NY Lottery says it goofed: Mahopac winner got $31 million after taxes
Posted: 11/16/2007 8:29:03 PM
The New York State Lottery has acknowledged that it made a $14 million mistake when it announced the amount of last week's Mega Millions award to a Putnam County man at Grand Central Terminal.
The winning ticket bought by William James Albertson from Mahopac actually brought him an after-tax prize of $30.7 million. At the big announcement, presided over by Lottery Director Gordon Medenica and Lottery announcers Yolanda Vega and Ralph Buckley, Lottery staff told reporters that Albertson would receive slightly more than $45 million once taxes were deducted.
Lottery officials continued to insist that was the correct amount even after The Journal News questioned the accuracy of that figure later that day and again Tuesday morning.
"It's a simple discrepancy," Lottery spokesman John Charlson said this week.
The Lottery did tell Albertson that he would get $14 million less than the announced lump-sum figure, Charlson said. Albertson could not be contacted yesterday.
Charlson said the mistake was made when someone in his office prepared a news release and the error was then picked up by others on the Lottery staff. When the figure was questioned by a reporter, Charlson said he may have simply checked the news release.
Charlson said the lottery usually touts the larger payout that could be received over 25 years rather than the immediate cash value because winners have the option of allowing New York State to invest their winnings for them. In this case, the "jackpot prize" is considered $75 million.
One local economist takes issue with this.
Farrokh Hormozi, an economics professor at Pace University in White Plains, said it was more accurate to describe the prize money in terms of what it is worth today because even a low inflation rate will dramatically reduce the value of money one or two decades in the future.
"The old saying of a bird in hand is worth two in the bush applies here," Hormozi said.
Lottery prize winners do not need New York state to invest their winnings to produce the kind of payout the state talks about, Hormozi said. The most conservative investment - U.S. Treasury Bonds -have reliably produced 4 percent annual returns, the same interest figure that the Lottery uses to produce the long-term value of its prizes.
A slightly more risky investment strategy would produce a bigger return than is possible by taking the long-term payout.
Hormozi said lotteries describe their jackpots in terms the longer term value because the talk of huge prizes drives people to buy lottery tickets.
"When the prizes rise, you see people standing in long lines for hours, people who would never go to the lottery," Hormozi said. "You have to make this so attractive and the stakes high so that they will participate."
The Red Mill Market in Mahopac Falls, where Albertson purchased the winning ticket, is festooned with posters that say the $75 million Mega Millions ticket was sold there.
Store manager Nick Capalbo said yesterday that he was surprised to hear Albertson had won $30.7 million after taxes, especially with all the signs proclaiming the higher amount. Capalbo, an education student at Pace University, said the $45 million lump-sum prize value seemed to be a more accurate way to describe the winnings.
Though the Lottery might be guilty of a little verbal manipulation, Capalbo said, $30.7 million is still a lot of money. "I'd be happy with $30 million," he said. "When you are talking about that much, it's a lot of money."
Source: Journal News
