1 1 2 3 4 5 6 7 8 9 10 11 TEXAS LOTTERY COMMISSION 12 PLAYER TOWN HALL MEETING 13 NOVEMBER 4, 1999 14 HARVEY HOTEL DFW 15 16 17 18 19 20 21 22 23 24 25 TRANSCRIBED BY: AMELIA BLANTON AUDISH, CSR, RPR COURT REPORTERS ASSOCIATED 214/528-0808 2 1 MS. MIERS: Good evening. If everyone 2 could take their seats, we're ready to begin. Good 3 evening. My name is Harriet Miers. I'm chair of the 4 Texas Lottery Commission, and it's my privilege tonight 5 to welcome you all-here and to actually as a formality 6 sake, the Lottery Commission is in session at this 7 time. I'd like to introduce to you Commissioner Tom 8 Clowe who is with us here tonight too. Tom is on the 9 front row. Tom and I will both participate tonight in 10 responding to questions or making comments as the 11 evening proceeds, but because two of us are here, 12 that's a quorum of the commission so we have an 13 official meeting of our commission here tonight. 14 I want to start by thanking each and 15 every one of you for being here. In my visiting with 16 you a moment ago a few of you warned me that I may not 17 particularly like to hear some of the comments that 18 some of you have come to make, but believe me, we are 19 here to make certain that we get the input from you 20 that you think would be valuable for us to have, so 21 thank you for taking the time to come out and visit 22 with us this evening. We have with us a number of the 23 members of our staff and these are individuals who run 24 the lottery day-to-day, are most familiar with how the 25 games work, can answer your questions, and they're COURT REPORTERS ASSOCIATED 214/528-0808 3 1 anxious likewise to hear what it is that you've come to 2 tell us tonight. 3 What I want to make clear is that tonight 4 is a town hall meeting so we can hear your thoughts. 5 We certainly will have some introductory comments, but 6 it's your comments and your thoughts that we're here to 7 hear, so be thinking about those comments you'd like to 8 make and questions you'd like to ask and we look 9 forward to hearing all of those. 10 At this time, I'm going to turn the mike 11 over to Linda Cloud, our executive director. Linda 12 comes to the Texas lottery years ago with a great deal 13 of experience from the Florida lottery and prior 14 experience. She has been a very wonderful employee of 15 the commission, first running, actually operating the 16 games, and now as our executive director, and we are 17 very pleased to have her with us here tonight. Linda, 18 why don't you take it from here? 19 MS. CLOUD: Thank you, Harriet. I too 20 want to thank all of you for coming here tonight and we 21 truly do want to hear your comments. We have been -- 22 the last couple of years we have been putting on town 23 hall meetings for our retailers. This is proof to us 24 it would be very beneficial because we've been able to 25 get feedback from our retailers and that's exactly what COURT REPORTERS ASSOCIATED 214/528-0808 4 1 we want to do here tonight is get feedback from you as 2 to what you want to see in the lottery games. 3 I want to introduce the staff to you. On 4 the left here is Toni Smith. She's our marketing 5 director and of course our chair, and then Pam Udall 6 who is our on-line product manager, and Ron Wilcox who 7 is our customer service manager. We have Laura Pierce 8 in the back who has been assisting y'all in continuing 9 to get your handouts. I need to introduce our general 10 counsel, assistant general counsel, Ridgely Bennett, 11 and he needs to let you know how we go about hearing 12 from you tonight. So Ridgely, if you don't mind. 13 MR. BENNETT: Once again, thank you all 14 for coming tonight. Because this is an open meeting of 15 a governmental entity, there are certain formalities 16 that have to be followed in tonight's meeting. As you 17 all are aware, part of the meeting will be a chance for 18 you-all to respond to us and ask questions and make 19 comments. And in that regard, if you'd like to speak 20 tonight, you have to fill out a witness affirmation 21 form. They're available in the back from Laura or 22 they're available at the podium. 23 The other thing we'd ask is that you 24 speak at the podium into the microphone so that we can 25 get a clear recording of tonight's meeting. And the COURT REPORTERS ASSOCIATED 214/528-0808 5 1 other thing that you have to do is give your name when 2 you make your comment so we'll have a full record of 3 who made comments tonight. Thank you. 4 MS. CLOUD: Okay. With that we want to 5 share with you a very short video. We're not going to 6 take up much of your time doing the talking tonight. 7 The video is designed for our players, and once we get 8 through with the video, then we're going to open this 9 meeting up to hear from you and we're going to listen, 10 so thank you again for coming out tonight. 11 (Video plays.) 12 MS. CLOUD: Okay. What we'd like to do 13 now is have you come to the podium and we do need your 14 speaker's -- your witness form. Toni will collect 15 those for us, so who's first? 16 MR. BURNS: Good evening. My name is 17 Jerry Burns. If there's such a thing as a hard-core 18 lottery player, I might qualify. There's ten of us 19 guys that have been together since '94 that play 20 together. We wheel eight numbers into 28 combinations 21 that give us a shot at any combinations of the six 22 numbers that come up. We never get it. The biggest 23 gripe among us is the small amount of payout for the 24 three numbers for instance. You've got, for instance, 25 a 20 million-dollar jackpot. You get 50 percent of the COURT REPORTERS ASSOCIATED 214/528-0808 6 1 numbers and you pay us three bucks. Now folks, that's 2 ludicrous. 3 You get 68 percent of the numbers which 4 is four of them approximately and you may win somewhere 5 between 75 and 125 dollars. You get 82 percent of the 6 numbers and you might get a couple of grand 7 (inaudible). Now, I recognize the mentality or at 8 least I think I do of the commission in that based on 9 what I've read recently that you folks feel like that 10 the jackpot seems to be headed -- in order to have 11 multiple, to increase statistics, and I can't contest 12 that. 13 I'm sure that there's statistics that 14 prove that out, but I can tell you at least within the 15 group that plays with myself and that the people that I 16 talk to outside of the group that the small payout 17 hardly justifies pulling up in front of the convenience 18 store and getting out and filling out a ticket. I 19 mean, three bucks; that's just -- and folks, when y'all 20 are talking about going from 3 to 5, nobody got excited 21 either, okay. I'm not a mathematician. I have no idea 22 what can be done from a standpoint of small payout and 23 still have anything to entice people on the top 24 payouts, but what's currently being paid on the small 25 end -- the way we play when we wheel, if we win ten COURT REPORTERS ASSOCIATED 214/528-0808 7 1 games we're going to get 30 bucks when we get three 2 numbers, but we spend anywhere from 2500 to 3000 3 dollars a year. 4 On an eight-game month we spend 252 5 dollars -- or on an eight-game month, we'll spend 224 6 dollars and on a nine-game month, we spend 252 dollars, 7 and that -- we hadn't gotten a scratch in more than 8 four months now but we're still playing. The 9 promotion -- and I'm not casting stones. The promotion 10 that was done here recently on trying to make 4 mill 11 seem like a lot of money which 4 mill is a lot of 12 money -- I was in marketing for 28 years, so I've got a 13 little bit of background in that. I don't think you 14 hit the spot. 15 You have this individual walking towards 16 the end of the rainbow and there's 4 million dollars 17 put on the screen. Heck, 4 million dollars is a lot of 18 money. 4 million dollars is a lot of money, guys. 19 There's no doubt about it, but you've got to appreciate 20 that big figures now, big numbers don't mean as much as 21 they used to. We have trillions of dollars in the 22 budget. We've got Bill Gates is worth 100 billion. 23 You know, you're multi, multibillion nowadays. When 24 you say 4 million dollars, it isn't chicken feed, but I 25 mean, it just doesn't arouse a lot of interest. COURT REPORTERS ASSOCIATED 214/528-0808 8 1 My opinion, is for what all this is 2 worth, is that had this been promoted in a more 3 tangible manner in that you show what 4 million dollars 4 would buy, one heck of a nice home, many, many 5 automobiles, probably several college educations not to 6 mention buying jewelry, etcetera, had these been 7 brought up on the screen I think you could do a sale on 8 a 1 million-dollar jackpot. You just -- you got to go 9 beyond the figures. You've got to show in my opinion 10 the more tangible, and to me this will -- this will 11 bring you some buyers. 