Lawsuit accuses Illinois Lottery manager of fraud in instant games

Feb 8, 2017, 9:43 am (7 comments)

Illinois Lottery

Three lottery players and a downstate bar have accused the Illinois Lottery's private manager of defrauding scratch-off players and retailers after an investigation found the lottery did not award many of the biggest prizes in its biggest instant games.

In a lawsuit filed Monday in St. Clair County, the plaintiffs cited a December article in the Tribune that examined the lottery's practices in the years after the state handed over its management to a private firm, Northstar Lottery Group.

The lawsuit goes beyond the findings in the Tribune investigation, and asserts that the players' odds were affected by Northstar's actions. Northstar has said that even if all grand prizes were not awarded in games, the odds of winning were the same for each individual ticket.

Northstar has faced calls for investigation by lawmakers since the article was published and also is in the process of being replaced by the state as lottery manager.

The Tribune studied the 17 biggest-prize instant games that were begun and ended in the five years since Northstar took over in mid-2011.

Reporters found that under Northstar, the number of tickets printed for games dramatically increased, allowing the lottery to offer bigger and better prizes for games. That helped entice players to buy more instant tickets than ever. But as sales dropped in many games, Northstar pushed to end those games' ticket sales before all, or sometimes any, of the grand prizes were awarded.

In all, those games awarded less than 60 percent of their grand prizes — a rate lower than other states studied by the Tribune, and lower than when Illinois managed its own lottery. The Tribune also found that, because of how the games ended, the lottery often paid a lower percentage of revenue than the games were designed to pay.

Northstar has said that the odds to players didn't change regardless of when games were ended. But the firms filing the lawsuit — Sprague & Urban, TorHoerman Law and Brandt Law — alleged that "Northstar materially misrepresented the actual odds of winning for the games in question."

"This was fraudulent," according to the lawsuit, which did not provide detailed evidence to support the assertion.

Northstar is owned by two longtime vendors who continued to do work for the lottery, International Game Technology and Scientific Games. Neither firm immediately responded to questions about the lawsuit, but in the past they have told the Tribune that they acted only in the best interests of players and the state by replacing lower-performing games with more popular ones to maximize sales.

IGT and Scientific Games were paid more from the increased sales. Northstar, in turn, was paid a portion of the profits the state made. The firms previously told the Tribune that Northstar did not take into account how the games' actual prize payout rates were comparing with the games' designed payout rates.

But the lawsuit noted Tribune findings that, for comparable big-prize games begun and ended in Illinois in the six years before Northstar was hired, the state awarded 87.5 percent of the grand prizes that the instant games were designed to pay out. Yet, for the 17 instant games under Northstar, the rate was 59.6 percent.

According to the lawsuit: "An award rate decrease of this magnitude is not explainable by happenstance or attributable to a lack of interest in the lottery; indeed, ticket sales were up under Northstar."

The lawsuit alleges that Northstar implemented "a practice of discontinuing games early when the profitability of the game was statistically maximized."

Doing so, the lawsuit alleged, deceived players while it deprived retailers of the ability to make bonuses for selling grand-prize winning tickets. The lawsuit did not detail how Northstar knew that the profitability of the games had been statistically maximized.

The lawsuit seeks class-action status to cover all players who bought tickets for the game and retailers who sold them. It seeks an unspecified amount of money that it said Northstar gained from "unjust enrichment."

The case was filed on behalf of Raqqa Inc., which runs the Fairview Lounge in Fairview Heights, Ill., outside St. Louis, and three players who bought instant-game tickets during Northstar's tenure.

The Illinois Lottery declined to comment on the lawsuit.

The lawsuit comes after four state lawmakers from both political parties and legislative chambers called for hearings into the findings of the Tribune investigation.

It also comes as the state is in the process of finding a replacement firm to run the lottery after state officials pushed to oust Northstar for failing to make the state the level of profits the firm pitched in its 2010 winning bid.

Chicago Tribune


lejardin's avatarlejardin

It just keeps getting better.  What an insult to players.  No way would I play ANY lottery game in Illinois.

Coin Toss's avatarCoin Toss

Northstar promised the state they would greatly increase lottery revenue and now they're pulling shenanigans trying to deliver on their promise. 

On the one hand they're running off a lot of players but on the other hand they know a certain faction will play no matter what.

music*'s avatarmusic*

 Please come and play Power Ball and Mega Millions. You are always welcome here. Security in these two games is high and the potential to win billions is amazing. Thank You!

US Flag

Danny Wooten

Happiness to all and all a good night.  :)

Groppo's avatarGroppo

Quote: Originally posted by Danny Wooten on Feb 8, 2017

Happiness to all and all a good night.  :)


Thank you, welcome aboard, and likewise, Mr Wooten.

OneTrickpony's avatarOneTrickpony

The lawsuit did not detail how Northstar knew that the profitability of the games had been statistically maximized.

I'll tell you how...they are math and statistic experts.  It's pretty obvious they increased the number of tickets, which immediately reduces odds of winning, then held back the Jackpot prizes until the end when everyone lost interest in the game, sales dropped and that gave them the excuse to end the game prematurely.  Voila.  Millions saved after millions raked in on worthless tickets.

And I LOVE that it's a BAR suing them! Cheers  Puke

LottoMetro's avatarLottoMetro

implemented "a practice of discontinuing games early when the profitability of the game was statistically maximized."

I'm pretty sure most lotteries, at least larger ones, use the exact same strategy.

I have tracked scratch-off statistics for my state and found that they tend to close the games, even with top prizes remaining, early in order to reduce variance of profitability in their portfolio. Ticket sales is one factor but on occasion the distribution of remaining tickets will be out of favor and in order to avoid a reprint they will just close the game early and move on. They are also very quick to collect unsold tickets for those games which are most out of favor.

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