Informant reported lottery scam
Agency criticized for silence in scratch-off case; director says he lacked evidence to notify police

By Vic Ryckaert and Kevin Corcoran
vic.ryckaert@indystar.com
November 10, 2004

(Comments in blue made by the Lotto Report)

Marion County Prosecutor Carl Brizzi said Tuesday that Hoosier Lottery officials knew for months there were potential problems with a scratch-off game, but failed to notify police about their suspicions of a possible scam.

A day after charging ex-security agent William C. Foreman and two other men with stealing from the lottery, Brizzi said an informant, rather than lottery officials, alerted his office to the scheme.

"There were no efforts by anyone in the lottery to bring this to law enforcement," Brizzi said. "But for the efforts of (investigators) Tom Trathen and Mike Thayer, $50,000 of public money would be paid out (per year) to these thieves over the next 20 years."

The lottery already had paid out the first installment to Foreman's alleged accomplices before Monday's arrest.

Lottery Director Jack Ross defended his agency.

"I had the option of either paying the ticket or leveling a very serious allegation," Ross said. "I did not have the evidence to level that serious allegation."

Foreman, 59, Indianapolis, was arrested Monday and charged with felony counts of disclosing confidential lottery information and theft.

Investigators say Foreman, a lottery security officer who resigned in September, told two men that a winning ticket in the "$2,000,000 Bonus Spectacular" game could be purchased at a store in southeastern Indiana.

The men who cashed in that ticket, Chad R. Adkins and Daniel J. Foltz, were formally charged Tuesday with theft.

According to court records, Adkins and Foltz say Foreman told them where to buy the winning ticket. The men then arranged to purchase the store's entire supply.

The documents do not say how Foreman, a retired Indianapolis police officer, gained that information.

When ordered to take a polygraph test, Foreman resigned his $52,800-a-year job on Sept. 13. Prosecutors say he was a few months short of being able to claim full retirement benefits.

Foreman, who is free on bond, is scheduled to appear in Marion Superior Court today. Adkins, 28, and Foltz, 31, both of Shelbyville, are charged with theft and scheduled to appear for hearings on Nov. 22.

Investigators have released little information on Foreman's connection with Adkins and Foltz.

Tickets carry codes

Lottery tickets are coded with "numbers" and other discreet marks that verify their authenticity. Only the manufacturer, Scientific Games, knows the numbers of the winning tickets. (WRONG) That information is never supposed to be shared with people at the lottery until a game is closed.

The "number" on each winning ticket IS included in an encrypted file that IS received by Security when the job is shipped from the printers. This file is then loaded into G-Tech's computer system when the job arrives. The lotteries know EXACTLY how many winning tickets there are for each prize category and the lottery terminals know which tickets are winners and which ones are not winners from this same encrypted file. How do you think the lottery could pay winning tickets if the terminals didn't know which tickets were winners? This information IS sent to each lottery by way of the "encrypted file" when the printer ships the tickets.

When shipping tickets, Scientific Games guarantees lotteries that X number of tickets out of X number of tickets contains an equal number of winning and non-winning tickets per dollar value. At NO time will a lottery ever be in the position of distributing all the winning tickets FIRST. Lotteries can also see to it that the top prizes are in the last batch of tickets to be shipped to retailers IF they want. The printer also has to GUARANTEE that they print within 2% of the quantity ordered so that the odds printed on the tickets remain correct. However, this does not mean that the odds printed are "really" correct particularly in games with second chance drawings and for lotteries who count "break-even tickets" as "winning" tickets.

But in this case, Hoosier Lottery investigator Matthew Hollcraft -- looking into a claim from a person who believed he had lost a winning jackpot ticket -- requested and received a list of winning tickets on May 13.

The identifying numbers, along with distribution information available to some within the lottery, can be used to trace the winning tickets.

A day after receiving the list of winning tickets, Hollcraft was forced to resign from the lottery for reasons including the security breach, Ross said.