12 Now, I'm going to make a suggestion, and 13 from a mathematician or a math standpoint, I have no 14 idea whether it will work or not, but has the 15 commission given any thought whatsoever to multiple 16 drawings on the jackpot? In other words, at some -- 17 and I'll just throw this out. There's several 18 scenarios that have crossed my mind, but say the 19 jackpot reaches 10 million dollars and it's promoted 20 and made very well known to all ticket purchasers that 21 once the jackpot exceeds the 10 million-dollar factor 22 you're going to have multiple drawings. 23 You're going to maybe give away a 10 24 million-dollar jackpot and then you're going to give 25 away -- if it's 13 million, for instance, you're going COURT REPORTERS ASSOCIATED 214/528-0808 9 1 to give away a million thereafter. You're going to 2 have 4 drawings. I use 10 million as just a number. 3 It could be 5 million and then if it reaches 10 4 million, you've got six drawings. In my opinion, 5 again, if you promote what a million bucks will buy, 6 you're going to draw as many ticket purchasers as if 7 you've got a 20 million-dollar jackpot. Could be 8 wrong. 9 Now that's my mentality and I assure you 10 that I'd be out there making more purchases. Now, I 11 realize if you had ten drawings, the odds are still 12 only one -- I mean, ten in sixteen mill, but at the 13 same time, I'm thinking, hey, they're going to draw ten 14 times. I just might hit that rascal and I can do well 15 on a million bucks. 16 I think I've covered my grievance. I 17 don't know of anything else particular that jumps out 18 at me. I think really the one item that I feel that is 19 number one with me is the small payout, and I -- once 20 again, from a math standpoint, I have no idea how it 21 can be worked. I don't know what it will do to top in 22 on the spots, but you need to motivate the little guys 23 that win three bucks now and again. You need to make 24 them say, hey, you know, if I get three numbers, I win 25 a quarter. If I get four numbers, I can win five COURT REPORTERS ASSOCIATED 214/528-0808 10 1 bills, and I get somewhere or another. I thank you for 2 listening. 3 MS. CLOUD: Sir -- 4 MS. MIERS: All right. The ice has been 5 broken. Who's next? 6 MS. SMITH: Okay. Del Brookins. 7 MR. BROOKINS: Good evening to the 8 commissioners. My name is Del Brookins, and I do 9 remember the day that Ann Richards, our former 10 governor, signed the bill into law allowing Texans to 11 wage, and I've got to tell you that I was one of the 12 first guys to go out and buy a scratch off. I kept 13 scratching and I kept scratching, and every now and 14 again, I'd win a dollar or two dollars, but what I was 15 eagerly awaiting was for the big boy. The big one. 16 We'd hear it all the time, and that big boy was lotto, 17 and I play lotto. I'm a staunch lotto player. 18 But commissioners, what I want to ask you 19 is why do you insult me with 3 dollars when you've got 20 a payoff of 50 million? Hey, give a guy a chance. If 21 it's that high, three winning numbers should at least 22 give 50 bucks. Okay. If you would increase that, 23 you're going to get more people to play like me. A lot 24 of my friends tell me, hey, we're not going to -- who 25 wants to win 3 dollars when we spend 18 dollars and we COURT REPORTERS ASSOCIATED 214/528-0808 11 1 only got three? Another thing about Texas lotto which 2 I really like, which I played last night -- I only got 3 one number. I think to the staunch supports like 4 myself and the other people who are here in the house, 5 if you would go back and refigure and offer some 6 incentive, if you get any one number, give it a 7 weighted average, maybe 20 dollars like the gentleman 8 before me stated. Let's give the people of Texas an 9 opportunity to win some of this money. 10 And about scratch offs, only yesterday I 11 was in this convenience store. They sold beer and 12 money orders, and you know, it wasn't an upscale store 13 but yet it had your lotto banner hanging outside. So I 14 went in and I saw one of your older tickets. It was 15 aces -- no, not aces; Hearts are Wild. So I go in and 16 I ask the guy, how many more have you got up there and 17 he says, I've got 12. Normally, I don't do it because 18 I've become skeptical, but I bought all 12 and my net 19 yield was two dollars, and it's kind of discouraging 20 and you see all of the discarded tickets lying on the 21 pavement. Nobody has respect enough to throw them 22 away. 23 About Pick 3, if I hit one number on Pick 24 3, my God, they're (inaudible) me. People, I'm 25 supporting you and the people of Texas want to keep COURT REPORTERS ASSOCIATED 214/528-0808 12 1 this alive, but you've got to help us. Let's give us 2 some money. Thank you so much. 3 MS. SMITH: Thank you, sir. 4 MS. MIERS: Thank you, Mr. Brookins. 5 MS. SMITH: Larry Rosenberg. 6 MR. ROSENBERG: Good evening. My name is 7 Larry Rosenberg. I'm a retailer with the Irving 8 district. My concerns are the jackpots. As a 9 retailer, we make a percentage on the sale. And as the 10 jackpots have been staying in the 4 million, 7 million, 11 10 million-dollar range, I've seen my business erode 12 from the high of 65 million dollars last year when we 13 couldn't keep the machine running fast enough to the 14 extreme, this 4 million and 10 million-dollar payouts 15 where we're not doing anything. My money has -- my 16 profits, my income has just decreased to where it's 17 almost to the point that it's not worthwhile handling 18 it. I don't know what you guys can do to increase the 19 jackpots, but you have to do something. 20 I think that this last game that you had 21 been talking about increasing the number of numbers and 22 number of winning combinations would have been a good 23 idea; however, y'all didn't disseminate the information 24 to us so that we could properly promote it and push it 25 to our players, our big players. I just recently found COURT REPORTERS ASSOCIATED 214/528-0808 13 1 out that if you have three numbers, you can win five 2 dollars. Now, a two-dollar increase doesn't really 3 seem like a lot of money, but if you talk to enough 4 people, you're going to convince them that this might 5 be the way to go. I'm not seeing the communication 6 between you-all and us as a retailer. Tell us about 7 this. 8 I didn't see anything in any of the 9 packages that you guys sent me. My representative just 10 barely touched upon it. So how was I to promote it? 11 How was I as an arm of the commission able to go out 12 and talk to the people that play, to the people that 13 spend the money? Now, these people are talking about 14 5-dollar payouts and 50-dollar payouts. We know that's 15 ludicrous. You have 100,000 people win three numbers 16 yesterday. That would have been 5 million dollars on a 17 7 million-dollar jackpot. Now, my concern is: Let's 18 get these jackpots up to the 30 million, 50 million, 70 19 million. That's when we all can make some money and 20 have a good time. 21 Now, one other complaint I have is 22 somewhere in here -- quality control in some of your 23 tickets. I lost my -- son of a gun. I give you, 24 Ms. Cloud, since you're the executive director, a 25 ticket and a quarter. Please scratch it. See how easy COURT REPORTERS ASSOCIATED 214/528-0808 14 1 that is to scratch. 2 MS. CLOUD: We know. We've had problems 3 with this game. We know what you're talking about. 4 MR. ROSENBERG: All right. So what -- 5 MS. CLOUD: This is from a previous 6 manufacturer. 7 MR. ROSENBERG: We also have problems 8 with the bar codes. You know, it's (inaudible). 9 MS. CLOUD: Are you having problems with 10 the (inaudible)? 11 MR. ROSENBERG: Well, I must say that you 12 guys (inaudible). 13 THE REPORTER: I'm having trouble -- 14 (Simultaneous comments.) 15 MS. CLOUD: You can have your ticket back 16 too. I'll keep your quarter. Maybe you want to repeat 17 what you were saying for the rest of the room? 18 MR. ROSENBERG: My concern is the quality 19 control on this particular game. This isn't the first 20 game that the latex has been extremely difficult to 21 scratch off. As a retailer, as a pro-lottery retailer, 22 I eat a lot of these. I don't bother sending one or 23 two or three tickets back, all right? When I get a 24 bad -- a really bad batch, then I will send them back. 25 Another complaint I have is with quality COURT REPORTERS ASSOCIATED 214/528-0808 15 1 control on the bar codes. We do a little bit of 2 business in our store and it's really tough when you 3 have to stand there and punch in ten or twelve numbers 4 and then turn it over and punch in another ten or 5 twelve numbers and then make a mistake and it say it's 6 not valid because the number's wrong and you have to 7 start all over again. So if you-all could do 8 something with the quality control on latex and on the 9 bar codes and increase the jackpots, we'd be real happy 10 campers, and we could really promote the hell out of 11 this. 12 MS. CLOUD: I want to tell you that this 13 ticket and the other ticket you referred to was from an 14 instant ticket manufacturer previous to the one we have 15 now. You should not be having this kind of problem 16 with the tickets you have today. And we did have a bar 17 code problem right at the beginning with the new 18 manufacturer, but we corrected that. You should not 19 have any problems with that. The first games that came 20 from the new manufacturer, I think we had some bar code 21 readers reading the bar code and we've tried to correct 22 that. 23 MR. ROSENBERG: I've seen some -- they're 24 still coming across -- some of them are coming across 25 fuzzy and some of them are coming across white light, COURT REPORTERS ASSOCIATED 214/528-0808 16 1 and we do have trouble occasionally. Now, as I said, 2 GTECH was in here the other day. I don't know what my 3 tech man did. He worked some magic and I'm able to run 4 them through, and I'm a little happier now, but I've 5 put in plenty of calls about it. 6 MS. CLOUD: Okay. Thank you. 7 MR. ROSENBERG: Thank you. 8 MS. SMITH: Kim Koukos. Koukos. 