When a customer brought a Keno ticket to Nick's Party Stop in Clinton Township, retailer Don Kallo ran the ticket through his lottery terminal, declared it a loser and tore it in half.
Kallo, the spouse of store operator Linda Kallo, then took the torn ticket — a $2,517 winner — to the Michigan Lottery Bureau to redeem it.
Suspicious lottery officials investigated and learned Kallo hadn't purchased the ticket, as he claimed, records show.
"It was determined the ticket had been purchased by a customer who had been told by Mr. Kallo the ticket was not a winner and ripped the ticket," according to lottery records obtained by the Free Press under Michigan's Freedom of Information Act.
The state suspended the store's lottery license for two weeks in 2016 and placed the store on probation until Dec. 18 of this year, during which time Don Kallo is not allowed to operate the store's lottery terminal.
Nick's Party Stop on Cass, which also uses the name Nick's Party Store, is one of 269 Michigan lottery retailers — out of a total of nearly 11,000 — to have their licenses suspended or revoked since 2016, records show.
Most suspensions result from retailers getting behind on money they owe the Michigan Lottery from ticket sales, which just set a record of $3.3 billion for 2016-17, resulting in a $920-million boost to the state's School Aid Fund.
Another major concern is a prohibited practice known as "discounting" — retailers buying winning tickets at a discounted price from players who want to prevent the state from seizing all or part of their prize to pay debts such as back child support.
Only a handful of the suspensions were for cheating, like Kallo was accused of doing.
"This truly is an aberration," said Jeff Holyfield, a spokesman for the Michigan Lottery.
"Our retailers ... really are focused, just as we are, on keeping customers happy."
Still, even a few incidents can erode player trust essential to the success of a lottery. Like other states, Michigan devotes considerable efforts to making sure bad operators are disciplined and, if necessary, rooted out.
Retailers have strong incentives to keep their licenses in good standing. The 6% commissions paid to retailers on ticket sales just hit a record total of $248 million, based on preliminary numbers for the fiscal year that ended Sept. 30. Retailers also get 2% commissions on prizes they redeem. Lottery sales also bring in customers who buy other items, Holyfield said.
Still, the occasional retailer goes astray.
In Battle Creek this year, officials found that Capital One Gas manager Devinder Singh Ghotra had been scratching off tiny areas from instant game tickets to determine whether the tickets were winners, then selling the losing tickets to customers and keeping the winners, presumably for purchase by himself or an associate.
"On March 14, 2017, a Bureau representative visited Capital One Gas, inspected the tickets on sale, and confirmed that small areas had in fact been scratched off," said a June 16 letter from lottery retail services manager Diane Carter, obtained under FOIA.
"The representative also observed the store manager, Devinder Ghotra, attempting to hide several other tickets that had similarly been scratched," Carter wrote.
"Mr. Ghotra then admitted... he had been scratching small areas on the tickets to determine if they were winners and removing winning tickets from sale to the public."
Ghotra, a relative of Capital One Gas operator Harpal Singh, was charged criminally with altering a lottery ticket — a five-year felony — and awaits a Jan. 16 preliminary examination, records show.
"This is an unusual case," said Calhoun County Prosecutor David Gilbert. "I've been practicing since 1988, and this is the first case I've seen of a retailer allegedly manipulating the tickets like this."
Lottery officials initially suspended the lottery license for Capital One Gas for one week and placed the outlet on probation for two years.
But after Singh resisted firing Ghotra — one of the terms of the probation — the bureau took the rare step of revoking the Capital One Gas license and adding one-week suspensions at seven other outlets licensed to Singh or his wife in Battle Creek, Kalamazoo and Burlington.
"Mr. Ghotra's conduct is an extremely serious matter that negatively impacts the honesty and integrity of lottery games offered by the Bureau," Carter wrote Singh.
"Further, your unwillingness to remove an employee caught engaging in this conduct does not provide assurance of reasonable security precautions nor regard for public trust in the fairness and integrity of lottery games."
Singh did not return a phone message. Ghotra could not be reached.
In the Nick's Party Stop case, Don Kallo told lottery officials he didn't have on his glasses and made a mistake when he declared the winning Keno ticket a loser, Holyfield said. It wasn't clear from the records whether Kallo or the customer tore the ticket, but Holfyfield said it was Kallo.
After Kallo admitted he hadn't purchased the ticket, he helped lottery officials locate the rightful prize winner, a regular customer who didn't want to press charges, he said.
Inside the store Tuesday, a manager answered to Don Kallo until a reporter started questioning him about the incident and a Free Press photographer took his photo. He then said he was not Don Kallo, who he said did not come to the store much anymore. He took the reporter's card and said he would give it to Don Kallo with a message to call the reporter. Don Kallo never called.