In an agreement signed Sept. 30 by Hollcraft and Ross, Hollcraft promised not to divulge any lottery information and agreed he would notify lottery officials beforehand if he is called to testify in court about the security breach.

Investigators also revealed Tuesday that lottery officials paid Hollcraft a $7,500 settlement.

Ross said the settlement allowed lottery officials to get a sworn statement from him detailing the security breach.

Hollcraft, who has not been charged in the case, could not be reached for comment.

"We were trying to make sure no criminal activity was taking place," Ross said. "That was our concern. We hadn't ruled that out as a possibility."

The lottery employs 11 security officers -- most of them former police officers -- and was conducting its own investigation into the matter, Ross said.

During the 2004 budget year, lottery proceeds amounted to about $200 million. The money was set aside to pay pensions of teachers, police officers and firefighters; to lower license plate excise taxes; and to cover other state expenditures.

Legislators weigh in

"Hopefully there's not a wide-scale loss of confidence in the lottery," said state Sen. Murray Clark, R-Indianapolis. "Obviously that's my fear. Definitely it should be looked into, but I don't want to second-guess anybody because I'm not privy to all the facts."

Clark and other legislators said what happened is a "management issue" that does not require legislative action. (Legislators are suppose to be protecting us - what do they mean it "does not require legislative action?" Scratch tickets account for 70% of all lottery sales in Texas. Do they just want the money no matter what?)

"It's always troublesome when something like this occurs, but we should keep in mind the system works," said state Sen. Vi Simpson, D-Ellettsville. "The point is they didn't succeed. I think perhaps Prosecutor Brizzi is making a bigger deal out of this than it is." (NO, he is not making a bigger deal out of this. Someone has to hold the lotteries accountable as most lotteries do NOT have to adhere to consumer laws. States were given a monopoly to run lotteries because the government WAS somebody WE were suppose to be able to TRUST. So much for that - huh? The states are giving People games of chance that they KNOW probably won't be won until the jackpot amounts reach unbelievable sums so as to entice play. If someone in the private sector tried to sell a product to millions of people every day yet the product was only beneficial to a very few and just ever so often, the AG's would shut them down. Just look at what's happened to some of the diet pill companies who enticed sales by advertising weight loss to people. The Texas AG said the only thing that got thinner was the people's wallets as he shut the company down for scamming people! Aren't our lotteries doing the same thing?)

Simpson said Ross, a former attorney for Senate Democrats, is "as ethical a guy as you'll ever find."

The McDonald's Corp. survived a similar disaster with its Monopoly game three years ago in which 35 people, many associated with the marketing company that ran the contest, pleaded guilty to rigging it, said Lisa Howard, a company spokeswoman.

The thefts involved more than $20 million in fraudulently redeemed game pieces. The company fired the marketing company and gave away $25 million in cash and prizes to customers.

The company continues to run the popular promotion.

Following McDonald's lead, Ross said the lottery is looking for ways to make things right for players of the scratch-off game.

"That's clearly something we would like to do," Ross said. "We certainly don't want to profit from this."

Call Star reporter Vic Ryckaert at (317) 444-2750.

Despite 'Red Flags' Over Ticket, Lottery Paid Men
Two Accused Of Using Inside Information Were Given $50K Installment

WRTV Indianapolis
November 9, 2004

INDIANAPOLIS -- The Hoosier Lottery paid two men the first installment of a $1 million scratch-off game prize despite signs that they might have used inside information to win -- suspicions for which they're now under arrest -- Marion County Prosecutor Carl Brizzi said.

The lottery in September paid $50,000 to Chad Adkins and Daniel Foltz two weeks after they went to lottery headquarters and turned in a winning ticket in the "$2,000,000 Bonus Spectacular" game, Brizzi said.

This week, former Hoosier Lottery security officer William Foreman was arrested on accusations that he told Adkins and Foltz in May where they could buy the winning ticket. Adkins and Foltz also were arrested recently and have admitted that Foreman told them where to make the purchase, authorities said.