9 MS. KOUKOS: You did real good on the 10 pronunciation. It is Koukos. I'm a player, a regular 11 player, a faithful player since day one. In fact, if I 12 have to travel out of town, I play multidraw because I 13 do have the same set of numbers and I would just be 14 terribly dismayed that I've played it for all these 15 years and lost. With that, what I'd like to see are 16 bigger jackpots. 17 When I read the Dallas Morning News that 18 bigger jackpots were being voted down, I couldn't 19 believe it because first of all, I didn't hear anything 20 about it. Maybe I was out of town. I don't know. But 21 I have a retailer who usually because I am so regular 22 says this is what's going on. We've got a new ticket 23 coming out next week. These are changes, whatever. 24 Didn't know anything about it and I thought well, gee, 25 nobody asked me if I wanted bigger jackpots. COURT REPORTERS ASSOCIATED 214/528-0808 17 1 If I want to win a lot of money and 4 2 million dollars is a lot of money, I'll play, but I'd 3 really play if I could win 50 million dollars or 100 4 million dollars. If I want to win a little bit of 5 money or better my odds I can play scratch offs or Pick 6 3 or Cash 5, but with the lottery I'd like to see some 7 huge jackpots. At work we run a pool. Each of us kick 8 in two bucks because we're all getting gray hair and 9 everyone wants to retire and we couldn't if we didn't 10 play, so I'm always afraid that my whole team will get 11 to retire and I won't if I miss a week, but then 12 several people dropped out. 13 We probably started this three years ago 14 with 40 people. We're probably down to 15 or 16 15 people. And every time the jackpot's back up, they 16 remember, oh, yeah, I used to be part of this pool and 17 I want to play again. So what I'd like is bigger 18 jackpots. Thank you. 19 MS. CLOUD: Thank you. 20 MS. SMITH: Lyndon Johnson. 21 MR. JOHNSON: My name's Lyndon Dwayne 22 Johnson and I'd like to first say thank you to Ron 23 Wilcox and the people that support -- y'all have been a 24 great help to me in the last couple of years. I'm 25 probably more informed than your average lottery COURT REPORTERS ASSOCIATED 214/528-0808 18 1 player. I've been intensely interested in the lottery 2 and the running of the lottery since 1992 when it began 3 in November. Currently, I've been -- my interest in 4 coming tonight was, first off, the changing of the 5 numbers of the ball sets to numbers from E, F, I, and J 6 being changed to A, B, C. 7 The reason I'm interested -- and I play 8 the lottery religiously. My family does too, and if 9 Ron could see my web site -- at least it's still not up 10 yet -- it's quite in depth and quite detailed. And 11 that goes into some of the complaints or issues that I 12 have with the information disseminated from the Texas 13 lottery to the general public. I live in Southwest 14 Tarrant County. To get here was about a 45-mile drive, 15 and in Tarrant County there are only two signs that 16 display the lottery. 17 And as I was driving here, I was trying 18 to figure out how could you show people what the 19 jackpot is. I listen to WBAP; you're well-placed 20 there. TV, you are well-placed. But I saw the state 21 signs for the traffic. Just a thought. You might see 22 if you could look into that. That might help pay for 23 the electricity for the sign. You'd pay in advertising 24 that would last. Just an idea. 25 Also, a lot of people have come here, at COURT REPORTERS ASSOCIATED 214/528-0808 19 1 least the ones that were before, who wanted bigger 2 jackpots. If they would have known from the beginning 3 what I know now, they would have seen that there are 4 more games. The money for lotto is spread out across 5 Cash 5, Pick 3 and, what, 30 plus scratch offs, and 6 that's no mystery as to why the lotto jackpot's not 7 growing. You have too many games. I quit playing 8 scratch offs. I used to play and loved the Weekly 9 Grand and then you changed it from a lifetime to 20 10 years, and I said that ain't worth it. 11 But anyhow, I also found out what the 12 odds are. People don't know that you print 50 million 13 of these tickets, you know, and they -- and I'm willing 14 to display it on my web site. All this stuff will be 15 on there, but I would limit those to ten a year or 16 twelve. Make -- you have a contest I noticed where you 17 have an artistic contest where somebody comes up with 18 the new scratch off. Have ten premium ones, ten good 19 paying ones and let the lotto build up. 20 Texas Million from what I've been able to 21 see from the numbers is a complete failure. I get 22 faxes from y'all every day, and I don't remember the 23 last time somebody won Texas Million. I don't know if 24 it's been six or eight weeks, but I cannot remember 25 when someone won Texas Million. Get rid of it. COURT REPORTERS ASSOCIATED 214/528-0808 20 1 Nobody's playing it apparently or the odds are just 2 phenomenal and they're not going to win. 3 But I think instead of messing with the 4 numbers and messing with the odds, getting the jackpot 5 up that way, eliminate some of the games to let people 6 more focus on lotto to get the jackpot up and reduce 7 the scratch offs to some premium games that I'll be 8 interested in scratching and others. I mean, 3,000 9 dollars for playing one of the games, I don't want to 10 spend two bucks on that. 11 But the reason -- again, back to the 12 issue that I put down on paper of why I wanted to come 13 up was the numbering of the ball sets. I'll give you 14 my address to my developing web site. Ron may still 15 have it. I don't know, but the lettering F, E, and 16 running -- I'm allowing people to look at the number of 17 hits per ball set per machine combination. I've talked 18 to thousands of people. I say thousands, maybe 2,000 19 people since '92. Everyone I meet, have to shake their 20 hand, say, hey, do you know about the lottery? 21 There's -- I've met one individual and 22 that was about two months ago who knew as much about 23 the ball sets and machines, how you run pretest, as I 24 do. I think there's a severe information deficit. 25 This is gambling and I don't play the lottery to win COURT REPORTERS ASSOCIATED 214/528-0808 21 1 three bucks or five bucks. I want the jackpot. And, 2 yes, I want a bigger jackpot, but if you look at the 3 history of the game from when it started in '92, it was 4 by itself. You've got all this competition with these 5 other games out there and Lotto Texas is suffering from 6 those games being played. 7 MS. MIERS: Can I ask you a question? 8 MR. JOHNSON: Sure. 9 MS. MIERS: Why do you have a web site? 10 What is the purpose of this web site? 11 MR. JOHNSON: Well, I had this great idea 12 back in '92. I first started getting the pretest 13 numbers off the state comptrollers bulletin board 14 system. That's where they initially posted the pretest 15 numbers, so I've kept everything in the database from 16 day one. And the web site is a market -- I'm actually 17 going to allow people -- I'm developing wheels, lottery 18 pools so that people like -- it made me happy for 19 people to run lottery pools. 20 I want to make it easier because I've ran 21 lottery pools for myself also, and it's a nightmare to 22 try to pick 50 tickets and then let everybody know what 23 the numbers are for that night. It takes two or three 24 hours and it could be 100 tickets, and I've run pools 25 as large as 500 tickets, but now I have a program that COURT REPORTERS ASSOCIATED 214/528-0808 22 1 prints my slips and everything like that. But I said, 2 you know, this would be a great marketing plan. If I 3 can get Texas lotto and get all this information, what 4 do I do when I win, how do I play it, what are the 5 odds, what are the hot numbers for each ball set and 6 machine combination, I think it's a good marketing 7 plan. 8 I think it's going to allow me to have a 9 population of people hitting my web site that is going 10 to allow me to advertise and make money off of them. 11 The web site is free to individuals coming to the web 12 site. You just sign up, put their name and e-mail. 13 They can put their lotto pool pals in there and run the 14 lottery. That's why. Marketing. 