yourself also seems like a big deal.

Are they allowed a number of 'spoiled' tickets they don't have to pay for? Could they be scratching them off to look for the winners, then only paying for the winners??

In Britain we have scratch cards. When you scratch off, there is the stuff you can see which tells you if you have a winner and a bar code, which is scanned into the terminal and authorises your winnings.

Some shops were scratching off the bar code (only), scanning a whole batch of cards to find the winners, cashing the winners for themselves and selling only the losing cards.

They were caught because they were scanning lots of losing cards into the terminals.

If someone has cracked the scheme that identifies winning from losing cards, then they could be using that technique.

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