Lottery’s Lucky Losers – Times Publications, September 2008

With his last $5 in his pocket and two weeks until his next paycheck, Shefik Tallmadge stops by a Circle K to check his weekly lottery numbers.

After picking out a breakfast pastry, he fishes in his pocket for the $5 and hands it to the cashier, along with the ticket.

The clerk routinely inserts the ticket into the machine to see if it’s a winner. The machine immediately begins playing a happy tune.

“You can’t cash this here. You have to go to Phoenix,” the clerk tells him as he hands back the ticket. “All the numbers match.”

“What?” Tallmadge says in disbelief, examining the ticket.

“I’m a winner!” he announces to the entire store. “I won the lottery!”

In fact, he had won Arizona’s largest jackpot at the time – $6.7 million.

Eighteen years later Tallmadge was bankrupt.

“They gave me enough money to get into trouble, but not enough money to make me rich,” he says. “I made some mistakes – very, very expensive mistakes.”

While it may be hard to believe, Tallmadge’s story is not that uncommon among multi-million dollar lottery winners. According to the Certified Financial Planner Board of Standards, nearly one-third of all lottery winners end up broke.

“People who get a regular paycheck don’t know how to deal with money like that,” Tallmadge says. “You go from $50,000 a year to $355,000 a year, and you just don’t know what to do.”

In Arizona, the lottery has created more than 400 millionaires in its 26-year history. For most winners, the money is a blessing, but for some the sudden wealth exacerbates existing problems.

While anyone who plays the lottery dreams of the life a winning jackpot might bring, the reality for many winners has been a nightmare of greedy relatives, hit men, divorce, suicide, financial ruin and even murder.

Arizona Lottery

Last year Arizona residents spent a record $473 million on lottery tickets, with winners collecting over $262 million in prizes.

And in the next few years, lottery spending is expected to significantly increase.

To help with Arizona’s $2 billion budget deficit, the legislature agreed to allow the lottery to add new games, increase payouts and remove the budget restrictions on gaming promotions. The plan is expected to generate an additional $52 million in lottery proceeds, which will help finance $1 billion in projects at the state’s three universities.

But critics argue that solving the state’s budget problems by encouraging Arizonans to gamble is “reckless and irresponsible.”

“It’s basically saying, ‘Even though times are tight, we’re still going to encourage Arizonans to spend on the lottery,’” says Peter Gentala, a general counselor for the Center for Arizona Policy.

Lottery officials argue that the revenue the lottery generates helps all Arizona residents.

Since the Arizona lottery’s inception in 1981, it has generated more than $2 billion to fund higher education, parks and recreation, wildlife preservation, transportation and other government programs.

Last year alone, the lottery generated about $145 million in profits for the state.

“Our mission is to make Arizona a better place to live,” says Art Macias Jr., director of the Arizona Lottery. “The nearly $145 million we raised last year went to help support programs that increase the quality of life in each community across Arizona.”

The problem, critics say and most research supports, is that the majority of lottery money comes from the state’s poorest residents, which is one reason many winners, who aren’t used to handling large sums of money, end up broke.

Low-income households spend an average of 30 times more on lottery tickets than high-income households, according to a 2008 report from the New Thrift, a nonprofit organization that researches American saving habits.

The report shows a household with an annual income under $13,000 spends 9 percent of their total income on lottery tickets, while a household with an income of $130,000 spends less than 0.3 percent.

A 2008 study by the Carnegie Mellon University says lottery players who considered themselves subjectively poor bought nearly twice as many lottery tickets as those who felt affluent, because they felt it was their “best opportunity for improving their financial situations.”

“The lottery is designed to extract money from people who can’t afford it,” says Gentala. “It’s like any other type of gambling scheme. I think the only real distinction is government powers and resources are used to promote the lottery.”

State lottery officials say their own research shows the average lottery player has a median household income of $52,000 and mirrors the demographics of a typical Arizona resident.

Macias also says the majority of winners have happy endings, and the cash increases their quality of life.

“We’ve made a difference in people’s lives,” Macias says. “By and large, our players reflect the average Arizonan, and the majority of Arizonans manage their money well and use their money wisely.”

Newly Rich

After Tallmadge won the lottery, he quit his job, took his mom and sister on a trip around the world, bought a Porshe 911 convertible and a Rolex watch.

He married a pharmacist and moved to Florida, where the couple purchased two homes on the beach.

“Life was very, very good,” he says. “You could open up any door you wanted, just about.”

The money was to be paid in annual installments over the next 20 years. Every year when June 7 rolled around, Tallmadge received a check for $355,000. Tallmadge says he celebrated the date like a birthday. For the first several years the Tallmadges stayed out of debt, but they spent every dime of the annual installments.

“You would be surprised at how quickly you can go through $250,000 (the amount he received after taxes),” he says. “We were living from paycheck to paycheck, just instead of the paycheck coming every two weeks, it came every year.”