15 MS. MIERS: Okay. Thank you. 16 MS. SMITH: Edward De Silva. 17 MR. DE SILVA: My name's Edward De Silva. 18 I am a lottery winner not in Texas but in a 19 sweepstakes. I won a sweepstakes a few years ago. I 20 won $36,000 so I'm familiar that it can be done. It's 21 a long shot, but it can be done. But the basic 22 principle here that I can see is that if you want 23 something you've got to give something and not only 24 give something but give more than what you'd like to. 25 And by doing that, you lower the percentage of your COURT REPORTERS ASSOCIATED 214/528-0808 23 1 profit and make it up in volume. I don't have a 2 particular panacea for solving all the problems, but 3 basically I see this is the only way to do it. People 4 want, of course, lower odds and a better chance at it. 5 Lower the lottery numbers from 50 to 45 or 48. Do it 6 that way. 7 Scratch off, you've got odds now running 8 from 1.3 something, 1.4 something. That's not bad, but 9 again, it could be lower. As far as 4 million, if 10 you're trying to sell the 4 million, it won't work, and 11 I'll tell you why, because people realize that you've 12 got a 17 in one million chance, if ever, to hit the 13 lotto, if ever. And if you've got that one chance, 14 you're not going to blow it on 4 million. You're going 15 to wait until the pot gets up there to 10, 15, 20, 16 whichever the case may be, and that's the basic fact. 17 You're not going to sell 4 million. You're just going 18 to have to take it as it is and let it build. Texas is 19 renown all over the nation and in all the world too for 20 the amount of money it takes in. Make it known for the 21 amount of money that it pays out. That's all I have. 22 MS. CLOUD: Thank you. 23 MS. SMITH: Alfred Machala. 24 MR. MACHALA: Good evening, 25 commissioners. How are you? I have some of my opinion COURT REPORTERS ASSOCIATED 214/528-0808 24 1 and speak from -- I don't know where all of y'all are 2 from, but what I want to tell you is why is it when the 3 lotto is at 4, 7, 10, and 14, 18 million dollars, 4 hardly ever do you have a jackpot winner? This is what 5 happens. This is street talk. This is what happens. 6 The seven numbers you put on the screen may not be the 7 numbers that have just been drawn for the 9:58 drawing. 8 These set of numbers come from a -- these 9 set of numbers could come from a set of practice 10 drawing and a computer search to be sure they have not 11 been purchased. Is it fair to control the drawings to 12 make larger jackpots? No, it's not. It is quite 13 evident every time you have a 4, 7, 10 million-dollar 14 drawing never is there a winner because the numbers 15 never show up. 4 million dollars is 14,000 dollars a 16 week in what y'all do in advertising. Why don't y'all 17 let us have it or maybe 7 million? People want big 18 jackpots. You can't have big jackpots if you don't 19 have players. 20 How many of you people out here have 21 ever -- how many of you people out here have ever been 22 to Austin to see how they draw the numbers? Anybody? 23 When the lottery was about a year old, I was there at 24 8:15 and it takes 12, 15 people. They go through 25 114-step procedure to do the drawing. And I stood COURT REPORTERS ASSOCIATED 214/528-0808 25 1 about from here to that screen to the machine, but how 2 do I know if that numbers that were put on TV were the 3 numbers that they drew that night? Thank you very 4 much. My name is Alfred Machala. 5 MS. SMITH: Thank you. Do we have other 6 speakers in the audience who have not filled out the 7 form and who wish to speak? Anyone else? Dawn 8 Nettles. 9 MS. NETTLES: I'm so glad you-all made it 10 to Dallas safe and sound. My name is Dawn Nettles. I 11 am a public lottery reporter, and I did not really plan 12 to talk tonight, but I received a number of calls today 13 from people who do not play who could not be here -- 14 were not -- could not attend tonight and asked that I 15 speak for them. Basically, I will make it short and 16 simple. Their ideas were, number one, to cut out the 17 Texas Million. 18 Someone said to me not too long ago that 19 you couldn't cut out the Texas Million because you-all 20 think that would only leave Texas with three games. 21 And I would like to say that prior to beginning the 22 Texas Million, there were only three games and 23 everything was rolling pretty well, so we hate to see 24 our money going to bad games when it could come back 25 into the others. COURT REPORTERS ASSOCIATED 214/528-0808 26 1 (Applause.) 2 The other suggestion that was made and 3 I've said this to you-all, but I swear it came from my 4 players today, is to please reduce the Cash 5 to twice 5 a week. There's too many games and it takes away. 6 Then the third thing that was suggested and you're 7 going to love this one, Pam. It came to me today to 8 please increase your lower tier prizes; however, the 9 players went one step further and they said, and I 10 swear, I have this in writing, okay. 11 They said to me today that the person who 12 wins the multimillion-dollar jackpot should get less to 13 revitalize your tiers. Don't add any more numbers, 14 okay. Don't add any numbers but lower the big payout 15 enough to give the people that do win the three, four, 16 and five numbers. I was told several times today that 17 the -- I just went totally blank -- that the people 18 have quit playing totally because they didn't win 19 anything at all, and if they would at least win 20 something, then they would continue to play. So please 21 don't increase the numbers at all to, you know, more 22 balls. But instead, lower your 64 percent that you do 23 pay, and so I have delivered their messages, and I 24 thank you and I hope y'all have a pleasant stay. 25 MS. SMITH: Chris Schobert. COURT REPORTERS ASSOCIATED 214/528-0808 27 1 MR. SCHOBERT: My name's Christopher 2 Schobert, and I just have a quick question to see if 3 you can answer it. The house bill that was passed back 4 in September or prior to September that went into 5 effect September 1st originally had called for sales to 6 be not only cash but credit card and debit card, and 7 the credit card part was struck. And I was curious why 8 they allowed debit card but no credit card. 9 MS. CLOUD: To our knowledge credit card 10 was never in the bill. It was the debit card. 11 MR. SCHOBERT: Originally, it was in the 12 bill. I don't have a copy with me but I do have a copy 13 that says so. 14 MS. SMITH: It was House Bill 703 and I 15 think the final version of that bill that was passed 16 did not include -- 17 MR. SCHOBERT: Oh, it did not -- no, they 18 had struck it before it passed, but it was originally 19 in there and up until I think -- I talked to my 20 legislator, like, at the beginning of August it was in 21 there and by the end of August, it was gone. It was 22 not -- 23 MS. CLOUD: It was never in there to my 24 knowledge. I will go back and check on that and we'll 25 get back with you on that one. COURT REPORTERS ASSOCIATED 214/528-0808 28 1 MR. SCHOBERT: Okay. Well, I have copies 2 of the web pages, so I'll bring it back, and I saved 3 them so... 4 MS. CLOUD: Okay. Well, our legislative 5 group will have all that information. 6 MR. SCHOBERT: Okay. 7 MS. CLOUD: And they may even have the 8 tapes from all the hearings. 9 MR. SCHOBERT: Okay. 10 MS. CLOUD: So we will get back with you 11 on that, but to my knowledge it has never been. 12 MS. MIERS: But your point was you wanted 13 credit card included? 14 MR. SCHOBERT: Yes. Well, I was just 15 curious why originally it said credit cards and debit 16 cards and then they struck the credit cards and left 17 the debit cards in there. I didn't -- 18 MS. MIERS: Well, I can speak probably to 19 the public policy issue which is that I think there 20 would be some concern of people borrowing and using 21 credit cards to purchase lottery tickets as opposed to 22 cash, which clearly they have. So I suspect there 23 would be significant discussion about whether that was 24 good public policy. 25 MR. SCHOBERT: Okay. Thank you. COURT REPORTERS ASSOCIATED 214/528-0808 29 1 MS. SMITH: Bill Kisner. 2 MR. KISNER: My name is Bill Kisner. I 3 didn't have any real complaints. I just had a 4 suggestion. I thought that was one of the reasons we 5 were here. My idea was to have second-chance drawings. 