On Tuesday, Brizzi told RTV6's Jack Rinehart that the lottery should have had enough information in September not to pay the $50,000 installment:

Authorities say lottery officials knew in May that the game had been compromised because someone spent $700 to buy a Ripley County store's entire supply of the game's tickets, and because the lottery knew a winning ticket was at that store.

Court records say that when Foltz and Adkins turned in the ticket in September, a lottery official recognized Adkins as Foreman's friend.

Authorities say Hoosier Lottery Director Jack Ross then required Foreman to take a polygraph test, which he refused. Foreman, while denying he compromised any tickets, resigned in September.

"Every single one of those red flags, in total or by themselves, would have raised enough suspicion to not pay this out," Brizzi said.

Marion County grand jury investigators have served a search warrant on the Hoosier Lottery headquarters, seizing more than 4,000 records and e-mails of the director, his security force and at least two former employees, Rinehart reported.

Ross told Rinehart that although the lottery had its suspicions, it felt it didn't have enough information in September to withhold the prize's first installment.

"There was some smoke, yes, but I didn't feel that there was enough to make the decision at that point not to pay," Ross said.

Foreman, 59, was charged this week with felony counts of disclosing confidential lottery information and theft, Brizzi said. He was released on bond Monday night from the Marion County Jail.

Foltz, 31, and Adkins, 28, remained jailed Tuesday pending court appearances, a jail official said

Ex-lottery official charged in $1 million payout scam
Man told 2 others where a winning ticket would be sold, prosecutors say.

Indianapolis Star
By Vic Ryckaert - vic.ryckaert@indystar.com
November 9, 2004

A former security officer for the Hoosier Lottery is accused of conspiring with two other men to rig a $1 million scratch-off game.

Prosecutors say William C. Foreman told two men that a winning ticket in the "$2,000,000 Bonus Spectacular" game had been sent to a store in Cross Plains, Ind.

One of those men then went to that store and bought its entire supply of the game's $20 tickets -- about $700 worth, according to court documents.

Foreman, 59, was arrested Monday and charged with disclosing confidential lottery information, a Class A felony carrying a prison term of up to 50 years.

Daniel Foltz, 31, and Chad Adkins, 28, also were arrested Monday. They face preliminary charges of Class D felony theft, with a possible prison term of up to three years.

Foreman, the secretary for the Indiana State Fraternal Order of Police, also is charged with Class C felony theft, carrying a maximum prison term of eight years.

After Marion County Prosecutor Carl Brizzi and a team of investigators served search warrants at the lottery's Downtown Indianapolis offices Monday, Brizzi said the inquiry continues.

"It's just this one game that was compromised," Brizzi said. "I don't want to send a scare to the entire state of Indiana that the lottery is somehow fixed, because our investigation is limited to just this one game and all of the tickets have now been accounted for."

Five tickets for the game would have won $1 million prizes, said Hoosier Lottery Director Jack Ross.

One of those jackpot tickets was sold to a legitimate winner who lives in Mishawaka; three were in the lottery's warehouse and subsequently were destroyed, along with all unsold tickets for the game.

The fifth ticket is the one redeemed by Adkins and Foltz. It was worth $1 million -- $50,000 a year for 20 years. Adkins and Foltz each were paid $25,000.

Ross said new tickets were printed -- including three new million-dollar winners -- and the game continues. The winners of the five valid tickets will be entered in a drawing to win an additional $1 million.

Ross said his agency is cooperating with the inquiry.

"If they have evidence now that this game is compromised, we will continue to cooperate and make sure they are brought to justice," he said. "The integrity of the lottery is job one over here. There are no games on the street that have been compromised in any way."

If it's proved the game was rigged, Ross said, the lottery will seek to recover the money awarded to Foltz and Adkins.

According to court documents, the game was compromised on May 13, when Hoosier Lottery investigator Matthew Hollcraft obtained a ticket reconstruction list from the Georgia-based manufacturer. That list, combined with information available at the lottery office, would allow someone to trace all five winning tickets.

