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What happens when Michigan lottery retailers try to game the system

Lottery spokesman Jeff Holyfield discusses the lottery’s eight-person security unit. Detroit Free Press

LANSING – A Detroit gas station and convenience store owner scratched hundreds of instant game tickets the Michigan Lottery sent him for sale to customers, trying to identify the winners so he could buy them himself and claim the prizes, officials say.

For each package of tickets, Mubarak Morshed calculated whether the total prize money exceeded the purchase price. If not, he reported the pack of tickets “missing.” If yes, he purchased the tickets and sought to collect the cash, Michigan Lottery spokesman Jeff Holyfield said.

Not surprisingly, Morshed’s actions drew suspicion. He not only lost his license to sell at Balasan Mini Mart on East Seven Mile, but was required to pay $14,600 for the 28 packages of tickets he scratched his way through, according to internal lottery records the Free Press obtained under Michigan’s Freedom of Information Act.

The Michigan Lottery revokes about 100 retailer licenses a year, for a variety of reasons. (Photo: Ryan Garza, Detroit Free Press)

“As criminal mastermind schemes go, this wasn’t the greatest,” Holyfield said. “This was a guy who probably kind of got carried away.”

Though officials say the vast majority of the 10,500 Michigan lottery retailers deal honestly with both the agency and their customers, a few are always looking for a new way to game the system. It’s the job of the lottery agency’s eight-person security unit, which handles about 1,500 cases a year, to investigate those offenders, and, if necessary, shut them down.

“We just want players to know that we take the integrity of the game and the integrity of our operations very seriously,” Holyfield said.

Jeff Holyfield (Photo: handout, handout)

Two store owners — one in Ypsilanti and one in Battle Creek — were caught in the last two years intentionally paying customers less prize money than their tickets were worth, records show. Both had their licenses revoked.

And 29 retailers around the state received license suspensions for “discounting” — agreeing to pay customers less than a winning ticket is worth and keeping the full value for themselves.

Many customers don’t want to cash winning tickets because the state will carve out of the winnings state-related unpaid debts such as child support.

Many of the store owners who had their licenses suspended after offering to help winning players out — for a price — were caught in “sting” operations run by state officials, who used undercover investigators looking to sell tickets and bogus Daily 4 tickets that would appear to be winners if scanned at a lottery terminal, records show.

Though lottery officials have investigated retailers previously for manipulating scratch and win tickets, also known as instant games, the case involving Morshed, the Detroit retailer who went on a ticket scratch frenzy, was unique, Holyfield said.

“I don’t know if it’s ever happened before,” he said. “Let’s say he was a pioneer, but not in a good sense.”

Morshed, who did not respond to a phone message left at the store, scratched the tickets after he’d confirmed receipt of them, but before they were activated for sale, Holyfield said. Because the tickets had not yet been activated, Morshed was able to report “unprofitable” packs of tickets as having been lost, Holyfield said.

Balasan Mini Mart on East Seven Mile in Detroit. (Photo: Paul Egan/Detroit Free Press)

But Morshed, who did cash some winning tickets before he was caught, drew suspicion because of the number of packs of tickets he reported missing. “It turned out he had all of the tickets sitting in his office,” Holyfield said.

Though Morshed lost his license and was required to pay $14,600 for the 28 packs of tickets he scratched, the lottery did not attempt to recover any prize money he collected, Holyfield said. Nor did the agency recommend criminal charges.

Another case, involving Ypsilanti-area convenience store owner Mohammed Abed illustrates the severe consequences a retailer can face if the lottery agency determines they cheated a customer out of even a relatively small amount of money.

Abed, owner of Quick Mart on Textile Road, was notified in February his license was suspended and would be revoked because he underpaid a customer by $30 on a winning Poker Lotto ticket, failed to cooperate with the ensuing investigation, and had on occasion allowed lottery players to operate his terminal and print their own tickets.

Abed’s Sterling Heights attorney, Marshal Garmo, told lottery officials in a series of letters that Abed’s first language is Arabic and the issue with the customer could have been an honest mistake, compounded by Abed’s difficulty speaking English.

“I spoke to Mr. Abed today,” Garmo wrote on March 15. “He was crying.”

Abed “said his business is down considerably since he lost the lottery sales. He said the store is empty and hardly any customers walk into the store because most of them want to buy lottery tickets.”