6 I thought this might help both the scratch off and the 7 lotto if when you didn't win the scratch off, you could 8 sign your name on back of it and mail it in. 9 And during the lotto drawings, when 10 you're doing the numbers of the lotto, after that they 11 could pull one of the losing tickets and award, you 12 know, 10,000, 100,000 depending on how much money they 13 had, and that would increase the scratch off sales and 14 would also help the lottery because everybody's going 15 to tune in to the lotto to see if they won on the 16 second-chance drawing. And while they're watching, 17 they might as well have a lottery ticket to see if they 18 won their numbers. That's really all I have. 19 MS. CLOUD: Thank you. 20 MS. MIERS: Thank you very much. 21 MS. SMITH: Carol Harden. 22 MS. HARDEN: Good evening, Ms. Cloud and 23 commissioners. I am truly a lotto player. I've been 24 playing lottery for over 16 years. As a player, I'm 25 very nosey. I listen to the complaints and concerns of COURT REPORTERS ASSOCIATED 214/528-0808 30 1 all the players in North Dallas. I do represent North 2 Dallas. One of the major problems that people are 3 talking about is that the profits for the foundation of 4 school funds -- the proceeds going to school funding. 5 I understand that it is probably a public record but 6 people want to see it. People in Texas, they don't 7 like to read or to research. 8 I haven't seen any information present in 9 the retailers. I think it would be a good idea as well 10 as how we put -- how you put the Cash 5, how the games 11 work, also include information on where the proceeds 12 are going to be distributed. They don't have an idea 13 where it's going, so it looks like that the lottery 14 hasn't fell through with what they said as far as for 15 the school funding. That is a number one very much 16 concern to people. 17 (Applause.) 18 Also, the ratio to tickets. I am a 19 scratch off and Pick 3 lover. The scratch offs I've 20 noticed that I purchased ten or more and I do read the 21 ratios on the back of all the tickets and they're one 22 out of every four and five. I bought ten or twenty the 23 night before last and I got 2 dollars out of the 24 twenty. Okay. I am one, I do check and see if it's 25 really happening, and it does happen sometimes. On the COURT REPORTERS ASSOCIATED 214/528-0808 31 1 newer games, I'm noticing the instant scratch off, 2 there are more winners more rapidly, but the older 3 games other than -- I like the Cash Vault. The Cash 4 Vault, it doesn't disappoint me very much. I bought 25 5 tickets and I did receive 4 dollars, okay. 6 So I think that the ratio of the payout 7 of the instant tickets is very, very low. If you 8 could, people -- they want to play. I listen to 9 everyone. They want to play and do want more winners. 10 Also, the lottery changes, I was strongly for the 11 changes of Lotto Texas, but again, I think the media 12 distorts all the information given by your commission. 13 It wasn't -- it didn't have a true benefit that was of 14 public knowledge, and I felt that if we acknowledged 15 them before the media gets ahold of the information and 16 distort it to where it looks like we would not win 17 money, it would be better. So I think public 18 acknowledgment and better knowledge would help us out. 19 And another thing -- hey, hey, don't do that -- 20 MS. CLOUD: You're not allowed to do 21 that. 22 (Simultaneous comments.) 23 MS. HARDEN: Okay. Thank you. 24 MS. MIERS: Can I ask you a question? 25 MS. HARDEN: Yes. COURT REPORTERS ASSOCIATED 214/528-0808 32 1 MS. MIERS: Because I want to understand 2 exactly what you were saying with respect to the public 3 receiving the money that goes to the education fund, 4 are you interested in seeing it publicized more in 5 that's where the money goes or the exact dollars that 6 flow into the fund? 7 MS. HARDEN: Both. I think both would be 8 of help. Even if there was a chart showing the 9 distribution of funds. Anything that the people can 10 actually see. This is instead of them having to go to 11 public records or doing research, calling the number. 12 They'd just like things more visible. I'm from a 13 (inaudible) so I recognize that people kind of -- they 14 don't want to read a lot, okay, but if it's more 15 presentable to present as far as the ratio and the 16 amount, that would be great. 17 MS. MIERS: Thank you very much. 18 MS. SMITH: Ted Luft. 19 MR. LUFT: Hi. I've run a pool since -- 20 I've been running a pool of the lotto since it started, 21 and we've played the same numbers every drawing. We 22 probably have 10, 15,000 invested and I'd hate to see 23 you change the numbers, how many numbers because that 24 would throw our numbers and make them -- you know, 25 expecting three and you need six numbers to win. COURT REPORTERS ASSOCIATED 214/528-0808 33 1 You're going to add more numbers to it and it throws us 2 totally out of whack, so I hope you don't change it. 3 Thanks. 4 MS. CLOUD: Thank you. 5 MS. SMITH: Leslie Brock. 6 MR. BROCK: Good evening, commissioners. 7 My name is Leslie Brock, and I'd just like to make a 8 point. I've been a lottery player since the inception 9 of this lottery, and I feel that we've invested quite a 10 bit of money in this lottery. But it seems to me that 11 the majority of the winnings is happening in the South 12 Texas area. That's the way it appears to me, and 13 specifically the large lotteries have been won in the 14 South Texas area. 15 And I've been keeping records of just how 16 it's been going, and like I said, South Texas is doing 17 real well with the lottery. I'm like the young lady 18 that just stood up. I'm very interested in seeing how 19 the money is distributed out to the schools. I would 20 like to see the benefit. In fact, I wrote the governor 21 to vote for it. I think that the lottery winnings 22 should go to the school systems because the schools are 23 suffering and we have all this money that goes into a 24 general fund, which I'm not really big on what this 25 general fund is. COURT REPORTERS ASSOCIATED 214/528-0808 34 1 To me it might seem like a slush fund for 2 anybody that wants to dip their hands in it and does, 3 so that's why I voted for it to go to the school 4 system. Realizing that since the inception of the 5 lottery, it's been figured given 6.9 billion dollars to 6 the school system, I'd like to see how the school 7 systems are really benefitting from that because 8 they're still complaining of needing funds and needing 9 high-tech -- technical equipment and things like that. 10 Thank you. 11 MS. CLOUD: Thank you very much. 12 MS. SMITH: Lilah Mohamed. 13 MS. MOHAMED: Hi. My name is Lilah 14 Mohamed. I've been a lottery retailer since the 15 inception, and I wasn't planning on commenting on this, 16 but on Forest Lane there's a brand new school that is 17 directly -- it's an academy, and I've spoken with the 18 principal. They have received quite a bit of funds to 19 put that school in and it's badly needed. It's in the 20 Richardson school district, so if you're from North 21 Dallas go by and see it. It's on Coit and 635. That 22 school. Sorry. Excuse me. 23 I'm talking to customers this last week 24 when I knew I was coming, and the main thing I heard 25 from them was more money, more money, more money on the COURT REPORTERS ASSOCIATED 214/528-0808 35 1 scratch offs, but let me add this. Gambling, scratch 2 offs, is a very personal thing and when you lose, it's 3 never your fault. I understand that my prizes have -- 4 payoffs have gone down a little bit since the tickets 5 dwindled, but they are picking up. I've noticed this 6 last week they were paying out more because we've got a 7 lot of new tickets in, so I'm hopeful that the 8 customers will be happy about that. 9 Now, as far as information. We've 10 received a marquee in our store, and all it has is the 11 jackpot prize, and one of the suggestions might be is 12 some of the information the customers want; instead of 13 just having the lotto jackpot come across there, you 14 can program other information in, like on Monday, 15 something else or Wednesday, the jackpot, just... And 16 as far as -- the only -- I have only heard two people 17 say that they were worried about where the money is 18 going because everybody knows it's going to schools 19 now. Most people just want more money on the tickets 20 and nobody wants more than six numbers on lotto in my 21 store. That's all. Thank you. 22 MS. CLOUD: Thank you. 23 MS. SMITH: Maxine Hughes. 24 MS. HUGHES: This is why I don't play 25 scratch offs anymore. Ten, 1 dollar; fifteen, 2 COURT REPORTERS ASSOCIATED 214/528-0808 36 1 dollars; thirty, 2 dollars; and you say it's 1 and 2 4.87. What it is, is 1 in 15. That's the same way 3 last Christmas. I bought fifteen 5-dollar tickets for 4 gifts. Do you know how many winners I hit? None. Not 5 one, and that is not one in four. That is one in 6 fifteen, and not even that in the case of the 5-dollar 7 ones. I don't do scratch offs anymore and I will not 8 do anymore scratch offs and I think a lot of people 9 feel the same way. 10 As far as the lotto, I haven't missed a 11 time since the lotto has started. I've made a little 12 bit, not a whole lot, and I love to play, but I do not 13 think it should be included -- enlarged, but I do think 14 that we should let it go on closer before there is a 15 drawing because in 15 minutes you can take that 16 computer and run through every number in there to stop 17 it from being -- going smaller than what it is to build 18 up that, and I do not think that's right. Thank you. 19 MS. SMITH: John Johnson. 