A federal court in the Southern District of Illinois will hear a class-action lawsuit against Northstar Lottery Group LLC, which manages the Illinois Lottery. Originally filed in St. Clair County Court last month, the suit contends Northstar cheated players and lottery vendors by misrepresenting the odds of winning scratch-off games. The plaintiffs–Raqqa Inc., operator of the Fairview Lounge bar, convenience mart and gas station in Fairview Heights; and Michael Cairo, a Chicago-area resident who bought scratch-off tickets–allege Northstar printed significantly more scratch-off tickets than it intended to sell, then end games before grand prizes were awarded to assure profits.
The allegations in the lawsuit are the same as the results of an investigation by the Chicago Tribune. That report stated 40 percent of the grand prizes in the state’s biggest scratch-off games were not awarded.
The suit was moved to federal court after Northstar said in a filing that the case concerned entities in different states and an amount more than $75,000. Plaintiffs’ attorney Tor Hoerman said he did not know if they would challenge the move from state court. He added lottery contracts in other states also will come under scrutiny. “If discovery indicates this is a national situation or a multistate situation, we’re certainly going to look at other states as well,” Hoerman said.
Northstar took over the Illinois lottery in 2011. The company is a partnership between IGT Global Solutions Corporation of Rhode Island, and Scientific Games International Inc. of Nevada. Illinois was the first state to privatize its lottery when it gave Northstar a 10-year deal. Northstar at first reported record sales, but quickly fell far short of its goals. Then-Governor Pat Quinn began the process to fire Northstar in 2014, and in 2015 Governor Bruce Rauner’s administration renegotiated the termination agreement. Northstar was removed as lottery manager effective January 1, 2017.
The lawsuit alleges for the six years preceding Northstar’s lottery management, Illinois awarded about 88 percent of the grand prizes in its large-prize games, which is similar to other state lotteries, the suit alleged. But under Northstar, that rate decreased to about 60 percent.
For example, in early 2013, Northstar started selling tickets for a $30 game called the Good Life. The Tribune investigation said the game was supposed to pay 78 percent of its revenue in prizes, including two prizes of $47 million each. But no grand prize ever was awarded. The game earned $63 million in sales and paid out $38 million in smaller prizes, a 61 percent payout, when it was discontinued. Fewer than 15 percent of the printed tickets had been sold.
Another plaintiffs’ attorney, Derek Y. Brandt, said vendors like Raqqa “sell the tickets, and they hope they sell one of the winners. Under our theory, if Northstar is pulling the plug early on the game because they know a higher percentage of the remaining tickets are winners than it likes, then it cheated the people who are banking on being paid for selling a winning ticket.”
Brandt added how Northstar reduced payouts and still missed its profit goals remains a mystery. “In theory, sales were up, and they weren’t paying out a lot of grand prizes, so it’s hard to know where the money that they saved went. That all should have been profit,” he said.
IGT Global Solutions Corporation and Scientific Games both have contracts with the Missouri Lottery. Susan Goedde, communications manager for the Missouri Lottery, said Missouri Lottery officials have no concerns about the performance of either company, and no scratch games have ended early.
