Saturday, October 28, 2006

Are lottery retailers stealing jackpots from customers?

Making the news in Ontario this week is a CBC report finding that people who sell lottery tickets are winning jackpots much more frequently than you’d expect. The CBC estimates that lottery clerks should have won 57 jackpots, but they won "nearly 200." According to statistician Jeffrey Rosenthal, the probability of this happening by chance "is about one chance in a trillion, trillion, trillion, trillion."

The suspicion is that when a winner brings his ticket in to be checked, the operator tells him it’s a loser, pretends to throw it away, and cashes it in himself later. Indeed, there was a lawsuit to that effect by one customer a few years ago – the retailer settled out of court for $150,000 – so it’s not unreasonable to suspect these things happen.

Taking the reported numbers at face value, the implication is that lottery retailers rip off unsuspecting winners twice as often as they actually win legitimately. That doesn’t strike me as unreasonable – if the average operator verifies 1000 times as many tickets as he buys himself, only 1 in 500 retailers has to be dishonest for these numbers to happen.

The Ontario Lottery and Gaming Corporation (OLGC), the government entity that runs the lotteries, is digging in its heels and insisting that
security is fine. They say they investigate all large jackpots.

But if the guys behind the counter are ripping off jackpots, shouldn’t it be easy to tell, at least in some cases? After all, the OLGC has a record of every lottery transaction made.

-- sometimes, when jackpots are very large, the lineups are huge at the busiest terminals. If an operator cashes a ticket that was bought in the middle of a continuous rush, wouldn’t it be implausible that he kept everybody in line waiting just because he had a whim to buy his own ticket at that moment?

-- a lot of people play the same numbers every week. The OLGC has the records to figure out if that’s the case with those winning numbers. If so, the winner can be asked to verify how often he buys those numbers, and whether he ever bought them after the win. Only the real buyer would be able to answer correctly. Moreover, if those same numbers were occasionally bought at other places, that’s a pretty good indication something’s wrong. Why would the owner go out of his way to buy a ticket elsewhere, when he can get it immediately (and at a discount) at his own machine?

-- it’s not always the same person – owner or employee – running the machine. Was the claimant actually working the day and hour the ticket was sold? Does he remember what time he bought the ticket?

-- Stores often display signs that say "$500,000 winning ticket sold here." Does the operator find out he sold the winning ticket immediately, even before the ticket is verified? If so, find out when the ticket was first checked. If it was, say, days after the draw, that would be suspicious. After all, if you had a ticket, and you found out that a $250,000 winner came from your store, wouldn’t you pull your ticket out right away to check it?

-- in the past, has the owner regularly cashed winning tickets before or after his store was closed? If so, those are probably his own tickets. Was this jackpot ticket also checked when the store was closed? If not, why the difference? And was this winning ticket in line with the pattern of other owner tickets? For instance, if the owner usually buys a $10 Quick Pick, but the jackpot was won on a $5 ticket where the customer chose his own numbers, that’s something of a red flag.

-- many people pay for their tickets with debit cards. Was their a debit card transaction at the time the winning ticket was sold? Was it for at least the cost of the tickets printed? If so, whose debit card was it?

There are probably a lot more ways a cheater might be caught – these are just off the top of my head. It sure does seem like there would be a lot of opportunity for an OLGC investigation to discover suspicious circumstances.

Probably, the government won’t want to release details of how the investigations actually work. But the Ontario
ombudsman is investigating, and it’ll be interesting to see how this plays out.

Right now, this is more Freakonomics than sabermetrics ... but we’ll see if we eventually get enough information to draw our own statistical conclusions.

Not that I don’t trust the government or anything.


At Monday, October 30, 2006 9:15:00 AM, Anonymous Anonymous said...

I watched a show (on E I believe) recently about lottery winners and their lives afterwards. They profiled one man in Southern California where this situation occurred. He brought the ticket in to be checked, the clerk said that he won $4 gave him the money and then kept the ticket for himself. It was in actuality a $500,000 ticket. The lottery commission became suspicious for some reason and investigated the clerks claim. They ended up discovering the deceit and were able to find the real winner by playing the surveillance video of the real winner buying the ticket on the local TV news.

At Monday, October 30, 2006 9:53:00 AM, Blogger Phil Birnbaum said...

Freakonomics posts on this story here.


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