20 MR. JOHNSON: Hey, commissioners. My 21 biggest problem that I think I have with the scratch 22 off is I own a business and it's fairly coordinated, 23 and there's a 7-Eleven store just right in the parking 24 lot, and I asked some of the clerks how many tickets 25 they sold. They sell approximately 100 tickets per COURT REPORTERS ASSOCIATED 214/528-0808 37 1 hour. Now, the thing that really grieves me, and I'm 2 not a player myself, but I see the poor being robbed, 3 which there's people on welfare and people who are just 4 working to make a living. 5 They come out through the deception of 6 these tickets, they'll make a fortune, and then they go 7 and spend a tremendous amount of their paycheck 8 thinking they're going to win something, and I think it 9 would be better to scratch scratch off period and just 10 let the lotto run or do it right where people can 11 benefit sometime because as the lady just said, I've 12 seen people have -- well, one lady bought 75 dollars' 13 worth, and I think out of 75 dollars and these were the 14 Weekly Grand, and I think she got 15 dollars back out 15 of 75 dollars' worth of tickets. So that's all I have 16 to say. 17 MS. CLOUD: Thank you. 18 MS. SMITH: Are there any other people in 19 the room who would like to speak?? 20 MS. CLOUD: Do you have a form, sir? Do 21 you have a form, sir? 22 MR. WALLACE: No. I was just trying to 23 find a piece of information that I need real badly. 24 Ms. Miers and the rest of the -- Ms. Cloud. 25 MS. CLOUD: Yes, sir. COURT REPORTERS ASSOCIATED 214/528-0808 38 1 MR. WALLACE: I guess I've talked to -- 2 and there's Mr. Wilcox. He was the first one that I 3 called. You know, I cannot believe that we are here 4 trying to decide what will increase the sales of 5 lottery tickets when it's real simple. If you will 6 take the criminal element out of it, then the lottery 7 sales would go sky high. I would start participating 8 in it once again. I can't believe I can't find the 9 two -- oh, okay. Here they are. 10 I have been trying to convince you, 11 Ms. Miers, of the improprieties inside the lottery 12 drawing, and one time you fluffed me off to a -- to one 13 of the security people, and that man talked to me for 14 approximately two hours. I have made a lot of 15 important phone calls simply because I had no idea 16 where this knowledge came from whatsoever. My name is 17 A. E. Wallace, okay. 18 I read on the Internet where the 19 commissioner or the chair of the Lottery Commission is 20 supposed to maintain the integrity of the game, and 21 several times there were questions about a drawing, and 22 one that really blew my mind was one Wednesday I think 23 the numbers was -- well, there was a discrepancy 24 between a 38 and a 33, and that -- I can't remember 25 which one came out, but the next day on the news, they COURT REPORTERS ASSOCIATED 214/528-0808 39 1 reported that whichever number came out, it was 2 supposed to have been this number and I'm saying how 3 can it supposed to have been? 4 The last one was when the drawing started 5 and one of the balls came out and the announcer 6 mentioned that ball or called the wrong number, and it 7 just so happened that the third ball later was the one 8 that he called prior. Well, those bring questions to 9 the mind, and you as the chairman should have done 10 something immediately about it. Now, GTECH, the 11 corporation that runs the lottery, if I'm not mistaken 12 and I know I'm not, those people were found guilty in 13 Pennsylvania for ball tampering and the same identical 14 thing has come to Texas, and they've made fools of us. 15 I first believed that the commissioners 16 had some kind of idea as to what was going on, but I 17 started thinking again. I said, no, they can't because 18 Justice Hill when he was a Supreme Court justice down 19 in Austin, it appears to me that in his mind and in his 20 heart he would have done the right thing, and I'm 21 thinking in you, Ms. Miers -- I've talked with you 22 several times and I believe that you are a just woman. 23 Mr. Sadberry, he is a relative of mine or -- not 24 really, but his dad was married to my aunt for -- well, 25 his first marriage. So Sadberrys and Wallaces are COURT REPORTERS ASSOCIATED 214/528-0808 40 1 pretty close. 2 Now, the question that I would like to be 3 addressed tonight are these two tickets. These are 4 winning numbers on particular dates. The winning 5 numbers for November 26, 1997, and if the audience 6 would like to participate, if you listen to me, please 7 follow just what I'm saying. The winning numbers were 8 10, 12 -- oh, God, now my eyes have quit on me -- 20, 9 23, 36, and 39. Now, it would take the rest of my life 10 or anybody, anybody -- it would take us as a state -- 11 let's say we took all the people in the state of Texas 12 and everybody hold those numbers. 13 If we went down to Florida and to all the 14 beaches on this earth, it would take us -- we could 15 count each grain of sand and this occurrence wouldn't 16 pop up again. Never. Now, with those numbers that I 17 just gave you, if you would subtract quickly each one 18 of those numbers from 50; the first number, you'd get 19 40; the second number, you would get 38; the third 20 number you would get -- what is that? Okay. That 21 would be 30. The next number would be 27. The next 22 number would be 14, and the next number would be 11. 23 Now, Thursday, November 27th, 1997, 24 Thanksgiving day -- and oh, yeah, by the way, nobody 25 won that lottery, that drawing -- the winning numbers COURT REPORTERS ASSOCIATED 214/528-0808 41 1 were 11, 13, 14, 30, and 38. Now did everybody get 2 those numbers if you subtracted them? 3 MR. MACHALA: I only get five numbers. 4 11, 13, 14, 30, 38 and what's the other? 5 MR. WALLACE: Well, the other number on 6 the drawing was 13. Now you should have 11, 14, 30, 7 and 38. 8 UNIDENTIFIED PERSON: That's five. 9 MR. WALLACE: This is a Cash 5 ticket 10 now. The next night was a Thursday. That was a Cash 5 11 drawing, okay? Now, how and where did 13 come from? 12 Well, if you look, you have 40 and you have 27 that was 13 not used. Subtract 27 from 40 and what do you get? 14 UNIDENTIFIED PERSON: We don't have 15 (inaudible). 16 MR. WALLACE: I beg your pardon? 17 UNIDENTIFIED PERSON: We don't have a 18 number of (inaudible) Cash 5. 19 MR. WALLACE: Absolutely. But I was 20 telling you to do it off of this ticket. Now, to the 21 chair, do you see my point? Do you have it? 22 MS. MIERS: I understand what you're 23 saying, sir. You're saying those were a day apart. 24 MR. WALLACE: Those were a day apart, and 25 if you need to find the 13, then you would have 40 -- COURT REPORTERS ASSOCIATED 214/528-0808 42 1 or 27 from 40 which are two numbers that you are not 2 using. If you line add them -- and I'm saying line add 3 because I have developed a system that will develop all 4 the lottery numbers that are called on the lottery 5 drawing. Now, 4, 2, and 6 and 7 is 13. Ms. Miers, 6 there's no way -- there is no way that this can happen. 7 So there is a criminal element there. I know it and I 8 don't know if you know it, okay? But I have talked to 9 Mr. -- what's his name? (Inaudible.) 10 I have talked to their office and those 11 people are -- well, I should say that they're a friend 12 to me but then they've also made me a friend to them. 13 After I talked to them, I was getting ready to go play 14 golf. I walked out of my -- after I finished talking 15 to them, I hung the phone up, and as I started walking 16 towards my door, my phone rang again. I ran back to 17 answer it, and it was those people again calling to see 18 if I was who I said I was. Now, how can these people 19 continue to operate a lottery in our state, I don't 20 know, after being caught in Pennsylvania? I don't 21 understand that. 22 Now, there's an easier solution to it 23 all. I know it would have benefited me. If the 24 numbers are not going to change, then why can't the 25 machines be turned off at 9:58? And I'm going to tell COURT REPORTERS ASSOCIATED 214/528-0808 43 1 you why. The 15 minutes is for them to fix the 2 drawing. And Ms. Cloud, you can shake your head, but I 3 already know. I know what's going on in the lottery 4 system. I have spent three, four years doing it, 5 developing what was going on, and it wasn't something 6 that I -- that I stumbled on -- I mean, it wasn't 7 something that I was brilliant enough to figure out. 8 It was something that was passed down to me. 9 And I was talking to my mother about it. 10 She says, Honey, God does not deal with gamblers. I 11 said, Mom, it's got to be something because I am going 12 about my life's business and I was directed to a 13 particular incident, and when I did investigate it, 14 there it was. And I just shook my head. I said, I 15 cannot believe that this is happening. Now, what would 16 happen if the drawings were held at 9:59 and the 17 machines -- because there's obviously a master switch 18 or something that cuts all the computers down. 19 Now, what would happen if we or if 20 you-all opted to make the drawing at 9:59 and shut down 21 the machines at 9:58? That would increase your lottery 22 sales because I went on a tear telling everybody this 23 especially, okay, but I have other evidence. I mean, I 24 have a lot of evidence that will prove that something 25 is being done with the ball. COURT REPORTERS ASSOCIATED 214/528-0808 44 1 MS. MIERS: Well, it may be appropriate, 2 Linda, to explain the process then why the things have 3 to be shut down and checked out immediately preceding 4 the drawing. 