The man who won the lottery 14 times (part 2)

Aug 27, 2018, 6:56 pm (16 comments)

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Just after 11 PM on February 15, 1992, a lottery ball machine at the Virginia State Lottery HQ spit out 6 winning numbers on live television: 8... 11... 13... 15... 19... 20.

In the coming days, officials would find out that one "person" had secured not only the $27,036,142 jackpot, but 6 second prizes, 132 third prizes, and 135 minor prizes collectively worth another $900k.

What unfolded next was the strangest, most improbable lottery tale in history — one involving thousands of international investors, dozens of complex computer systems, and a mathematical savant who'd masterminded the entire operation from the other side of the world.

This is the story of the man who "gamed" the lottery by buying every possible combination.

If you have not yet read Part 1 of this story, stop right now and head over to The man who won the lottery 14 times (part 1).

Part 2

As Mandel knew, the "buy all combinations" method of winning the lottery was more of a logistical than a financial challenge. The hard part was yet to come.

Tickets could be legally printed at home, but they still had to be taken to an authorized lotto retailer in the US, paid for (at $1 each), and processed. Waltzing into a gas station with 7m tickets and a truckload of cash wasn't an option.

Mandel hired the accounting firm Lowe Lippmann to transfer $7.1 million in investor funds to Crestar Bank in Virginia, where it was cut into $10k cashier's checks. He then lined up advance deals with Virginia-based retail chains to buy the tickets in bulk. All he needed was a point-person on the ground to orchestrate the mayhem.

For this task, Mandel turned to an esteemed associate by the name of Anithalee Alex.

Perennially outfitted in a gold rolex and a safari suit, Alex was a sweet talker who could "make the world seem like a bed of roses." An ex-paratrooper turned Rolls Royce salesman turned oil prospector, he could often be seen gallivanting around his small town of Teutopolis, Illinois, in a t-shirt that read: "Please Lord, let me prove to you that winning the lottery won't spoil me."

When his old pal, Mandel, rang, Alex was fresh out of bankruptcy court, with $400k in debt and 16 maxed-out credit cards. He was ready for action — any action.

The job was harrowing: He was to coordinate the drop-off, payment, and processing of 7 million lottery tickets at hundreds of stores all over Virginia.

The jackpot hit $27 million on a Wednesday; the next draw would be on Saturday. This meant that he and his team had just 72 hours to pull it off.

A logistical nightmare

On February 12, 1992 — 3 days before the draw — Alex checked into a Holiday Inn in Norfolk, Virginia and set up a "command center" at the Koger Center, a nearby business park.

In the "88-acre "maze of buildings," Alex assembled a team of 35 couriers (most of whom were certified accountants) and distributed cellophane-wrapped bundles of 10k tickets with stacks of $10k cashier's checks.

"Think of it like an office pool," he reportedly told the CPAs, "except a larger office pool."

For 2-straight days, the couriers methodically descended on 125 gas stations and supermarkets. At Farm Fresh, Miller Mart, and Tinee Giant locations throughout the region, flummoxed store clerks were asked to buy and process millions of algorithmically-generated lotto tickets.

"We thought they were nuts," Rick Miller, a local gas station proprietor, later admitted. "But if someone comes up and says they want to buy 700k lottery tickets, we're not going to chase them away."

A representative at Farm Fresh, who bought 2.4 million of Mandel's tickets, had a more spirited take: "For someone to try to do this ticket-by-ticket is a very chancy proposition," he said. "But that's what lotto's all about."

By Saturday evening, the team was nearing completion. Then, disaster struck.

One of the chains who'd bought tickets in bulk got overwhelmed and quit in the final hours, leaving millions of combinations on the table. When the deadline for entry arrived, only 5.5 million of Mandel's 7 million tickets (78%) had been processed. Mandel's "fool proof" plan, which relied on securing every single possibility, was in jeopardy.

Like a regular lottery, winning the jackpot would ultimately come down to luck.

"The most incredible thing in the world"

Mandel knew that without 100% of the combinations secured, his strategy was reduced to a multi-million dollar game of chance.

