A performance audit has convinced Pennsylvania Auditor General Timothy DeFoor that the PA Lottery is not tracking frequent winners, especially retailers with regular wins.
The worry is such winners might be indicators of a black market 10% scheme.
Also known as “discounting,” a ticketholder resells the winning slip for a 10% discount below face value to avoid paying tax and overdue child support.
Frequent wins by retailer and spouse should have resulted in a closer look
DeFoor’s office examined 17 PA Lottery winners with 50 wins or more of more than $600 from July 2017 through March 2020. Those 17 players claimed almost $2.7 million in awards.
One of the winners is a Lottery retailer who had filed 42 winning claims. And the retailer’s spouse filed an extraordinary 88 times.
Why ‘discounting’ is a worry
In a discounting scheme uncovered earlier this year, a father and son in Massachusetts had cashed in 13,000 winning tickets, mostly scratch-offs, for almost $21 million.
And in October, 12 individuals from MA who are ticket-cashers, store owners or employees were indicted for a similar 10% scheme running from April 2020 through May 2021, according to MassLive.
A three-part PennLive investigation in 2017 found more than 200 people have claimed at least 50 Pennsylvania Lottery tickets worth $600 or more between 2000 and 2016 – a feat that, in many cases, is “statistically improbable.”
PA lottery law needs tightening
PA law bars lottery employees, their families and some state employees from playing.
But the PA lottery law allows retailers and their spouses to play.
Current rules require flagging a retailer’s winning claims but not a spouse’s.
That should change, according to the audit.
Findings released in a performance audit
A report from DeFoor’s office came out this week highlighting the issue.
The auditor’s staff found identifying repeat winners is a simple matter and such data is already collected.
But then the Lottery fails to follow through and analyze the data.
The auditor’s report also said the Lottery’s back office does not inventory every winning ticket above $600. They also failed to monitor retailer activity.
DeFoor said such an analysis would:
“Help determine if someone is claiming prizes for a prohibited player or engaged in illegal activity such as avoiding paying taxes or child support. [The] Lottery would then be able to forward the case to a proper law enforcement agency.”
Investigative teeth needed, the audit suggests
The auditor pointed out the Lottery lacks investigative authority. But DeFoor said the Lottery could team with his office or the state Attorney General’s Office.
Alternatively, they could seek a change in the law allowing them to follow through on suspect patterns, said DeFoor.
Currently, a retailer with a winning claim should trigger a review. But that does not extend to spouses, DeFoor’s report said.
Lottery partially agrees but disputes assertion of illegal activity
Secretary of Revenue C. Daniel Hassell, who ultimately oversees the PA Lottery, agreed in part – but ultimately disagreed.
Hassell wrote:
“Our agency agrees with the majority of the findings and recommendations.
“However, we strongly disagree with the performance audit’s assertion that frequent wins by Lottery players are an indication of illegal activity. This unfounded assertion relies upon the same flawed methodology that others have relied on to erroneously raise questions about the perceived statistical improbability of certain Lottery players’ wins.”
Hassell went on to say:
“Pennsylvania Lottery players should know that the security procedures…ensures that all prizes that are paid out are legitimate.
“We take this responsibility very seriously and will continue to take the appropriate steps so that Pennsylvania Lottery players have the utmost confidence that our games are operated fairly and securely.”
Lead image via Shutterstock.
