Lottery panel to consider changing jackpot policy

By John Moritz
Star-Telegram Austin Bureau

AUSTIN - Amid complaints of false advertising, Texas Lottery Commission officials will consider changing the way jackpots are paid.

C. Thomas Clowe, the commission chairman, said the three-member panel will discuss this month whether to guarantee the advertised jackpot or continue basing the grand prize on a percentage of ticket sales. (We want all prizes based on sales - this is SAFE for both the player and the state of Texas)

Clowe said Thursday that he is concerned that miscalculating the lotto jackpot could undermine confidence in the game. (Have you forgotten that Dr. Eubanks testified that staff does an excellent job in jackpot estimations? Staff knew there wouldn't be a winner and they knew that what they were advertising wasn't right - they just didn't think I'd tell on them this time. Seems like the commission should be more worried about the people who have "spoken with their dollars" - a familar phase to Commissioner Clowe.)

"We want the public to have confidence in the lottery," Clowe said. "This is the people's business."

The commission came under fire this week when it was accused of overestimating Wednesday night's jackpot even though the pace of ticket sales would not support the advertised $8 million payout.

The complaint brought calls from state Sen. Jane Nelson, R-Lewisville, for new legislation to compel the lottery to comply with the state's truth-in-advertising laws.

Nelson, who is vice chairwoman of the legislative panel that reviews the performance of state agencies, said that Texans must have full confidence in the lottery's integrity.

"Clearly, this is an example of the pitfalls associated with government-sanctioned gambling," said Nelson, an outspoken opponent of gambling. "We have to be absolutely sure that everything that goes on there is open and aboveboard. The public needs to know what's going on. I need to know what's going on." (Thank you Senator Nelson.)

A complaint was filed Monday by lottery commission critic Dawn Nettles of Garland with Texas Attorney General Greg Abbott's office accusing the commission of overstating Wednesday's jackpot in an effort to boost sagging ticket sales.

Lottery officials have acknowledged that the jackpot was overestimated but said it was an honest miscalculation.

Lottery spokesman Bobby Heith said the chief reason for the miscalculation was that ticket sales did not increase as expected as the deadline for Wednesday's drawing approached. (No it wasn't an "honest" mistake - FACT: There have been four $8 million jackpots in the past 10 months. Two on a Saturday night where sales are always higher and two on a Wednesday night where sales are always lower. All draws produced the same sales - the two Wednesday night draws were $2.1 million and the two Saturday draws were $2.6 million. The TLC - like me - knew sales would come in at $2.1 for a Wednesday night draw. The commission was too far off on Friday June 3rd - they knew they'd be falsely advertising when they signed off on the jackpot estimation sheet for Saturday's roll amount.)

To make sure that another overestimation did not occur, lottery officials did not advertise a higher jackpot for Saturday's drawing even though there was no grand-prize winner Wednesday.

It was the first time in the Texas lottery's history that the jackpot was not increased after a drawing without a winner. (I'd also say it's the first time - in a very long time - that the TLC has actually advertised the correct jackpot amount at the low level)

On Thursday, Abbott spokeswoman Angela Hale said the attorney general's office examined the complaint and was satisfied that lottery officials "were addressing the issue raised in the allegation." (Yes, they did address it but they still violated consumer law and it was intentional. If I did that in my business and someone filed a complaint, the AG would come after me.)

Clowe said that weak lotto sales can be attributed at least in part to the lottery commission's decision in 2003 to join the multistate Mega Millions game, which is similar to lotto but often generates jackpots that are far higher. (Why do ya'll keep talking about how proud you are that Lotto sales surpasses Mega Millions sales? Why do ya'll say it appears that MM hasn't hurt Lotto Texas? How do you account for Lotto Texas FY05 projected sales at $500 million then reduced to $399 million yet Lotto Texas FY05 sales currently stand at $245.8 million? The TLC projected Mega Millions sales for FY05 at $399.8 million but currently Mega Millions sales stands at $138.1 million. How do you account for those projections that are WAY off target? The People of Texas said NO to games that were harder to win - Remember? Clearly the People are speaking with their dollars.)

He said the agency has policies in place to ensure that it follows all consumer-protection laws.

"I believe we have rules in effect that do just that," Clowe said.

He said further discussions are planned for the commission during its June 24 meeting.

"We have had very open and extensive discussions on that, and we will continue to have those discussions," Clowe said.

Under current policy, anyone who wins the lotto during the first four drawings after a jackpot is won is awarded the advertised amount. After the fourth drawing, the amount a jackpot winner is awarded is based on a percentage of ticket sales.

Nettles said she would fight any effort to change that policy because when jackpots roll into the tens of millions of dollars, the percentage of sales often exceed the advertised jackpots.