Tallmadge says at the time it seemed like the party would never end. But in just a few years the checks would stop.

Rags to Riches to Rags

Financial planners say instant wealth from a lottery can and often does turn into a financial disaster if not properly managed.

“If you’ve been responsible with money, you’ll probably be responsible with the lottery money. But it presents big surprises and challenges that you can’t see coming,” says Susan Bradley, a certified financial planner and founder of the Sudden Money Institute, a resource center for new money recipients and their advisors.

Many lottery winners don’t plan for the future or set aside money for tax implications. Others will begin living extravagant lifestyles, overspending beyond their winnings.

“They start giving away the money to family members and spending it on things that are luxuries rather than assets,” says Paul Deloughery, a Phoenix probate attorney who has worked with dozens of lottery winners.

For most, the difficult part is denying family members’ requests for money, he says.

“They start getting phone calls and guilt trips,” he says. “It makes it really awkward on relationships.”

Numerous past winners say the money has actually destroyed their relationships.

Michael Klingebiel, who won a $2 million lottery in New Jersey, was sued in 1998 by his own mother, who accused him of failing to share the jackpot.

A $31.5 million jackpot split Lewis Snipes’ family apart. Snipes and his wife disagreed on whether to accept the lump-sum payout. The family chose sides, and the matter remained in the courts for four years.

One of the most tragic stories of lottery greed happened to a man who was generous with his wealth.

After Jeffrey Dampier Jr. won a $20 million Illinois lottery jackpot, he treated his family to houses, cars and a Caribbean cruise.

But authorities say that didn’t satisfy his sister-in-law, Victoria Jackson. In 2005, she kidnapped Dampier Jr. at gunpoint, stole $10,000 from him and shot him in the back of the head. Jackson was sentenced to three consecutive life sentences.

“He tried to help everyone,” Dampier Sr. said about his son after his death. “That’s his downfall.”

Fair Weather Friends

When Tallmadge won his millions, news of the windfall spread quickly, and so did the requests for money from friends, family and strangers.

“Everybody knew who I was; everybody wanted something from me,” he says.

The first call came from a little girl asking for money to buy new uniforms for her soccer team. In the background Tallmadge says he could hear the girl’s mother telling her to “cry harder.”

The pressure also came from his friends.

“They felt that I owed them something,” he says. “I became the problem in their minds. I had changed instead of them changing, and I hadn’t. The only thing that was different was now I had some money in my pocket.”

Soon Tallmadge lost all his friends. He says the money and people’s reactions to it forced him to move out of Arizona. Today, all of his friends are people he met after he won.

Deal with the Devil

On average, just three to five years after winning a jackpot most multi-million dollar lottery winners are facing financial ruin, says Edward Ugel, a former sales representative for a finance company and author of “Money for Nothing: One Man’s Journey through the Dark Side of Lottery Millions.”

Ugel’s practice area focused on buying the series of payments from lottery winners in exchange for a discounted lump sum. While working in the lump-sum industry, Ugel says it was his job to aggressively hunt down winners and offer reduced amounts of cash in exchange for their annual checks. On average, winners would receive about $.40 on the dollar, which he says they would accept because they were often desperately broke.

“For the most part, the typical lottery winners that you were doing business with were not very financially sophisticated, were not highly educated and frankly, were in a financial crisis,” he says.

Ugel believes the reason so many lottery winners end up destitute is because the lottery perpetuates a “millionaire myth,” when realistically even someone who wins $3 million will never be a real millionaire.

Out of every significant jackpot, the lottery keeps half of the jackpot amount while a significant portion of the balance is paid in taxes.

“But the lottery says you’re a millionaire,” he says. “They take a picture of you with that ridiculous oversized check and leave you with a head full of ideas about where to spend all this money that you really don’t have.”

Evelyn Adams won the New Jersey lottery not once, but twice for a total of $5.4 million. By 2001 she was poor and living in a trailer, having gambled away most of the money in slot machines and given away the rest.

“Winning the lottery isn’t always what it’s cracked up to be,” she said after losing it all.

Before striking it rich, William “Bud” Post lived life as a drifter, working as a day laborer and truck driver in circuses and carnivals.

Then in 1988, he won $16.2 million in the Pennsylvania lottery. Within two weeks, he had spent $300,000 of it; within three months, he was $500,000 in debt.

His relationships with his siblings became strained, and his brother was arrested for allegedly hiring a hit man to try to kill him and his sixth wife for the inheritance.

Within a year, Post was $1 million in debt, and eventually declared bankruptcy.

He lived his last few years on $450 a month in Social Security benefits and food stamps before dying in 2006, at the age of 66.

“Everybody dreams of winning money, but nobody realizes the nightmares that come out of the woodwork, or the problems,” he said in 1993, five years after winning.

Easy Come Easy Go

Tallmadge says the lump-sum payout offers were non-stop. At the time, he wasn’t working and was looking for something that would keep him busy while providing a steady income.