Even during the few minutes it took for a reporter to leave a message for Abed inside his store on a day last week, a customer buying another item asked for Mega Millions tickets and was surprised to learn the store did not sell them.

“If the lottery license is not returned, Mr. Abed and his family will be out on the streets,” Garmo wrote. “His wife is pregnant with their first baby.”

But Diane Carter, the lottery bureau’s manager of licensing and retail services, said in a letter to Abed that the case was reviewed by Lottery Commissioner Brian Neill and Abed’s request to reinstate the license was denied.

The player had a ticket with a diamond flush poker hand worth $50, but only received $20 from Abed, Carter wrote.

One lotto sign still appears in front of Quick Mart near Ypsilanti. But tickets are no longer available, after lottery officials determined the owner shortchanged a customer on a winning ticket. (Photo: Paul Egan/Detroit Free Press)

“When he asked for the rest of the prize, (Abed) told him the ticket was a $20 winner,” she wrote.

The player then asked for the ticket back, at which point Abed printed him a new ticket that was not a winner at all and denied ever having seen the ticket with the diamond flush, she wrote.

Lottery records show the $50 ticket was checked, but not redeemed for a prize, just before 4 p.m., that a new ticket was printed about 30 seconds later, and that the $50 ticket was redeemed about two minutes later, after the unhappy customer apparently left the store, the letter said.

Abed told the lottery investigator that store security video of the sequence of events was not available, despite the fact the Washtenaw County Sheriff’s Office said the store had provided security video to them for another, unrelated incident.

Garmo told the Free Press he felt lottery officials handled the case fairly, but Abed’s wife, Doha Abed, said she and her husband feel a suspension would have been more appropriate.

“It was very unfair,” she said. “It’s been very difficult without the lottery license.”

The Michigan Lottery also revoked the license of Jasvir Singh, at Handy Dandy Party Store on West Michigan in Battle Creek, after he allegedly underpaid a player by $10 on a winning Poker Lotto ticket.

No additional details were available about that incident, beyond the December 2017 revocation notice sent to Singh. The Handy Dandy Party Store, owned by JKS BC LLC, was sold after the Michigan Lottery revoked its license and a new license was issued in October 2018 to the new owners, Deep Liquor LLC and Mandeep Kaur, Holyfield said. The store has again been selling lottery tickets since then.

The Free Press published an earlier report about lottery retailer discipline cases, in November 2017. That article, which looked at cases that had arisen since January 2016, found five instances of lottery retailers cheating customers or tampering with instant game tickets. Only one of those cases resulted in revocation of a retailer’s license, and that was after a clerk at a Battle Creek gas station sold customers tickets that he had already scratched and determined were losers.

Capital One Gas initially received only a one-week suspension and a term of probation, but that penalty was increased to license revocation after the retailer refused to fire the offending clerk, which was a requirement of his probation.

In one case examined in 2017, a Clinton Township party store received only a two-week suspension and probation after the husband of the store’s owner declared a customer’s Keno ticket a loser, tore it in half, and then cashed it himself for $2,517.

For the more recent cases examined in the last two years, all cases of cheating customers or tampering with tickets resulted in license revocation, even when the amounts involved were as small as $10.

Holyfield denied there has been a shift by lottery officials to harsher discipline in such cases, and said each case is judged individually, weighing many factors including whether the retailer has been in trouble before. In the case of the Clinton Township store and the customer cheated of $2,517, Holyfield said an important factor was that the offending clerk was not the person who held the license, but was her spouse.

Lottery retailers can also lose their licenses for committing crimes unrelated to the lottery.

Records show retailer Raymond Gedeon of Dollar Palace in Lansing lost his license in March after he was convicted of food stamp fraud. Gedeon was sentenced to two years in prison in February after pleading guilty to food stamp conspiracy in federal court in Grand Rapids.

The Michigan Lottery revokes about 100 retailer licenses a year. The most common way to lose a license is not by cheating customers or by discounting, but by getting behind on money owed to the lottery.

Since October 2017, the lottery sent revocation notices to about 75 retailers who had collectively fallen behind by more than $350,000 on their payments to the Michigan Lottery, records show. During that time, close to 100 retailers received revocation notices for being repeatedly late with payments, or being late with a single payment while on probation, records show.

After receiving such notices, many retailers quickly pay what they owe and in some cases post bonds to ensure prompt payments in future, Holyfield said.