Two others besides Hollcraft had access to that list, prosecutors say: Pete Byrne, the lottery's security chief, and Foreman.

Foreman, prosecutors say, conspired with Adkins and Foltz to claim a winning ticket sent to Otter's Grocery in Cross Plains, in Ripley County in southeastern Indiana.

According to records, store clerk Ragina Warner identified Foltz as the man who spent about $700 to purchase the store's stock of "$2,000,000 Bonus Spectacular" tickets in May. She told police she had never seen anyone buy that many $20 tickets.

Lottery officials had been conducting their own investigation into that game, Ross said. The list, a major security breach, was one of the performance issues that led to Hollcraft's resignation in May, Ross said.

According to court records, Foltz went to lottery headquarters Sept. 7 to claim the prize; Adkins went the next day. Byrne, the security chief, interviewed the men and recognized Adkins as Foreman's friend.

In that interview, Ross said, Adkins admitted he knew Foreman but denied receiving any information from him about the game.

Ross delayed paying the men and required Byrne and Foreman to take polygraph tests. Byrne passed the test.

Foreman refused the polygraph and resigned in September, Ross said, "but he insisted on telling me that he had nothing to do with compromising the tickets."

Call Star reporter Vic Ryckaert at (317) 444-2750.

---------------------------------

Before buying that next scratch ticket, read this ... Click here

Expert Offers Lottery-Winning Tips
NBC TV - Texas

NBC Interviewed D. Nettles Nov 3, 2004
Aired Nov 8, 2004 - 10 PM - Channel 5 DFW - KXAS

The Written Editorial as it appeared on Channel 5 KXAS TV web site
(Additional comments by Dawn Nettles in blue)

Lottery players typically have a system. Some people use significant numbers like ages and dates. Others simply bet on the same set of numbers for every drawing in the hope that the numbers eventually will hit.

Dawn Nettles, publisher of The Lotto Report, said some strategies could increase the odds of picking a winner. Plotting previously drawn numbers could pay off, according to Nettles.

"Well, if I were out there playing, I would play No. 1 because it hasn't been drawn in the last two weeks, so it's time for No. 1 to be drawn," she said. (This statement was pertaining to playing Pick3 ONLY and was made on Nov 3 - 11 AM. Number 1 WAS drawn on Nov 4 (143) for the day draw and twice on Nov 5 - Day (351) and Night (182) draws.)

The Lotto Report tracks the Texas Lottery. Games that have multiple drawings a day, such as Pick 3, could boost the chances of winning. Nettles warned, though, against playing daily.

"Oh no, 'cause you can't win every day," she said. "It's impossible."

A large number of lottery players put their faith in state-operated computers when they opt for a "Quick Pick," or a lottery computer-system assigned set of numbers. According to lottery experts, (NOT Dawn Nettles) computer-generated numbers are less likely to be duplicated, and any potential winner would not have to share a jackpot. (I advise ALL players to NOT buy Quick Picks as there ARE too many duplicate numbers.)

The experts (NOT Dawn Nettles) also recommend playing instant-win scratch-off games. New games, early in their lifecycles, offer the best chance because the jackpots have yet to be claimed. (If I played scratch tickets, and especially tickets with million dollar prizes, I would wait until most of the tickets were sold as the top prizes - for the most part - seem to be claimed late in the game.)

"They keep selling the tickets even after the top prize is sold," Nettles said.

Nettles also suggested limiting lottery-ticket buying to Texas games because the odds of winning a multistate game are too great. (The odds of winning Lotto Texas are extremely bad too.)

"Chances are very slim," Nettles said. "If God's picked you to win, then you only need one ticket to win."

Although some players believe the chances of winning a lottery drawing are increased by buying a ticket in a small town, a Texas Lottery representative said the odds remain the same from town to city. In fact, more winning tickets have been sold in Houston than any other Texas town.