Lottery Can ‘Pay Off’ With a Bad Feeling Too

Playing the California Lottery can “pay off in a lot of ways,” according to the advertisements.

One way is to win $2 million or more. The lottery ads say that’s “a good feeling.”

Another way is to have the law catch up with you. Players who owe money, are illegal aliens, are embroiled in a lawsuit or are being sought by police say that’s a bad feeling.

Winners are finding themselves scrutinized by the lottery’s own security system, extensive news coverage and a computer network that provides personal data on them to more than 100 state agencies.

The results:

- Attachment by state and county agencies of some or all of the money received by more than 140 winners--a total of more than $200,000, much of it for child-support payments, as of 10 days ago.

- The ordered deportation of one $2-million winner and an investigation by federal agents into the immigration status of at least two other grand-prize winners--one of whom picked up $50,000; the other, $10,000.

- A court order freezing all but $1,000 of the $100,000 winnings of a Newport Beach housewife because of a suit against her husband’s restaurant business.

- The arrest of a Sacramento woman on an outstanding petty theft warrant after police saw her name in a newspaper story about lottery winners.

- An investigation to determine whether a self-described “compulsive gambler” who blew more than $2,600 on losing lottery tickets had purchased them with money provided by the federal government for the support of his mentally retarded son.

Director Not Bothered

Mark Michalko, the lottery director, said his ancillary role as lawman doesn’t bother him.

“We’re dealing with the enforcement of state law,” he said. “That’s a good thing. . . . We haven’t had any adverse reaction from the public that our security people work closely with law enforcement. . . . I’m comfortable with what we’re doing.”

Michalko said every state with a lottery “approaches the issue of security a bit differently. . . . With some it’s minimal, with some it’s strong. We’re probably the strongest.”

Discussions with spokesmen for lotteries in other states seemed to bear Michalko out.

“We don’t run our winners through a computer to check for welfare or support payments or that kind of thing,” said Dick Poulson, a public affairs officer with the Washington state lottery. Scott Phelps, the Arizona lottery deputy director, said his state doesn’t either. Marlene Desmond, a press relations officer with the Colorado lottery, echoed their comments when she said the citizenship or immigration status of a winner “has never been an issue” in the two years or more that their lotteries have been in operation.

Few Are Identified

As in most other states, the vast majority of California winners--those who win the instant prizes of $2 and $5, redeemable at the store where the tickets were purchased--collect their prizes without even having to identify themselves.

But for the few Californians who are “high-tier” winners--purchasing tickets that provide instant payoffs of $100, $500, $1,000, $5,000 and $10,000 in the games--the rules change a bit.

Each is asked to fill out a “Winner Claim Form,” which includes 18 questions about the individual submitting a ticket for payment. The only questions that must be answered are the ones asking the winner’s name, address and winning ticket number. But the form doesn’t say anything about that, and lottery officials said that most people answer all 18, including those asking the winner’s date of birth, Social Security number, citizenship, education and household income.

Once lottery officials in Sacramento have verified that a winning ticket is genuine--there have been about 50 “cut-and-patch” forgery attempts discovered, with 15 suspects arrested--the winner’s name, address, Social Security number (if included) and amount won are forwarded to the state controller’s office, which makes the actual payment.

This is where a lot of the debtors get into trouble.

The controller’s office is linked to more than 100 other state agencies through a mutual data referral system called the Offset Program, so-called because credits to one agency can be balanced off againsts debits from another. Using this program, the controller’s office is docking winners whatever they owe to or through these agencies--usually child-support payments, back state income taxes, outstanding student loans and overpaid unemployment benefits. Several $1,000 and $5,000 winners lost every dime this way.

In addition, the same data on lottery winners is forwarded to the Internal Revenue Service on every person winning $600 or more. There are no reports on whether the IRS has taken action against any winners owing back federal taxes, but lottery sources said some will undoubtedly surface.

The scrutiny increases for the $100 instant winner whose number is drawn from the big drum in Whittier, making him a grand-prize finalist. During a show televised on Monday nights, finalists spin a large wheel to win additional prizes ranging from $10,000 to $2 million, with the top prize soon to increase to $3 million.

Well before that turn at the wheel, each finalist is given a background check by the lottery’s security department, which includes 33 sworn peace officers headed by Lew Ritter, a former Los Angeles Police Department deputy chief.

Check on Two Issues

For the purposes of the spin, Ritter said, the check concerns two issues, eligibility and withholding of federal taxes. If the finalist is found to be under 18 or a lottery employee, he is ineligible. If the finalist is a U.S. citizen, 20% of his grand-prize winnings will be deducted for federal taxes. If the finalist is not a citizen, 30% will be deducted.

