Virginia 'Scratchers' called misleading

$84.7 million in refunds sought

By Sue Lindsey ASSOCIATED PRESS | Monday, June 16, 2008

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ROANOKE | The Virginia Lottery has taken in millions of dollars illegally by misrepresenting the prize money available for its "Scratcher" games, according to a Washington & Lee University business professor.

Scott Hoover contends that the lottery has not ordered retailers to pull shipments of tickets from Scratcher games after the top prizes have been awarded, meaning players are buying tickets with no chance of winning the largest prize promised on the ticket.

John Fishwick, an attorney representing Mr. Hoover, has filed a notice of a claim with the lottery seeking refunds of $84.7 million to those who purchased an estimated 26.5 million tickets over the past five years.

"The state has profited to that effect," said Devon Munro, Mr. Fishwick's associate.

Lottery spokesman John Hagerty said officials stand by the games.

"We have worked hard over the past 20 years to successfully build a reputation for integrity in the way our games are presented," he said.

Mr. Hoover said he began an investigation after he bought tickets for the "Beginner's Luck" game last summer and tracked the payouts online.

"It became apparent that the numbers posted online violated the basic laws of statistics," said Mr. Hoover, who has a doctoral degree in finance and has taught applied business statistics courses at Washington & Lee. The number of grand prizes available should go down at a certain rate, he said, but "it just wasn't doing that."

The game has six grand prizes of $75,000 in each shipment of tickets, Mr. Hoover said.

He said the last grand prize was awarded July 24, according to information obtained from the lottery under the Virginia Freedom of Information Act. Mr. Hoover said 241,000 tickets from that shipment were sold after that date, including the ones he bought in August.

Mr. Hoover said his analysis of lottery data indicates that roughly 36.8 million tickets were sold after grand prizes were awarded in more than 47 games since 2003. He said he only was asking for refunds for the estimated 26.5 million tickets bought after the grand prize tickets already had been sold and yielded no prizes.

The problem arises in popular games when the lottery orders a new batch of tickets with additional top prizes, Mr. Munro said. "They sell out the old ones, and they do it knowingly," he said, violating the Virginia Lottery's stated policy that it will pull tickets from shipments out of which the top prizes have been paid.

"It tends to be a revenue-based decision," Mr. Munro said. "They do it for their best-selling games."

Mr. Fishwick said his team wants the state to stop selling defective tickets, in addition to paying damages.

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