"We don't want them low-balling the estimates once the jackpots start getting on up there," Nettles said.

During the legislative session that ended last month, a bill to extend the lottery's life for 12 more years contained a clause that would have required the agency to fully comply with consumer-protection laws, including those dealing with deceptive advertising. The measure died, meaning that the lottery commission will again come under review in 2007.

The provision was developed by the state's Sunset Advisory Commission, an arm of the Legislature co-headed by Nelson that reviews and evaluates all state agencies.

Ironically, Nelson helped kill the lottery-extension bill because pro-gambling lawmakers intended to use the measure as a way to legalize Las Vegas-style video slot machines in Texas. But she said she will explore ways to craft legislation that will bring greater consumer protections to the lottery without providing an opening for additional gambling opportunities in the state.

The Letter I sent to the Attorney General and
the District Attorney of Travis County.

June 6, 2005

Attorney General Greg Abbott
Office of the Attorney General &
District Attorney Ronald Earle
Office of The District Attorney
Public Integrity Unit
P. O. Box 1748
Austin, TX 78767

RE: Texas Lottery - The Advertised $8 Million Jackpot - Deceptive Advertising

To Whom It May Concern:

The Texas Lottery is currently advertising the next Lotto Texas jackpot at $8 million. This is for the drawing to be held on Wednesday, June 8, 2005.

The problem is - if someone were to win - as per the Lotto Texas rule, the winner is entitled to 39.104% of roll sales which falls far short of revenues needed to fund a prize of $8 million - in fact, they only have enough to fund an estimated $6.5 million - at best. I feel the variance is entirely too high to support the amount they are advertising.

I contacted the TLC this morning to try to verify the factor applicable but they refused to tell me verbally. Because I am in the “lottery business,” so to speak, I track the rates/factors weekly and the rate I obtain is always higher than what Texas can obtain. Therefore, I am positive that the Texas Lottery can not fund the amount advertised.

Texans want and need pari-mutuel payouts as this is the only way a lottery can guarantee that players receive their share of sales - but - we also want and demand truth in advertising.

Just so that you know, the current Lotto Texas rule states that the TLC will pay the greater of either the amount in the prize pool or the “investment cost” for the first four (4) draws in a roll. After the 4th draw, a jackpot winner will receive 39.104% of roll sales. The TLC knew they would not have enough to fund $8 million but have chosen to falsely advertise the amount one would win if they won.

Your immediate attention to this matter would be appreciated. Consumers deserve to know the truth when it comes to purchasing lottery products.

Thank you very much.

Sincerely,

Dawn Nettles
Publisher

cc: Texas Lottery Commission

My Email to the Commissioners, Reagan Greer and Gary Grief

6-06-05

Subject: $8 Million Jackpot & Grievance Policy

Dear Commissioner Clowe, Commissioner Cox, Commissioner Olvera

I just wanted to be the one to tell you that I filed complaints with the AG and the DA of Travis County today regarding Wednesday's advertised $8 million Lotto Texas jackpot. I regret this but I feel the TLC should not knowlingly mislead the public.

As you know, the Lotto Texas rule states that the TLC will pay the greater of either the amount advertised or the amount in the prize pool for the first 4 draws in a roll. After the 4th draw, then they only pay the amount in the prize pool.

I certainly agree with paying pari-mutuel prizes - this is the only way to guarantee the people that they will receive their share of sales. But, I also believe in truth in advertising and if the jackpot is won, a winner would not receive $8M as stated.

I called Bobby Heith this morning and asked him what the factor was but he refused to tell me. He said I'd have to make an open records request. I do request jackpot estimates each Sunday but in this case there was not enough time to obtain the information thru channels so I was hoping the TLC would simply tell me the factor.

Since I obtain the factors from other lotteries easily, I was able to determine the approx costs for Texas. The rate I obtain is always higher than what Texas obtains so I am positive that a winner would only receive roughly $6.5 million and this is too far off the amount advertised. To me and others I've contacted today, this is deceptive advertising.

I've also been meaning to raise one more issue of importance. The TLC does not have an employee grievance policy. I took it upon myself to contact other state agencies - roughly 20 of them - and so far I haven't found one that doesn't have something in place for grieving employees. This includes the AG, Comptroller, State Auditors Office, SOS, Dept of Banking, Environment Quality Commission, DOT, CPS, Building and Procurement, plus many others.

The TLC is the only agency I found that doesn't have a grievance policy for their employees.

I would like to urge you to do the right thing and have the TLC provide an official source for employees to complain - if of course, they have a complaint.

Thank you for any consideration given to these two issues.

Dawn Nettles
P. O. Box 495033
Garland, Texas 75049-5033
(972) 686-0660

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