May 8 teleconference date set in Illinois lottery fraud case

By Karen Kidd | Apr 24, 2017

EAST ST. LOUIS — A scheduling and discovery conference is set for early next month in the fraud case of the now former private management firm of the Illinois Lottery, filed following a newspaper's investigation.

The telephone conference is scheduled for 3 p.m. on May 8 before Magistrate Judge Donald G. Wilkerson at the East St. Louis courthouse in the class action filed in February against the private management firm Northstar Lottery Group. Northstar is accused of defrauding scratch-off players and retailers in the state.

The class action was originally filed Feb. 6 in St. Clair County's 20th Judicial Circuit Court, but the case was removed on March 8 to U.S. District Court for the Southern District of Illinois following a determination that the damages sought from the allegedly manipulated games are more than $75,000. 

On March 15, the court granted Northstar's motion for more time to answer allegations in the case, according to court documents.

The bench trial in the case currently is scheduled for December 2018 before Chief Judge Michael J. Reagan in East St. Louis.

The case was filed shortly after a investigation by the Chicago Tribune found that the state's lottery, managed by Northstar, printed more tickets than the Illinois Lottery generally printed but did not award many of the largest prizes in the lottery's biggest instant games. Plaintiffs in the case are three lottery players and Raqqa Inc., which owns Fairview Lounge Bar and Grill in Fairview Heights.

The case claims to represent businesses that act as retailers for the Illinois Lottery and individuals who purchased game tickets.

Northstar managed the Illinois Lottery from July 1, 2011, until the first of this year, according to the lawsuit. 

"As the Private Manager of the lottery, Northstar oversaw and directed the day-to-day operations of the lottery, including the design and operation of the individual games offered to Purchasers at point-of-sale locations by Retailer Plaintiffs," the lawsuit said.

"The Lottery generates more than $2 billion in ticket sales each year," the suit continued. "As the Private Manager, Northstar's compensation was tied to the Lottery's net income, thus giving Northstar an incentive to generate as much revenue as possible while paying out as little as possible in prizes and commissions. In short, Northstar had a profit motive in the Lottery."

The lawsuit alleges that Northstar routinely designed and operated games that failed to pay off on grand prizes advertised. 

"Purchasers were induced to purchase tickets for these games and retailers were induced to perform work to sell those tickets," the suit said. "But before all (or sometimes any) grand prizes were awarded, Northstar discontinued games. The result was that Northstar locked in profits for itself and eliminated risk that it would have to pay out winnings to purchasers and bonuses and commissions to the retailers."

Plaintiffs in the case seek $350,000 for the seven counts against Northstar, which is accused of violating the Illinois' Consumer Fraud and Deceptive Business Practices Act.

The Illinois Lottery, founded in 1974, now operates under its acting director Gregory Smith, with assistance from the Lottery Control Board, from locations in Chicago, Springfield, Des Plaines, Rockford and Fairview Heights. The terms of two of the Lottery Control Board's members are set to expire in July.

Northstar and state lottery officials have been declining comment in the case.

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Chicago Tribune Illinois Department of the Lottery St. Clair County Circuit Court U.S. District Court for the Southern District of Illinois East St. Louis

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