He was aware of other ill-fated attempts to game a US lottery by bulk-buying tickets: In a 1990, a Sacramento retiree bought 30k tickets with a diaper bag full of cash and walked away empty-handed; months later, a computer engineer known as "The Phantom" purchased 80k combinations at a Jacksonville, Florida bar and only won minor prizes.

Even if Mandel were to win, there was the possibility of multiple winners — a scenario that could significantly dilute the jackpot.

At 11:20 PM on February 15th, the numbers were drawn on live television. I nearby warehouse, Alex and his team frantically rifled through 5.5 million physical copies of receipts, looking for the winning ticket.

Then, piercing through the carnage, a victorious shout: They'd won.

"When the $27 million ticket came up, everybody was 6 feet off the ground," Alex later said. "It was the most incredible thing in the world." Purchased at a Farm Fresh in Chesapeake, the ticket had been processed in the twilight hours. Alex's diligence had paid off.

From his home in Australia, Mandel sent out a short message to his 2,524 investors: "One of our target lotteries did jackpot to our required level," he wrote. "We entered and won."

The $27,036,142 jackpot (and $900k in secondary prizes) was to be paid out in 20 annual installments of $1.03 million. But Virginia's lottery czars had other plans.

What would Thomas Jefferson say?

Although completely legal under both US and Virginia state law, the Australian group's feat was interpreted as an effort "cheat" the traditional system.

"We might remember Thomas Jefferson's view of a lottery," Virginia Lottery director Ken Thorson pled to the press. "It is an opportunity for the common man to spend a small sum for the possibility of a higher prize... We never anticipated a group trying to make such a large purchase."

Mandel was subjected to a 4-year legal crusade, in which he was personally investigated by 14 international agencies, including the CIA, FBI, IRS, National Crime Authority, and Australian Securities Commission.

In the end, neither Mandel nor the ILF was found guilty of any wrongdoing. "I will live to be 150," he proclaimed.  "I am not the type of person who lays down and dies because some glorified clerk doesn't know what he's doing."

Meanwhile, in his home country of Australia, he became something of a folk hero: A widely-circulated cartoon depicted him as a kangaroo hopping out of the US with a pouch full of cash — defiant, victorious, and full of life.

I want my money back

The future, however, was not bright for everyone. Four years after the Virginia win, Mandel's investors were still looking for their "phenomenal returns."

The investors — small business owners, machine operators, housekeepers, and doctors — had been regaled with tales of riches, and promised participation in up to 9 lottos per year. Yet, they'd only received a $1.4k return on their $4k investment.

Meanwhile, Mandel paid himself a one-time "consultant's fee" of $1.7 million, and purportedly sold the annuity on the 20-year payout to a US insurance company for a lump sum of $14 million. After overhead fees ($5.5 million for the tickets, and $500k in expenses), he was left with a princely sum.

Records show that he funneled this cash into the Pacific Basin Fund, a Hong Kong-based account managed by his brother-in-law. "What we calculated to be the reality has changed," he wrote in a 1994 letter to investors. "It may not seem such a hot investment now." After that, his investor updates went cold.

After failed attempts at launching a life insurance company and a lottery system in the British territory of Gibraltar, Mandel declared bankruptcy in 1995. He then spent the next decade running various investment scams — one of which earned him a 20-month prison sentence in Israel.

"Stefan Mandel is not only irrelevant," a disgruntled investor later quipped. "He's toxic"

And what became of the mastermind?

Today, Mandel spends his days at a beach house on a remote tropical island in Vanuatu, a country off the coast of Australia. He lives a quiet life and reports being "retired" from the lottery.

Anithalee Alex, his one-time associate, also dropped off the grid, and keeps a low-profile life somewhere in Illinois. "You could not have written a script as good as this," he reminisced, years later. "This is one time real life was better than fiction."

Though we were able to piece together the logistics of Mandel's 20-year lottery career, he's never revealed the minute details of his algorithm. As he told an enquiring AP reporter in 1992, "That would be like Coca-Cola revealing their recipe."

