Winner Files Formal Complaint Alleging TLC Cheated Lotto Winners ... TLC Denies Cheating Winners ...

Posted: Friday, Feb 4, 2005

Original Story Regarding the Cheated Winners, Click here.
July 2006 - San Antonio Express News -
"Willy-Nilly" Lotto Prizes Spur Audit, Click here.

My Rebuttal
to the 2004
Audit Report
(Refutes claims
made by the

Letter (pdf)
DA to

Excerpts from
TLC Meetings
given to the
Texas legislature.)

- Spreadsheet -
Used to Calculate
Prize Amounts (pdf)
Shows the many,
many ways winners
were paid. Includes
interest rates.
(Revised July 2006)

The BIG Question?
Were Lotto Texas jackpot winners entitled to all that
was in their prize pool when they won the lottery?

The Texas Lottery claims ....

"Prior to March 2002, rules did NOT specify the methods
used to calculate the acutal amount awarded to a
Lotto Texas prize winner
." (2004 TLC Audit Report)

Can you believe it? The Texas Lottery wants YOU to believe that they
could calculate prize amounts anyway they wanted. The players money is
theirs and they can decide, after each win, how much they want to pay a winner.

This is the EXCUSE the TLC is using to justify having cheated Lotto winners
then over paying other winners by $100 million.

Of course, if you read the Excerpts from the Commission Meetings that I
am providing for you, you'll see how staff contradicts the "excuse" above.
Staff explains that jackpot awards are based on sales - they explain
Lotto Texas was NOT an "advertised jackpot game" like the
Texas 2 Step game was. This is why they were proposing to change the
Lotto Texas rule back in 2001-2002, so they COULD "legally" pay
the amount "advertised." Something they had already been doing.
Even when they paid the so called "advertised" amount, the amount
paid to many CVO winners wasn't the real amount needed to give
a return of the amount advertised. As per the rate at the time.
You can see this on the spreadsheet that I'm providing to you too.

The TLC desperately needs for the Texas Legislature to believe there
was no directions given in the rule. After all, they were paying the advertised
amount rather than a percentage of sales - even though it wasn't in the rule -
and as a result of this "business decision," they overpaid winners by $100 million.
(Overpaid means the winner received more than what was allocated)

In the Excerpts, you can see first hand how staff lied.

For instance, Ms. Cloud said, "since I've been here, we've been paying
the higher jackpots.
" Gee, she must have forgotten about the nine
wins that did NOT receive the "higher jackpots." The other four
cheated wins were paid by Ms. Kim Kiplin.

Another lie - Ms. Kiplin told the Commissioners that she's adding
language to a rule "to make it consistent with existing language that's
in 401.304 (D) (4)
[Lotto Texas rule]." Problem is, the language she was
referring to wasn't already in the rule. She sure did need that language
to be in the rule though - and - she really needed for the Commissioners to
believe it was in the rule due to allegations that winners had been cheated!
(In the excerpts, I show the "existing language" and the "proposed language")

You'll see where staff admitted that since 1997, there was NO direction
as to how the TLC was to spend the "reserve" money, but there WAS
direction prior to 1997. It's rather ironic - the first winner cheated out of
his rightful winnings won the Lotto on Feb 26, 1997. At that time,
Ms. Kim Kiplin was the Acting Executive Director. Ms. Kiplin is
currently the TLC's General Counsel [attorney] and she's the one
who wrote the 1997 rule. She wants us and the Legislature to believe
she wrote a rule with no direction on how to pay jackpot winners?

There have been two internal audit reports since I brought this issue up
in Sept 2001. The first report, completed in 2002, said there were
"varying interpretations" of the rule and that's why prize calculation were
calculated in so many different ways. The report said "varying interpretations"
was brought to the attention of the Executive Staff in a memo dated March 30, 2000.

Oddly, the second report, completed Dec 31, 2004, says there were "so many
policies and procedures for calculating prize awards" that the auditor couldn't determine
which policy was in effect at any given time. I requested to receive "all these policies
and procedures
" but received only 3 different policies. All were clearly dated and
precise. Because of what I received, I realized the TLC must have made the
determination as to which way to pay a winner based on what his attorney may
or may not have known at the time. Not that these policies and procedures
mattered anyway, the rule supersedes any and all internal policies.

