Lotto prizes may be off the money

Web Posted: 07/10/2006 12:00 AM CDT
Lisa Sandberg
Express-News Austin Bureau

AUSTIN — Juan Rodriguez hardly needs the state's money; six years ago, he became an instant millionaire when he won the Texas Lotto jackpot.

But Rodriguez insists the state shortchanged him when it doled out his $8.9 million cash prize — and he wants all $74,000, plus interest and penalties.

"How would you like it, to be cheated and not paid?" asked Rodriguez, 43, a now-retired oil and gas worker from Jourdanton who bought his lucky ticket in February 2000.

Across Texas, winners of as many as 12 Texas Lotto fortunes insist they were stiffed a total of $2.8 million by the state Lottery Commission.

And that's pocket change compared with the $64 million the commission may have overpaid winners of 127 jackpots during a six-year period that began in 1996 — money that could have gone into the state's general fund to pay for state services.

Tuesday, the state auditor's office, which has studied the allegations for the past six months, is expected to settle the matter once and for all when it releases its much-anticipated report. A finding against the commission would have immense repercussions for an already scandal-ridden agency.

Would the commission actually pay the winners it cheated? Or conversely, would it try to collect from winners it overpaid?

"It's messy," said Gerald Busald, a math professor at San Antonio College who has studied the commission's calculations. "There's no doubt people were paid differently. They just willy-nilly changed the procedures from one day to the next."

Bobby Heith, a spokesman for the Lottery Commission, expressed optimism his agency would be vindicated and said two internal audits cleared it of any wrongdoing.

He would not speculate whether the agency would begin issuing checks or try to collect money from overpaid winners.

The allegations of underpayments and overpayments were first leveled five years ago by Dawn Nettles, the agency's unofficial, unpaid — and to agency bosses, uninvited — watchdog.

As the author of the online Texas Lotto Report, she discovered that the $8,999,268 she calculated Rodriguez should have taken home when he claimed his lump sum was not what the state paid him. He was shorted $74,000, she said.

So she looked at winnings dating to 1996 and discovered the state used no set method of calculating jackpot prizes, even though its rules at the time indicated winners be paid 32 percent of ticket sales.

The state used five or more methods to calculate prizes, she said. Some were paid less than the jackpot amount advertised; some were paid more than the amount advertised. Some were paid more than the investment cost needed to pay winners the advertised amount over 25 years; some were paid less than that amount.

The seemingly random payment methods led to two outcomes, Nettles charges: Some winners were cheated and many more were overpaid.

"This is simple math," Nettles said. "It's cut and dry."

She is a fierce advocate of Lotto winners — she insists most winners continue to live on fixed budgets after taxes eat into their jackpots — and she doesn't mince words.

"The state intentionally, purposely, maliciously cheated these people and it's not right," she said.

In 2001, she began testifying before the commission and taking her case to lawmakers. She didn't get the support she wanted — until she mentioned the state might have overpaid other jackpot winners by some $64 million.

That got people's attention.

So did the acknowledgment last year by the commission's then-Executive Director Reagan Greer that advertised jackpots were inflated to boast sluggish ticket sales. He resigned shortly thereafter.

Under increasing pressure, the agency requested the state auditor investigate the allegation of underpaid and overpaid winners as well as a separate issue over some staff firings this year.

The auditor no doubt has rifled through the eight-page, small-type spreadsheet prepared by Nettles showing disputed prize awards. Among the alleged overpaid winners, it lists Andrew C. and Rita G. LaSalle, who in 1996 collected $275,000 more than their $34 million share entitled them to, and Ruth Thompson, who in 2000 collected $579,000 more than her $4 million award entitled her to.

Paul Lombrano of San Antonio is also among the alleged underpaid winners, who shared a $33 million jackpot in 1998 with 16 other players and claims the state owes them $226,000.

Though Lombrano could not be reached for this report, he was quoted in an editorial Nettles wrote for her Web site, where he sought to explain how a jackpot winner could walk away with a winning ticket and still feel cheated.

"Our yearly checks, after taxes, (are) only $28,000 per year. For me, that's enabled my wife to be a stay-at-home mom which is very (much) appreciated," he was quoted as saying.

"We were so excited when we won. We never once thought we couldn't trust the Texas Lottery when they had us signing all those papers. I can't begin to tell you how I feel now. I say, turn this over to the media and let them have a field day. Maybe then somebody will make them pay us what we actually won."

lsandberg@express-news.net

Comments by Dawn Nettles

First of all, I'd like to commend Ms. Lisa Sandberg for her ability to grasp this issue and do such a fantastic job in explaining the situation to you. Every word of her story is accurate.

Today many of you have been calling and asking questions - mostly - do I think the State Auditors Office is going to cover for the TLC in their report.

That's a tough question for me to answer - lawyers across the state have predicted that they will. And that will really hurt because then I'll know for sure that there is no justice.

Now on the other hand, I don't see how the State Auditors can clear the TLC. That's because they have over-whelming evidence of wrong doing.

For instance, regarding the "cheated winners" - on March 15, 2000, I began posting on my web site exactly how much money a winner should collect. On March 30, 2000, the Finance Director of the TLC sent a MEMO asking for permission to pay according to the rule. From the day I began posting the amount a winner should collect, no winner ever received less than the percentage allocated to the win.

If the TLC had been paying correctly, why did they suddenly start paying that percentage?

Secondly, regarding the overpayments - the TLC's policies and procedures clearly stated that the TLC was "NOT obligated" to pay more than the set percentage of sales allocated to the win. Because in years past the TLC had been instucted by the Legislature to transfer the "reserve monies" to the General Revenue Fund, clearly, the state lost those revenues. And needlessly, I might add.

Also, when I met with the State Auditors in late February 2006, they ask me if I was aware that the reserve money "would have gone to the General revenue fund" if it had not been paid out to these few winners and I said, "Yes." That told me that they KNEW reserve monies had been turned over to the state.

Late last week, I sent the State Auditors a two page letter and attached documents proving what was said in my letter. Those were doucments showing them why I have alleged that the TLC has two sets of documents. I had already made one document public, but held many others back. I only sent the SAO two such documents.

With my having this knowledge, I can not see how they can help but tell the truth. However, because they allowed the TLC to respond to their findings by way of "draft documents," I can also see how they might overlook their real findings. The TLC has this way of denying everything.

The state owes winners their rightful winnings. It will be up to the Commissioners or Director Sadberry to issue that order. If they still refuse, then the legislature can issue the order. After this, then it would be up to the courts to rule. That would be really bad because we just recently read where the state is failing to pay on judgements ... this is really sad.

Either way, we'll know Wednesday when the State Audtiors gives their report. It's a toss up as to what I think will happen.

As for all of you who won and are concerned that they may come after those overpayments, well, I just can't believe that they will do that. But again, WHO KNOWS what they'll do?

Stay tuned ...