His legacy lives on in US legislation: All 44 states that run lotteries have enacted lawspreventing the profitable replication of Mandel's strategy. In effect, this secures him a title as the first and last man to ever successfully game the lottery by buying every possible combination.

Reflecting back on wilder times, he played off the riskiness of his gambit.

"I'm a man who takes risks, but in a calculated way," he told the Romanian paper, Bursa. "Trimming my beard is a lottery: There is always the possibility that I'll cut myself, get an infection in my blood, and die — but I do it anyway."

"The chances," he concluded, "are in my favor."

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Hustle

Comments

Bleudog101

Reading this and my only thought was the clerks who had to print the many tickets, how many times the rolls of paper had to be changed.  They got lucky since the article said all possible combinations were not purchased.   Might agree with the investors that he is toxic...to others but certainly not himself.  He got his money in a big way.

music*'s avatarmusic*

Was it all worth it?  Mandel will be forever remembered as the man who changed the laws for every lottery player.

 He did come close to losing it all because of one retailer. 

Party

steelthug

for real that was a scare

Raven62's avatarRaven62

If it wasn't for Rolling Jackpots: Buying All the Combinations would never work Profitably!

itpmguru's avataritpmguru

It is like a night when you play your favorite P3 # 20x or 30x exact hoping for that big win, but realizing you forgot to play it with a $6 CBO to cover all possibilities and your investment.

He was indeed a smart lottery player, but he was also a scammer taking the investors for a ride.

duckman's avatarduckman

One thing that would also ruin the profitable payout for the "buy-all-combinations" player is if there are multiple jackpot winners...

RJOh's avatarRJOh

Quote: Originally posted by duckman on Aug 27, 2018

One thing that would also ruin the profitable payout for the "buy-all-combinations" player is if there are multiple jackpot winners...

The jackpot has to roll to an amount that would pay out enough to cover playing all the possible combinations and how often does that happens today with any lottery?

Stack47

Quote: Originally posted by Bleudog101 on Aug 27, 2018

Reading this and my only thought was the clerks who had to print the many tickets, how many times the rolls of paper had to be changed.  They got lucky since the article said all possible combinations were not purchased.   Might agree with the investors that he is toxic...to others but certainly not himself.  He got his money in a big way.

The $27,036,142 jackpot (and $900k in secondary prizes) was to be paid out in 20 annual installments of $1.03 million.

Correct me if I'm wrong but doesn't that average out to $408 a year for the 2,524 investors?

gunjack

Quote: Originally posted by RJOh on Aug 27, 2018

The jackpot has to roll to an amount that would pay out enough to cover playing all the possible combinations and how often does that happens today with any lottery?

now mega millions and power ball tickets is 2 bucks a ticket, Maybe thats why they went up on the price

TheMeatman2005's avatarTheMeatman2005

Quote: Originally posted by gunjack on Aug 28, 2018

now mega millions and power ball tickets is 2 bucks a ticket, Maybe thats why they went up on the price

If each store that printed 700,000 tickets at 6 cents per ticket they would benefit $42,000 for their trouble.

Not a bad day's work.

Todd's avatarTodd

Quote: Originally posted by TheMeatman2005 on Aug 28, 2018

If each store that printed 700,000 tickets at 6 cents per ticket they would benefit $42,000 for their trouble.

Not a bad day's work.

That's a great point.

Dd2160's avatarDd2160

Wow he stiff his investors...terrible thing to do!!!

It was 4am when i read this so i could have been half sleep..lol.

itpmguru's avataritpmguru

Quote: Originally posted by TheMeatman2005 on Aug 28, 2018

If each store that printed 700,000 tickets at 6 cents per ticket they would benefit $42,000 for their trouble.

Not a bad day's work.

I Agree!

GiveFive's avatarGiveFive

"His legacy lives on in US legislation: All 44 states that run lotteries have enacted laws preventing the profitable replication of Mandel's strategy."

How's that done?  What do the laws say that keeps someone from buying every possible combo? 

I realize that's logistically impossible for a one person acting alone to pull off buying every combo, but I'm curious as to how the lawmakers crafted a law with language such that it prevents a coordinated effort.  G5

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