5 MR. WALLACE: The drawing is not going to 6 change. The drawing is not going to change. Folks, if 7 the drawing was on the up and up, there is no way that 8 the numbers are going to change. Matter of fact, it 9 would give me a chance and I know I could win the 10 lottery four or five times. 11 MS. MIERS: Okay. 12 MR. WALLACE: If the drawings are done 13 the way that they have been done, then I would win the 14 lottery at least four or five times before I die unless 15 I walked out of here tonight and one of those goons 16 follow me and blow my brains out. 17 MS. CLOUD: Sir, I can tell you -- no, 18 I'll let Pam tell you since she's our on-line 19 coordinator the importance of the draw break and the 20 times we have. But I also can tell you, you are so 21 wrong about the criminal aspect of our lotto drawings, 22 and I have my security director here tonight and he's 23 going to explain the whole process to you and we 24 encourage -- invite you to come to Austin to the 25 drawing and see for yourself. COURT REPORTERS ASSOCIATED 214/528-0808 45 1 MR. WALLACE: I have been told that so 2 many times but these numbers are not going to lie. 3 This drawing is not going to lie. 4 MS. CLOUD: Pam, do you want to 5 explain -- 6 MS. UDALL: Actually, I'm going to hand 7 it to Ron because he understands the draw breaks real 8 thoroughly as far as (inaudible). 9 MS. CLOUD: Okay. 10 MR. WILCOX: At 9:45 the computers are 11 shut down, and the reason they are shut down for a 12 period of time is there are lottery personnel on site 13 at GTECH. Those people physically hand-remove massive 14 tapes that have all the transactions on them from the 15 computer, lock them up, and then they have to notify 16 the studio that those tapes are under lock and key and 17 secured by Texas lotto security representatives. 18 That's to be sure nobody can get into the tapes close 19 to draw period and make any final modifications, and 20 the drawing cannot proceed -- the studio will not let 21 the drawing proceed until they get verbal confirmation 22 from GTECH that the tapes have been removed and are -- 23 MS. CLOUD: Not from GTECH personnel. 24 From our security people at GTECH's operation center. 25 MR. WALLACE: Then what about this? COURT REPORTERS ASSOCIATED 214/528-0808 46 1 MS. CLOUD: I would have to take -- I'd 2 have to take a copy of those tickets and go back and 3 research what happened on that. I'll have to be honest 4 with you; I didn't follow what you were saying very 5 well. 6 MS. MIERS: And also, we can look into -- 7 MR. WALLACE: Take those numbers because 8 50 is the largest number in our lottery system; 9 subtract -- 10 THE REPORTER: Excuse me. I can't 11 understand. I can't hear. 12 MS. CLOUD: She's got to take down 13 everything you say. 14 MR. WALLACE: Okay. Subtract each one of 15 those numbers from 50. 16 MS. MIERS: I've been following this, 17 Mr. Wallace, and I will discuss that with Ms. Cloud. I 18 understood what you were saying, all right? I don't 19 know that we want your only copies of those tickets, 20 but if we could get copies of them, we'll be happy to 21 research what happened there and also whether there is 22 too much time that is allowed. We certainly can look 23 into that to determine if there's anything that we 24 could do better there. So in between the time the 25 drawing is stopped and the drawing is actually -- COURT REPORTERS ASSOCIATED 214/528-0808 47 1 pardon me, sales are stopped and the drawing is made, 2 we'll look into that. 3 MS. SMITH: Victor Joe Adams. 4 MS. CLOUD: We have a mike for you, sir. 5 MR. ADAMS: Okay. 6 (Simultaneous comments.) 7 MR. ADAMS: My name is Victor Joe Adams. 8 One of my questions that I thought was answered earlier 9 in speaking to someone I find it wasn't -- concerned 10 with the Texas Million. Does the Texas Million pay for 11 itself? In many weeks, you may see a 2000-dollar 12 winner, occasionally a 25,000. My question very simply 13 is: Where does the rest of the money go? Do they pay 14 it all out in 10-dollar winners and 25,000-dollar 15 winners? 16 MS. UDALL: It's a set prize game, so 17 that's how it works. So when they take in -- 2 percent 18 of that goes to prizes and that's divided up to lower 19 tiers. To have a million-dollar winner does not mean 20 that we don't set that aside. Basically we use it on 21 tiers to set that. 22 MR. ADAMS: Okay. Several weeks ago I 23 read this in the paper on the Texas Million drawing 24 that there was, I don't know, insufficient funds or 25 something and they had to take the payout out of a COURT REPORTERS ASSOCIATED 214/528-0808 48 1 reserve fund. This was reported in the Dallas Morning 2 News. What I'm wanting to know is, is there a reserve 3 fund and, if so, how much is in it? Why isn't it in 4 the lottery in the payout? 5 MS. UDALL: We don't have any reserve 6 funds for that game, so that was erroneous information. 7 MR. ADAMS: Okay. The other thing and I 8 realize it's up to the legislature, I think to improve 9 sales of the lottery to me is very simple, maybe 10 oversimplification is simply to increase percentage of 11 payout realizing the legislature wants as much for its 12 education funding as it can get, and like any 13 bureaucracy, it gets used to something and thinks it 14 can't live -- cannot live with less, but of course they 15 can. 16 I think on behalf of the Lottery 17 Commission, on behalf of the players and the people in 18 Texas, they could convince the legislature that a 19 larger percentage of payout would indeed benefit. I 20 talk in terms of 60 percent. If you're playing the 21 lottery and you have a 50/50 shot, you can go to 22 Louisiana and get that sometimes. That's all. Thank 23 you. 24 MS. SMITH: Tammi Pavey. 25 MS. PAVEY: Hi, I'm Tammi Pavey. I'm the COURT REPORTERS ASSOCIATED 214/528-0808 49 1 daughter of the owner of the Hypermart retailer. My 2 mother's, she's up here. I don't have any complaints. 3 I've watched the lottery, working in the store, 4 managing the store. I see the customers from the very 5 poor to the ones with the most money. The lottery is a 6 game of chance. Anybody knows that. I see the 7 benefits which come from the lottery. My children 8 benefit in the schools, in the Garland school district. 9 There are children there, they're not all 10 rich, and they have an opportunity. My child -- one of 11 my children is in the math science magnet technology 12 center. If it weren't for the lottery being able to 13 give those funds, that would not be there for those 14 children to have that education. We have a customer 15 that comes in, and he purchases -- he continually 16 purchases daily 20, 30 dollars' worth of lottery 17 scratch offs. When he wins, he's up. When he doesn't, 18 he loses and he's down, and one time he thought that 19 our people were fixing these tickets. 20 My mother took and went and put in 21 cameras, monitored the sales making sure there 22 wasn't -- she called the lottery commission, talked 23 with them, asked them what to do. Nothing came out of 24 it. There was no fixing to it. It's just that when 25 people lose, they're down. When they win, they're up, COURT REPORTERS ASSOCIATED 214/528-0808 50 1 and that's just what happens. 2 MS. CLOUD: Thank you. 3 MS. SMITH: Is it Paul Buettiker? You're 4 going to have to correct my pronunciation I'm sure. 5 MR. BUETTIKER: Good evening, 6 commissioner, ladies and gentlemen. I did not want to 7 speak tonight, but I listened and you need some 8 (inaudible). You have a huge problem. People think 9 you cheat. I couldn't believe to hear that. You have 10 a problem, and I cannot believe in Texas people think 11 you're cheating. I realized -- I'm disappointed. I 12 wish I wouldn't have come here. I play the lotto once 13 in a while, but you have a huge problem. And then you 14 have a huge problem. You have a communication problem. 15 You don't communicate well. That's what I hear 16 tonight. You don't tell the people what happens, so -- 17 MS. CLOUD: We are going to address these 18 issues in a minute. 