Just recently, I requested a copy of that "March 30, 2000 memo" but the TLC filed
for an Opinion from the AG to keep the memo from me. The reason - because I
told them that the cheated winners were going to seek legal remedy. It appears if a
state agency has reason to suspect litigation, they can withhold damaging information.
I can assure you, the memo and responses would be damaging to the TLC!

The good news is that anyone who has NOT threatened to sue the TLC, could obtain
a copy of the memo - it IS a public document - and there would be no charge to you.

IF you'd like to know about those "vary interpretations" used for calculating prize
amounts, just send an email to Open Records (
Simply say: "I would like to receive a copy of the March 30, 2000 memo
where varying interpretations were called to the attention of the TLC
executive management staff concerning Lotto Texas jackpot payments
and a copy of all responses to the memo.
" You must provide your name and
physical address so they can mail it to you.

This memo should shed some light on how and why the TLC paid winners
in so many different ways - and why they suddenly started paying winners
all that was in the prize pool. I would think this would be of great
interest to all players. You have a right to know and so do I.
But they won't give it to me.

It's ironic too - in March 2000 is when I began posting EXACTLY how much
a winner should collect if he won. As you will see on my spreadsheet, no winner
ever received less than the amount in the prize pool from that time til now. That
wasn't the case before I began posting how much the prize award "should" be.

By the way, the "reserve money" was part of the 55% of sales that the
TLC told us they WERE returning to the players. In the past, the TLC
was told to transfer the "reserve money" to the General Revenue Fund.
Therefore, players didn't receive their share of sales.

You'll actually read lots of interesting things in the Excerpts. I
encourage you to read what I've pulled from the transcripts. I've
made some comments so that you know what's really up.

To better understand all of this, I would suggest that you read in this order .... A
brief summary of the entire situation - scroll down. Then I'd read the rebuttal to
the December 2004 Interim Report, the winners complaint letter (a pdf),
the Excerpts (a pdf), then I'd print and review the spreadsheet (a pdf).
You can easily see the many ways winners were paid.

Summary of Events Leading to the
Discovery That Winners Had Been Cheated

In 1997, I noticed that all winners were receiving the exact amount that was "advertised." I inquired and was told that the rule "had changed" and the TLC was guaranteeing the amount advertised.

This turned out to be a lie as the rule did not say they were guaranteeing anything except the 4th prize - in fact, the rule still said that all prize amounts would vary due to pari-mutuel calculations. On top of that, all jackpot amounts were advertised as "ESTIMATED" amounts.

Then in March of 2000, I began posting how much a winner would receive in the event there was a Lotto Texas win. The reason I began posting this information was because the TLC was paying more than what the rule said was allocated for the top prize award.

In August of 2000, I began obtaining the documents necessary to calculate each Lotto win. The TLC had just overpaid one winner by $1.9 million prompting me to investigate.

Through my research, I found that between Feb 1997 - Feb 2000, the TLC was essentially robbing Peter to pay Paul. What the TLC did during this time frame was under-estimated larger jackpots - literally keeping some winners prize monies. Other winners were paid more than what was in the prize pool ... sometimes by enormous sums ... The TLC was "gambling" that there wouldn't be a winner. Their philosophy was that the higher the amount on the billboard, the greater sales would be. They even had warnings from Finance that sales did not justify the amount advertised as there was not sufficient funds to pay a winner. At that point, they'd transfer monies from "reserve."

What is MOST important for you to remember as you read all of these things is that from the day (March of 2000) I began posting how much a winner should receive - every winner has received at least the amount allocated to the top prize. This is THE proof that the TLC knew the game was to pay based entirely on sales - which is what the rule said.

In May 2001, the Texas Lottery finally proposed to change the rule to say they were going to pay the "advertised amount" rather than a "set percentage of sales" as the rule currently stated. As you know, we fought that rule. After an 8 month battle, they adopted a rule in March 2002 that said they would "pay the greater of" either the amount in the prize pool or the amount required to invest to get a return of the advertised amount.