Alan Applebaum, a Farmington Hills attorney who represented the store in the case, said he didn't dispute the violation, but argued without success for a reduced penalty.
"These are in my opinion good citizens — very hardworking people," Applebaum said of Kallo and his wife. "Maybe it was an honest mistake."
Many retailers now have electronic units players can use to scan their own tickets to determine whether they are winners, which would avoid problems like the one at Nick's Party Stop, Holyfield said.
Of the license suspensions since January 2016, three others involved suspicion of dishonesty or ticket tampering by a licensee or a store employee.
In January 2016, Repete's Party Store in Holland had its license suspended for one week and was placed on probation for two years after an employee was found to have tampered with instant lottery tickets, records show. It's not clear from the records what was done to the tickets,but a requirement was that employee Cassandra Guerra not operate the lottery terminal during the probation period, according to lottery records.
A call to Michael Travis, an operator of Repete's, was not returned.
And in March 2016, A&C Supermarket in Hamtramck received a similar punishment for selling instant tickets that had been tampered with, records show.
Hakem Hakim, the owner of A&C, said Wednesday he's not sure how the tampering happened or what was done to the tickets, but the store has taken steps to secure its instant tickets to avoid a similar incident.
Going a week without lottery sales was "inconvenient more than anything else," he said. "You're not taking care of your customers as they come in."
In August, Capital Liquor in Detroit received a suspension and a 30-day revocation notice for an unspecified act that "seriously impairs (the licensee's) reputation for honesty and integrity."
Another 20 retailers were suspended for buying winning tickets from customers at discounted prices, then claiming the full value of the prizes themselves, or for cashing so many winning tickets that they were suspected of doing so.
It's a big issue, since before paying a lottery prize of $1,000 or more, the bureau is required to seize from the winning prize purse any arrears in required child support payments, unemployment benefit restitution, or court payments.
Winners who know they face likely seizure of all or part of their prizes sometimes turn to retailers to take the tickets off their hands — for a reduced price.
It's called discounting, and retailers know it's against lottery rules.
Records obtained by the Free Press show the Michigan Lottery Bureau ran a sting operation in Detroit this year — using a fake Daily 4 ticket programmed to scan as a $5,000 winner — and nabbed 10 retailers who agreed to purchase the ticket for a discounted price.
Each of those retailers had their license suspended for one week and was placed on probation for two years, records show.
They were: Bailey's Liquor and Food Mart; Flamingo Liquor; Hatter Marathon; Michigan & Livernois Gas; New Merchant Food Center; Serena Group LLC; Special Way Market; Swanson Sunoco; West End Liquor Store; and Woodmere Liquor, records show.
While acknowledging the records spoke for themselves, Holyfield didn't want to discuss clandestine methods the bureau sometimes uses to monitor retailers.
"We don't want anyone to know what the secret sauce is," he said.
But the bureau also uses a 20/20 rule, under which any time a retailer redeems 20 tickets worth more than $600 in a certain time period, or any number of tickets with a total value exceeding $20,000, an investigation is launched into possible discounting, he said.
One-week license suspensions and probation terms were issued to 75 & West Road Inc. in Woodhaven and Romulus Gas & Mart LLC in Romulus, both operated by Michael M. Berry, who claimed 47 winning tickets above $600 since 2011; FW Fuels Inc. in Harper Woods, where Fayez Allahmad "claimed several winning tickets which may be related to discounting," and Kelly's Beverage & Deli in Eastpointe, where Jawher Gumma claimed 67 winning tickets above $600 since 2009, records show.
In the case of Kelly's Beverage & Deli, store attorney Peter Abbo argued the suspension was issued based on "suspicion and conjecture," rather than fact. The Lottery Bureau reviewed the case, but the penalty stood.
Licenses can also be suspended or revoked if a retailer is convicted of a crime other than a traffic offense.
George's Cafe in Union, which sold Club Keno tickets, was notified in June its license would be revoked after owner Robert George, Jr. was convicted of felony gambling for having illegal slot machines, resulting in his liquor license being placed in escrow, records show.
Most suspensions — and most of the 80 to 100 license revocations issued each year —are for retailers falling behind on the money they owe the Michigan Lottery, records show.
Between Jan. 1, 2016 and Oct. 2 of this year, the Michigan Lottery Bureau suspended or revoked the licenses of 80 licensees who were overdue on payments of nearly $528,000, plus 65 other licensees who had been repeatedly delinquent on payments or fell behind while they were on probation, records show.
Another way lottery retail licences get suspended, and ultimately revoked, is through inactivity.
Since January 2016, the licenses of 91 outlets were suspended or revoked because they hadn't sold or validated tickets for an extended time period. In many of those cases, the inactivity related to a change of ownership, records show.