Retailers have strong incentives to keep their licenses in good standing. They receive 6% commissions on ticket sales, plus 2% commissions on prizes they redeem. Lottery sales also bring in customers who buy other items.

In the 2018 fiscal year, the most recent year for which data is available, the Michigan Lottery set new records for sales, at $3.6 billion, prizes paid, at $2.2 billion, and commissions paid to retailers, at nearly $267 million. The lottery also contributed a record $941.3 million to the School Aid Fund.

Discounting, at least for a first offense, is typically dealt with by a license suspension and probation, not a revocation.

Since October 2017, 28 retailers around the state received one-week license suspension for discounting, while one retailer received a two-week suspension. The suspension comes with a $700 investigation fee and a term of probation of one to two years, during which time the retailer is prohibited from cashing winning tickets for themselves.

West End Liquor Store on Joy in Detroit received the two-week license suspension. An aggravating factor in that case was that the license holder admitted to discounting tickets on previous occasions, records show.

Receiving one-week license suspensions for discounting were Detroit retailers including:

  • Special Way Market on Schoolcraft
  • Hatter Marathon on Fenkell
  • Serena Group LLC on West Warren
  • New Merchant Food Center on East 7 Mile
  • Mays Liquor on West Chicago
  • Roseberry Market on Roseberry
  • Caesar’s Palace Liquor on West McNichols
  • Food Giant Supermarket on Greenfield
  • Omni Party Store on West Seven Mile
  • Fifth Avenue Liquor Spot on Fenkell
  • N&A Market on Whittier
  • Express 100, Inc. on Livernois
  • Six Mile X-Press Party Store on West McNichols
  • Bottom Up Party Store on West 8 Mile
  • Barrel and Bottle Party Store on Dexter
  • Holiday Party Store on Joy
  • Van Dyke First Stop LLC on Van Dyke
  • Super Spot Liquor on Harper.

Also receiving one-week suspensions for discounting were:

  • Huron Plaza Party Store and Prime Time Liquor and Kitchen in Pontiac
  • Muthana Gas Mart in Highland Park
  • Dairy Mart 6231 in Allen Park
  • Tele Fuel Mart LLC in Redford Township
  • Z&H Groesbeck Service Center in Mount Clemens
  • Miss Tracy in Grand Rapids
  • Trade Winds in Farmington Hills
  • K&B Mini Mart in Rochester Hills
  • Sunshine Liquor Shop in Troy

Discounting is also dealt with on a case-by-case basis, and retailers get a chance to appeal their suspensions, Holyfield said.

Only one retailer, Wine Captain in Dearborn, was successful in having a proposed one-week suspension reversed during the nearly two-year period examined by the Free Press.

Owner Fady Kasgorgis had been licensed since 1986 without a prior violation and offered an explanation lottery officials could not refute, Holyfield said.

“The owner said that one of his employees found a stack of tickets on the counter at the business,” Holyfield said. “He scanned them and discovered one was a winner and informed the owner. The owner said he waited for someone to come back to the store to claim the ticket, but no one did. So, he tried to claim the prize and found that the ticket was a copy of a winning ticket.”

Fares Hattar, owner of Hatter Marathon in Detroit, appealed his suspension, but without success.

“Prior to the incident in question, I had held a Michigan lottery license for a period of 25 years without committing a single infraction,” Hattar wrote in October 2017. “Many regular customers patronize my business on a daily basis for the exclusive purpose of purchasing Michigan lottery tickets,” and even a one-week license suspension “runs the risk of doing irreversible harm to my business.”

Hattar said Wednesday he got through the suspension OK by being up front with his customers and telling them it would only last a week.

Despite his worries, “they ended up coming back,” he said.

The Free Press used the Freedom of Information Act to obtain records about Michigan Lottery retailers who had their licenses revoked or suspended.

Claiming Prizes

If you win a Michigan Lottery prize, you have one year from the date of the drawing to claim your money. The method for claiming your prize depends on how much you won, and whether you played online or through a retailer.

Online Claims

If you played online, any prize of up to $600 will be paid automatically into your online account. You can withdraw winnings at any time or decide to purchase more tickets. The minimum withdrawal amount is $10.