Prior to adopting the 2002 rule, I told them that this plan was bad business, risky and foolish but I didn't really care so long as the People were going to receive "at least" the amount in the prize pool.

In an attempt to prevent the TLC from changing the rule to "legally" pay the amount advertised, I told the TLC that I discovered they had cheated 13 Lotto Texas wins between Feb 1997 and Feb 2000. I urged them to pay those winners what they had rightfully won.

It took the TLC one year to come out with the first audit report regarding my allegations. The 2002 Audit Report confirmed everything I said, however, the TLC denied any wrong doings. They claimed they had a right to pay the winners in the manner in which they did. Needless to say, I disagreed with them and still do.

By reason of deduction - IF the TLC had the right to pay winners the "advertised amount" as they claimed, then why did they suddenly start paying winners at least the full amount in the prize pool after I began posting the prize amounts on my web site? Now winners were receiving MORE than the advertised amount.

And, IF they already had the right to guarantee the amount advertised, then why did they need to change the rule? It had just been changed (July 2000).

I've continued to ask - for 3 1/2 years - when were they going to pay those winners - all to no avail. They have no intentions of paying those players - yet they want you to believe that "integrity" is of the utmost importance to them.

This past July 2004, I realized that I had been approaching this issue in the wrong way. Instead of complaining about the cheated winners, I should have been complaining about the $100 million in overpayments. So - I took the overpayment issue to the Texas Legislature.

The Texas Legislature DID care about this issue and the Legislature told the Texas Lottery that they wanted explanations - so to speak!

As it turns out, the Texas Lottery did yet another audit but once again, the TLC claimed they had a right to pay jackpot winners in the manner that they did. This report was completed on Dec 31, 2004.

By the way, the Texas Legislature let the TLC investigate itself. As fate would have it, the attorney representing the TLC auditor was the very person who cheated the first winner - Ms Kim Kiplin. Do you honestly think we'd see an unbiased report about the TLC's activities when the TLC is doing the investigating? Of course not.

The issue is now two-fold - the overpayments and the underpayments - the Texas Legislature needs to handle the overpayment issue by writing laws to ensure the People that we will receive our FULL share of sales after each and every drawing.

The underpayment issue is now up to the cheated winners because the TLC claims they had the right to pay them in this matter. It appears the Texas Legislature must agree with the TLC's findings. I can only assume the legislators don't want to lose any more money than what the state has lost so they're keeping mum.

The cheated winners have now sought legal counsel for a civil suit to be filed. If anything, the winners want this issue EXPOSED. The Texas Lottery cheated them and they want EVERYONE in the world to know about it. This is where we are now.

I've posted most of the documents that have been turned over to their attorneys for their civil case. I believe after you read my rebuttal to the 2004 Audit Report, the winners letter to the DA, the excerpts from the Commission meetings and then look at the spreadsheet, you will see how deceitful the TLC really is. Links are at the top and bottom of this page.

When you're looking at the spreadsheet, carefully study page 4. On this one page, you will see 5 ways the TLC paid Lotto Texas winners. (See the column titled "Pay Code" and the definitions are included on the spreadsheet.)

Oh, by the way, the TLC is now stating that the statute of limitations has passed for these winners to collect. Talk about using loop holes to avoid doing an honorable thing. So much for integrity.

Someone needs to explain how it is that bill collectors can continue to "legally" harass folks after a 7 year period of not receiving any payments has passed.

I would love to hear your comments. Tell me - what do you think a jury of 12 people would do?


My Rebuttal
to the 2004
Audit Report

Letter (pdf)

Excerpts from
TLC Meetings

Spreadsheet -
Used to Calculate
Prize Amounts (pdf)

Original Story Regarding the Cheated Winners, Click here.

The Lotto Report
Dawn Nettles
P. O. Box 495033
Garland, Texas 75049-5033
(972) 686-0660
(972) 681-1048 Fax

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