“Every month I would get a letter in the mail that said, ‘Turn in your lotto,’” he says. “We succumbed to it.”

Tallmadge invested the lump sum he received into four gas stations, which struggled, sinking him into debt. Two years later, he says, he was strong armed out of business in favor of corporate-owned stations and was forced to sell at a substantial loss.

After losing that income, the Tallmadges lost their second home. Buried under a mountain of debt and back taxes, they were forced to declare bankruptcy.

Tallmadge blames bad advice and predatory lump-sum companies for the loss of his fortune.

“I thought I was doing the right thing. I was just caught up in circumstances that were beyond my control,” he says. “I was put into a pool with all the sharks, and I was just a minnow. I just got eaten alive.”

More Money, More Problems

Many lottery winners discover the millions only compound their problems, experts say.

“It can bring out either the best or the worst in people,” says Deloughery. “I’ve seen people who had drug addictions or are alcoholics and all of a sudden they have a lot more money to buy more drugs or more time to drink.”

Before winning $34 million in the 2000 Kentucky lottery, Mack Metcalf’s past included frequent drinking binges, DUI charges, drug dealing and a debt of $31,000 in back child support, according to media reports.

He and his estranged wife split the jackpot, but their good fortune only contributed to the worsening of their addictions.

In 2003, three years after winning the jackpot, Metcalf died at age 45 from complications related to his chronic alcoholism. In 2005, his wife’s body was found decomposing in her bed. Authorities believe she died as a result of a drug overdose. She was 51.

But perhaps the world’s unluckiest lottery winner is West Virginia businessman Jack Whittaker. On Christmas Day, 2002, Whittaker won a record Powerball jackpot of $314.9 million, taking home a lump-sum total of $113.4 million. But the pressures of his new wealth led to numerous problems, including several arrests for drunk driving and assault.

Then his 17-year-old granddaughter, Brandi Bragg, who he was supporting with a $2,100 a week allowance, started hanging out with the “wrong crowd” and got hooked on drugs.

In 2004, Bragg’s boyfriend was found dead in Whittaker’s home of a drug overdose. In the $100 million wrongful death suit, the boy’s parents alleged Bragg’s allowance had funded the drug addiction.

A few months later, after having gone missing for several weeks, Bragg was also found dead, wrapped in a plastic sheet, dumped behind a junked van. The cause of death was listed as unknown.

Whittaker’s legal problems and granddaughter’s death put a strain on his marriage, and in 2005 his wife filed for divorce.

Since winning he says he has been robbed twice of more than $750,000 and involved in 460 legal actions. Most recently he was sued by Caesars Atlantic City casino for bouncing $1.5 million worth of checks to cover gambling losses. Today he claims he is broke.

“Since I won the lottery, I think there is no control for greed,” he said after his granddaughter’s death. “I wish I’d torn that ticket up.”

Just 1 Regret

Today Tallmadge is a stay-at-home father of three. His wife supports the family as a pharmacist.

Unlike some previous winners, Tallmadge says he’s glad he won, but admits, in many ways, life is better without the lottery stress.

“It’s a lot calmer,” he says. “I don’t have to look over my shoulder anymore.”

Still, he continues to play the lottery every week, hoping once again to hit the jackpot. This year, Tallmadge would have received his final payment from the jackpot win, had he not traded it for a lump-sum payout. Although the date was once anticipated like a birthday, this year it went by unnoticed.

“I have no regrets. It taught me a lot,” he says. “Well, I regret it wasn’t more.”

Ten Tragic Tales
• Karen Cohen won $1 million in the Illinois State Lottery in 1984 but filed for bankruptcy in 2000. In 2006, she was sentenced to 22 months in jail for lying in bankruptcy court.

• Ed Gildein won $8.8 million in the Texas Lottery in 1993 but gambled away most of the money.

• Victoria Zell, who split a $10.9 Minnesota jackpot in 2001, is now serving time in prison for a conviction in a drug- and alcohol-related collision that killed one person and paralyzed another.

• Paul McNabb was Maryland’s first lottery millionaire, but he ended up driving a cab in Las Vegas.

• Thomas Strong won $3 million in a Texas lottery in 1993. In 2006, he died in a shoot-out with police.

• Ken Proxmire, who won $1 million in a Michigan lottery, was bankrupt within five years.

• Kenneth and Connie Parker were married 16 years but divorced just months after winning $25 million.

• After Charles Riddle won $1 million in Michigan in 1975, he got divorced, faced several lawsuits and was indicted for selling cocaine.

• Juan Rodriguez won $149 million in a New York lottery, but just 10 days later his wife of 17 years filed for divorce and took half his winnings.

• Billie Bob Harrell Jr. won $31 million in a Texas jackpot in 1997. Two years later, after a divorce, overspending and lending, he killed himself with a shotgun.