If you win a prize between $600 and $50,000, you must complete an online claim. Just go to your account, select вЂ˜Tax Reported Prizes’ and follow the step-by-step process. You should have copies of your Social Security card and valid government-issued photo identification (state ID or driver’s license) ready to submit. The prize will be paid into your online account once the claim has been approved.

Prizes over $50,000 need to be claimed in person at the Michigan Lottery’s central office in Lansing. You will first need to complete an online claim by logging on to your account and selecting вЂ˜Tax Reported Winnings’. You are then advised to call the Michigan Lottery on 517-373-1237 to arrange an appointment. Winners must present their Social Security card and valid government-issued photo ID (state ID or driver’s license) to receive their prize.

Claim Centers

If you bought your ticket in a store, prizes up to $600 can be claimed from Michigan Lottery retailers, just by presenting your winning ticket and having it validated. However, retailers are not required by state law or Lottery rules and regulations to offer prize redemptions. Some stores also have strict limits on how much cash can be kept on site, so it may not be possible to receive your prize until a later date.

If you win a prize of up to $50,000, you can claim your money from any of the Michigan Lottery’s Claim Centers listed below. Opening hours are 8:00AM to 4:30PM from Monday to Friday (excluding holidays).

Lansing Claim Center

101 E. Hillsdale Street
P.O. Box 30023
Lansing, MI 48909
Phone: 517-335-5756
Fax: 517-335-5644

Livonia Claim Center

33231 Plymouth Rd.
Livonia, MI 48150
Phone: 734-266-3769
Fax: 734-266-3778

Sterling Heights Claim Center

34700 Dequindre Road
Sterling Heights, MI 48310
Phone: 586-939-2300
Fax: 586-939-4108

Detroit Claim Center

Cadillac Place
3060 W. Grand Boulevard
Suite L-600
Detroit, MI 48202
Phone: 313-456-4040
Fax: 313-456-4045

Grand Rapids Claim Center

3391-B Plainfield Ave. NE
Grand Rapids, MI 49525
Phone: 616-364-3372
Fax: 616-364-5421

Saginaw Claim Center

Jerome T. Hart State Office Building
411 E. Genesee Avenue
Saginaw, MI 48607
Phone: 989-758-1670
Fax: 989-758-1881

You will have to provide the original winning ticket, valid government-issued photo ID (state ID or driver’s license), Social Security card and bank account details. Players must bring with them the original winning ticket, plus valid photo identification and Social Security card.

Alternatively, prizes up to $50,000 can be claimed from certain partner bank claim centers across Michigan:

Escanaba

Delta CP Branch #381
305 Ludington St
Escanaba, MI 49829

Grayling

Grayling- Branch #350
2384C S I-75 Business Loop
Grayling, MI 49738

Marquette

Marquette- Branch #387
2025 US 41 W
Marquette, MI 49855

Sault. Ste. Marie

Sault Ste Marie- Branch #374
2700 Davitt St
Sault Sainte Marie, MI 49783

Houghton

Houghton- Branch #382
902 Razorback Dr.
Houghton, MI 49931

Prizes of greater than $50,000 must be claimed at the Michigan Lottery’s central office in Lansing. You should call the Michigan Lottery on 517-373-1237 to arrange an appointment, and must then present your winning ticket, Social Security card and valid government-issued photo identification (state ID or driver’s license) to receive your prize.

Annuity Payments

An annuity is a fixed sum of money paid out to winners in regular instalments for a long period of time. A number of Michigan Lottery games have a top prize where players can decide whether to receive an annuity payment or a reduced cash option.

The cash option represents the current cash value of a jackpot, while the annuity is how much it would be worth over time with all the interest it would accrue. For example, winners of the Powerball and Mega Millions jackpots can choose whether to receive 30 annual instalments over 29 years or a one-off lump sum.

In Lucky for Life, players who win either of the top two prizes have 60 days from the date they make their claim to request the alternative cash option, otherwise they will continue to be paid the advertised daily/yearly payments.

Taxes on Winnings

Michigan Lottery prizes are subject to federal and state income tax laws, depending on the value of your win. There is no withholding on prizes under $5,000, but anyone who wins at least $600 will be required to report the income in the tax year it is claimed. For prizes over $5,000, winnings are subject to a 4.25 percent withholding at state level and an estimated 24 percent in federal tax.

Michigan Lottery prizes are valid for one year after the winning drawing. Find out how to claim your prize from a lottery retailer or a regional MI Claim Center. ]]>