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Having a lottery machine: Now that's the ticket

Dec 27, 2005, 6:49 am

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Critics raise questions as retailers play by the rules and win scores of jackpots

New Jersey's 10 most frequent winners of lottery jackpots have one thing in common: Luck.

But five of those top 10 winners have something else going for them: A store that sells lottery tickets.

"We play, we win," explained Mahendra Vora, standing behind the counter of Everything Nice, a stationery store on Bergenline Avenue in West New York that he owns with his wife, Sudha.

Together, the lucky couple has claimed 175 jackpots between 2000 and 2004, worth a combined $360,000. He said he "played all the time," but declined to say how many tickets he buys.

"We're just lucky sometimes," he said.

It's hard to imagine anyone much luckier, especially when it comes to the state's twice-daily Pick-4 drawings.

The Voras have claimed 119 Pick-4 "jackpots" — tickets that pay about $2,500 and therefore must be reported to the state and Uncle Sam for tax purposes.

The odds of winning a single Pick-4 jackpot?

10,000 to 1.

It is not illegal for retailers like Vora to play or win the lottery. And New Jersey, like every state with a lottery, programs its terminals to make it impossible for a winning ticket to be sold or printed after a drawing.

The state also reviews winning claims by dealers "to ensure the integrity of the lottery has not been compromised," according to a Treasury Department spokesman.

Regardless, critics say any lottery that permits dealers to play or win has a serious integrity problem and is exposing itself to the potential for tax evasion or other illegal activities.

"It's a bad policy," said Carl Zeitz, a former member of the state's Casino Control Commission, which regulates gambling in Atlantic City. "You want to assure the public that the game is honest, and the people who are involved in the game shouldn't be playing the game."

By contrast, dealers, security guards and other licensed casino employees are not allowed to gamble in their own casinos, or other casinos owned by their employer, said Daniel Heneghan, a commission spokesman.

"You can't have a person after a shift as a dealer for a card game turning around and playing," Heneghan said.

The Star-Ledger earlier this month printed a three-part series showing the state's growing dependence on the lottery to plug its budget gaps. The investigation analyzed five years of lottery sales and found a distinct pattern of lottery sales rising in areas where income levels fell.

As part of that project, the newspaper obtained a database of lottery winners from the state. An analysis of the most frequent jackpot winners found five retailers among the top 10.

Interviews the past two weeks found many possible explanations: luck; retailers who buy winning tickets at a discount from people who don't want their earnings reported; dealers buying tickets that were incorrectly entered; and even retailers on the fringes of addiction who buy so many tickets they can't help but score several jackpots.

Pramod Patel, who owns two convenience stores in Morristown and was 10th on the list of winners, said he often buys more than $50 of tickets a day just from "mistakes" — tickets his customers reject because store clerks type in the wrong numbers.

To illustrate, he reached into his pocket on a recent afternoon and pulled out a mixed wad of green bills and pink lottery tickets he said he had purchased that day.

Patel said he would rather buy the mistakes than void them, in part to save time but also for superstitious reasons: "It's usually the mistakes that turn out to be winners," he said.

Patel reported 80 jackpots, mostly Pick-4, between 2000 and 2004, good for $138,786.

When a player wins a jackpot of $600 or more, he or she must fill out paperwork and send it to Trenton to claim the prize. The primary purpose is to report the income for tax purposes — though taxes are only withheld if the prize is more than $5,000.

New Jersey also screens winners to see if they have defaulted on student loans or owe child support.

Several people said winners often skirt regulations by submitting winning tickets through a proxy.

Retailers "buy winning tickets from customers all the time," said Charles Shakor, a former lottery seller who owns a supermarket in Old Bridge. "There is no doubt."

A retailer, he said, might pay $3,000 for a $4,000 winner — a discount the actual winner is happy to accept because they get the cash immediately and without any taxes or other documentation.

The retailer may or may not ultimately pay taxes on the winning ticket, he said, but it's much more difficult for the government to trace once the proceeds are mixed with other cash transactions at a convenience store.

"I have definitely heard stories about people who regularly claim prizes on behalf of other people," said Todd Northrop, a Somerset County resident who runs "Lottery Post," a Web site with 20,000 registered members. "It is not only common to avoid things like child support, but also to manipulate taxes."

While illegal immigrants are entitled to collect lottery winnings, many don't know the rules and sell tickets to a proxy, said Rich Cunningham, who runs a workplace safety program in New Brunswick.

"At one point there was a buzz going around that if you claimed a lottery jackpot, that would attract attention to you and people were getting sent home because of it," Cunningham said. "You get these kinds of urban legends all the time among immigrants."

Patel, however, said he knows the rules and would never cash a customer's ticket under his name.

"I don't do that," he said.

Officials from the Treasury Department and the New Jersey Lottery, which generated $2.3 billion in lottery sales last year, denied repeated requests to comment on the possible reasons why dealers were winning so often.

Critics, meanwhile, say it's an issue that demands attention.

"If retailers are winning this often, in my mind it would at least set off red flags," said Alicia Hansen, a lottery expert at the nonpartisan Tax Foundation in Washington, D.C. "Perhaps the state is getting so much money from these stores it wouldn't care too much."

Zeitz said the issue speaks to a fundamental conflict of interest.

"The lottery commission is self-regulating," he said. "It regulates the game, but it also sells the game, so it has every incentive to keep pushing sales."

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