The Lombardi Law Firm Blog

Is the Iowa Lottery being corrupted by retailers involved with inside trading and the outright deception of its customers?

The Iowa Ombudsman released an investigative report of the Iowa Lottery. The reports should shock every Iowan. The shock won’t be because of questionable behavior and practices by the retailers that sell the tickets, no that should be expected. But because no one in the government or the Attorney General’s Office seems to care or have anticipated it could happen. This report makes me ask the question: Are we Iowans naïve, stupid or just complacent about organized criminal activity and corruption from inside trading?

The story has been covered by MSN’s Money Central, The AP and BusinessWeek in their financial news, the Cedar Rapids Gazette and the Des Moines Register newspaper.

Here are a few instances of questionable winnings:

In 2007 a northwest Iowa store owner claimed a $250,000 prize from an instant ticket that came from her store. Her big win was announced in a press release issued by the Iowa Lottery:

[The retailer] was spending the day with her girlfriend … when they decided to stop by the store to see her husband…. [They] own the store.

“On my way to give [her friend] a ride to her house, we just drove through the drive through [of the store] and [my husband] said, ‘Here, why don't you just scratch some lottery tickets?’”

[The retailer] scratched the tickets on the spot and revealed the big winner!84

In January 2008 the media reported my request encouraging the public to contact my office with concerns about the Lottery. In response, we received several dozen contacts from the public.

Here are some representative samples of comments made by these individuals:

• “I know a lot of people who work in c-stores [convenience stores] and they all say co-workers have pulled this scam at some point.”

• “I have been told (heard) that others are aware of ticket ‘sellers’ holding ‘dead/loser’ tickets near a machine and running those thru instead of running the ones you give them. I have not seen this myself, but because of the many articles I have been reading, I am watching the vendors more closely when turning in my tickets.”

• “I have had two occasions over the years where I knew I had a small winner and the clerk told me I did not have a winner. I had them check again and they then found their ‘error.’ I believe it was a mistake both times on their part or I would have reported it to lottery headquarters.”

Why are retailers and the relatives of retailers eligible to win the lottery to play the scratch games?

Odds are against the pattern and practice winnings, see what you think.

One out of 67,000. Those are the approximate chances of buying an Iowa Lottery ticket and having it win a high-tier prize (more than $600).85

Iowa retailers and their employees have claimed dozens of high-tier prizes. In 2007 alone, we found that retailers and store employees claimed at least 28 high-tier prizes, totaling $676,352. Those prize winners included a store owner (mentioned above) and a store clerk, both from northwest Iowa, who each claimed $250,000 prizes from instant tickets from the stores where they worked.86 In all of 2007, only seven other people claimed an instant-ticket prize for $250,000 or more. We could not establish whether any of the other seven involved retailers or store employees.

The Iowa Lottery was already tracking the developing scandal in Canada when it received those two $250,000 prize claims in early 2007. The Iowa Lottery did not investigate either prize claim before honoring them. Through our investigation, we found that the Iowa Lottery generally does not investigate prize claims by anyone unless it has received a complaint.

We found that the store owner and the store clerk have also claimed other big prizes. The store owner (and her husband) have claimed 16 prizes since 1991 for a total of $263,501; 11 of their claims have occurred since 2004. The store clerk alone claimed eight prizes for $266,000 in less than one year’s time.87

The Iowa Lottery does not track prizes claimed by retailers and their employees. That’s incredibly naïve or stupid, I’m not quite sure which to choose. The Iowa Ombudsman’s report is 218 pages long so it will take me some time to get through it, but I will and will report more on the findings.

Iowa Lottery It's a Wonderful Life Contest

And so today I have to wonder, is the Iowa Lottery promoting such a wonderful life, or is that just one more dream that doesn't exist?

Is it illogical to think that if the State of Iowa is the entity that owns and operates the lottery or scratch game system that organized crime will not exist?

Or is that simply just a field of dreams?