Massachusetts lottery audit reveals lax oversight, fraud

Jean McMillan

Friday, July 16, 1999 | 10:31 a.m.

BOSTON -- Lax oversight and possible fraud at the state lottery allowed scam artists to collect millions of dollars and avoid state and federal taxes, according to a report from the state auditor.

The controls were so weak that "winners" who claimed multiple cash prizes under names like Chris Mis and Walter Purple didn't tip off lottery officials, the report said.

"There was a cavalier attitude and the audit recommendations in the past were ignored and that's why we're talking about the same things today," Auditor Joseph DeNucci said Thursday.

In one case, 319 winning tickets worth $412,000 were cashed last year by a person, or people, going by the name Clarance Jones without anyone questioning the claims.

"It's hard to believe anybody can be that lucky," DeNucci said in today's editions of the Boston Herald.

Only six of every 100,000 tickets yield a $1,000 to $5,000 prize, DeNucci said. Someone like Jones, then, would have to buy hundreds of thousands to millions of tickets to get so many winners.

DeNucci believes the winnings were collected by "10 percenters," people who for a fee collect winnings under a bogus name to allow the real winners to avoid paying taxes or other financial obligations like child support. The practice has been used by racetrack winners.

Auditors found that the top 10 multiple winners last year won 842 times for a total of $1.8 million. Five of those top 10 used fake identification.

They did not estimate the total amount of tax evasion, but about 1,800 W-2 forms for $7 million in winnings were returned by the post office as undeliverable last year, the Herald reported. The mysterious Clarance Jones, for example, listed a post office box for his address. State officials can't find a home or telephone listing.

DeNucci said the audit provides strong evidence that the scam artists were aided by lottery employees. Copies of the report were forwarded to the attorney general's office for review.

Former state Treasurer Joseph Malone, who was in charge of the lottery last year, did not return a call to his home Thursday.