But Ritter said his investigators might well learn much more, like whether a finalist is a fugitive or wanted in connection with a crime. Ritter said he hasn’t found any, but if he does, he won’t hesitate to turn them over to appropriate authorities.

All of which brings up the question of Jose Caballero, a 24-year-old San Jose laborer who admitted, moments after winning the $2-million grand prize on Nov. 4th’s televised “Big Spin” show, that he had illegally sneaked into the United States from his native Mexico.

The admission appeared to catch lottery officials flat-footed, but Ritter said later that he had known about Caballero’s illegal status a week before the show.

No ‘Criminal Offense’

“I have an obligation as a peace officer to turn in a wanted criminal,” he said. “But I do not have an obligation with the Immigration and Naturalization Service because the state attorney general has said that (being an illegal alien in this country) is not a continuing criminal offense. . . . Of course, if they or anyone else calls about something like that, I’ll tell them.”

INS officials admit they first heard about Caballero, who faces deportation, on the radio. Like most lottery winners who subsequently heard from the law, Caballero had fallen victim to publicity about his financial windfall.

The same sort of thing happened a week later, after Bill Seaton, the lottery’s public affairs director, casually told reporters at the Nov. 11 “Big Spin” that one of the day’s 20 winners, not identified, was an illegal alien.

Seaton’s remarks were widely reported in the news media, and the next day, INS investigators said the published reports had prompted them to open an investigation of not one, but two, of the Nov. 11 winners. The results of that investigation have not been made public.

And there are other stories, as well.

Child Support Owed

Prosecutors said they had been looking into child-support payments owed by Joseph M. Frontino, 33, a Riverside hospital worker, for some time before he won $10,000 during the “Big Spin” on Oct. 28.

But Frontino said everything seemed to be going all right for him until his former wife saw him pictured as a winner in the local newspaper Oct. 29, “and then all hell broke loose.” Frontino has disputed the claims of officials in Sacramento, Riverside and San Luis Obispo counties that he owes $11,600 for the support of three children, but most of his winnings have been impounded pending settlement of the claim.

“I didn’t win a damned thing,” Frontino said. “All I got was a bad time.”

Sharon Nunez, 29, of Newport Beach won $100,000 on Nov. 11.

But after her victory had been celebrated in local newspapers, a company suing her husband for $10.25 million won a court order freezing all but $1,000 of her winnings. The company contends that Raul Nunez Jr. failed to pay rent for equipment used in his restaurant business. A court hearing on the matter has been set for Dec. 19.

Petty Theft Warrant

Donna Sobb, 31, of Sacramento found out by telephone Oct. 19 that her name had been drawn as a grand-prize finalist on the “Big Spin.”

Sacramento police, who had an outstanding petty theft warrant naming her, spotted her name in the newspaper the next day.

After getting her address through the lottery office, the officers arrested her. Released on $100 bail, Sobb won $50,000 when she spun the lottery wheel Oct. 28. Two weeks later, after pleading guilty to the warrant’s charge of shoplifting some children’s clothing, Sobb forked over $153 of her winnings in fines. The news of her wealth also prompted local officials to bump her off the welfare rolls.

Bill Woehl, 42, an unemployed Fresno resident, and his wife, Lynn, received a lot of publicity earlier this month when newspapers published a picture of the kitchen wall they had papered with more than 2,500 losing lottery tickets.

The Woehls said their income was “zilch,” except for the $400 they received monthly in Supplemental Security Income for the support of their mentally retarded son. Federal officials, saying the use of such money for lottery tickets is illegal, launched an investigation, which is continuing.

Released on Bail

Then there are those whose involvement with the law has nothing to do with their success in the California lottery. One such person is Salvador Valencia Rodriguez, 20, an Orange County resident who won the right to spin the grand-prize lottery wheel tonight.

For a while, lottery officials said, it looked as though someone else would have to spin the wheel for him. Rodriguez, arrested by Irvine police Oct. 31 for failure to serve a jail sentence and on suspicion of possession of marijuana and stolen property, was in the Orange County Jail on Nov. 12 when his name was drawn as a grand-prize finalist. A Nov. 5 probation report had recommended that he remain in custody, but last week his probation officer relented, and Rodriguez, formerly held in lieu of $11,000 bail, was released on his own recognizance.

Rodriguez is scheduled to go on trial Tuesday, but tonight he’ll get his chance to spin the wheel that could make him a millionaire.