19 MR. BUETTIKER: (Inaudible). In Texas I 20 learned -- from (inaudible) to Texas and said, talk to 21 them; think it's flat. You don't take it. You throw 22 it out, and the Lotto Texas is flat. My opinion: You 23 have to start from scratch, and that's not (inaudible). 24 My opinion of the lotto: I give you a real marketing 25 gift. I tell the story when I tell my friends, play COURT REPORTERS ASSOCIATED 214/528-0808 51 1 the lotto, I said one time I found a bottle and then a 2 genie came out and she said, You have one wish. So I 3 said, I'd like to win the lottery. So the genie said, 4 You have to come halfway. And I said, Why halfway? 5 She says, you have to buy a ticket. Then you can win. 6 That's a lottery, 4 million dollars. 7 Nobody can crack 4 million dollars. With 4 million 8 dollars today, can you even (inaudible) 4 million 9 dollars to spend it all on yourself? I don't know. So 10 that's a marketing issue. You have to address that. 11 Communication. When you go to insurance companies, 12 they tell you if you cannot read the fine print, don't 13 buy it, and your fine print is smaller and smaller. 14 That has to be addressed. Very simple. Today, I am 15 cashing -- I have a (inaudible) ticket. I have three, 16 come on three. I couldn't get the numbers from nobody. 17 Nobody could find -- nobody could tell me. Maybe it's 18 expired. Maybe the days are up, so I give up three 19 bucks, but I was a general customer. 20 Then with the marketing problem, there's 21 no hype. You have no spokesperson. When you want to 22 put on the TV, you see MCI. There's a spokesperson. 23 There's Michael Jordan. Jordan says, It's five cents a 24 minute. What do you have? Nobody. We learn from 25 these how we should live our life. When I buy a COURT REPORTERS ASSOCIATED 214/528-0808 52 1 toothpaste, it says on the top, 20 percent free. I buy 2 a lotto ticket, what do I get? If I pay 10 dollars, I 3 get 10 dollar. If I pay 20 dollars, I get 20 dollars. 4 What happens to me when I buy 5 tickets, I might not 5 get six. When I buy 10, I get 12. When I buy one, I 6 get one, but nothing like this. Then I read the 7 newspaper and the newspaper says, We want to raise the 8 jackpot but we have to increase the numbers. 9 That's the only solution that came out of 10 how many meetings? How many ideas came out so that the 11 public could see because that may have happened, the 12 people can address includes. Nothing was in the 13 newspaper. I give you a lottery idea. Lotto tickets 14 goes to school. Is that a charity? Yes. If I'm 15 giving to charity, it's tax deductible. Nobody ever 16 says we (inaudible) tax-free winnings. That would be a 17 first for Texas. Let's change the law and say Texas is 18 first state who has tax-free winnings. 19 Yes, I understand you have to pay federal 20 taxes, but that could be done by the state. 21 (Inaudible) state, give you 3 million dollars. It's 22 your money. You don't have to pay taxes or all this 23 hassle. That would be your market. When you've 24 studied all the markets -- how about (inaudible) tax 25 people many, many years. How we can do it? Because COURT REPORTERS ASSOCIATED 214/528-0808 53 1 there's hype. They want to do that. The marketing -- 2 tonight I found first time out who won the 38 million 3 dollars. I couldn't remember his name. 4 When I look around the room, the 5 marketing or whoever, for me, I tell you, C minus, I 6 don't know. There's no posters up. There's no 7 T-shirts here. There's nothing here. I have to say 8 we'd be better off at the state fair. We come out, 9 spend our time. There's no hype here. There's nothing 10 happening. We've got to sell lottery, then we have to 11 downsize? If you don't see a sale of seven degrees, 12 the problem goes up. Means you're probably facing have 13 to downsize. My opinion, I can pick up a lottery 14 newspaper (inaudible). 15 Then another idea is the hype. You don't 16 have a football game. You have a bowl, an Orange Bowl, 17 whatever, Rose Bowl. Why don't the lotto have four big 18 drawings a year? Save your tickets and then you make 19 four drawings, a Thanksgiving drawing, a 4th of July 20 drawing, and then you save the ticket the whole year 21 round and you have a chance to win. I understand you 22 have multiple numbers, but you're still the winner. So 23 we save our tickets, don't throw them in the garbage. 24 Then we have the hype, one time a year, four times a 25 year. That's an idea. COURT REPORTERS ASSOCIATED 214/528-0808 54 1 The next thing I have is why two drawings 2 every week? You guys lose. You guys lose. If my 3 mother made lemonade like you do the lottery, there 4 would be no more lemons in the lemonade. There would 5 only be water left. But if you have one drawing, 6 Saturday night, hype it up, and do -- make it good. Go 7 with the drawing from sea to sea. Make it portable, 8 like, (inaudible) Dallas market center, all of the 9 public, even the police go out, and do the drawing 10 right there so the people can see you. 11 If you would like this, you could do it 12 right there. You would have huge hype. Then you go to 13 Austin, etcetera. And the last thing I have really is 14 you sellers. What do you do? What do the sellers do 15 for you? They get just the regular tickets. They get 16 no incentives, etcetera. That's what I can't believe. 17 The seller -- the retailer sells your ticket. If it 18 costs 500 dollars a week, he gets 5 percent each. If 19 she gets 1000 dollars a week, she gets 10 percent, but 20 now the sellers have no (inaudible). Only why should 21 they stay? 22 Instead of asking, Do you want lotto 23 tickets, the guy asks you for a pack of cigarettes. He 24 goes, and while you're buying cigarettes, how about a 25 lotto ticket. So if you were giving money (inaudible). COURT REPORTERS ASSOCIATED 214/528-0808 55 1 You have to sell lottery tickets to be able to have a 2 machine or to -- then you need to be selling lotto 3 tickets. Right now, it's like an afterthought in 4 grocery store. People go buy a Coke and then if they 5 have money left over buy a Coke, so then you have 50 6 cents. What can I get for 50 cents? (Inaudible) 7 special. The retailer has to sell like anybody else 8 and have an incentive, and he does -- he tells the 9 person who's selling tickets. Right now what do you 10 do? If you are selling the (inaudible) lotto tickets? 11 Thank you very much. 12 MS. CLOUD: Thank you. 13 MS. SMITH: Do we have anyone else in the 14 room who wanted to speak? 15 MR. MACHALA: I'd like to (inaudible) 16 something. There hasn't been hardly anything said 17 about Texas Million. Can I say something? Yes? It 18 will be nice. 19 MS. SMITH: Yes, sir. 20 MS. CLOUD: Yes. Come up. 21 (Simultaneous comments.) 22 MR. MACHALA: I'm Arthur Machala again. 23 I know it's not proper for me to speak, but I need to 24 say something about Texas Million. The Texas Million 25 started out in May of 1998 and there were tickets sold COURT REPORTERS ASSOCIATED 214/528-0808 56 1 two weeks prior to the drawing and what really is 2 surprising that they had six winners on the first 3 drawing and hardly everybody had a million since. And 4 I was wondering, don't you think that is not -- excuse 5 the expression -- don't you think that lottery is 6 fixed? I mean, to have six drawings on the first 7 drawing and never hardly have another drawing? 8 So -- but I work at the Dallas Farmers 9 Market a lot and whenever the lottery is at 25 or 30, 10 40, 50 million dollars, the business is bad because 11 people will spend -- they will spend 25 dollars on the 12 lottery before they will buy 5 dollars' worth of food 13 for their kids and that's how the lottery affects the 14 poor people. Thank you very much. 15 MS. SMITH: Ms. Nettles, did you have 16 something you wanted to say? 17 MR. ADAMS: Just one question. Pick 3, 18 the lottery, Pick 5, and Texas Million, which of these 19 is the least profitable, least successful in terms of 20 sales and income? 21 MS. UDALL: Well, as far as sales, it's 22 Texas Million. As far as profitability, as far as each 23 on-line game pays -- gives the State about 37, 38 cents 24 profit. So anytime you buy a lottery ticket, the State 25 gets about 38 cents for on-line tickets. The Texas COURT REPORTERS ASSOCIATED 214/528-0808 57 1 Million is twice that. It's 64 cents because those are 2 2-dollar tickets. But as far as our sales go on the 3 on-line games, Texas Million would be about one and a 4 half million a week as far as actual sales. 5 MS. MIERS: So I think the question is if 6 you were judging which of those games sells the most so 7 that the most revenue is contributed to the state, 8 which is the least successful in terms of dedicated 9 funds to the state? 10 MS. UDALL: Well, if you put the sales in 11 the quotient, it would be Texas Million. Lotto is our 12 best game followed by Cash 5, Pick 3, and then Texas 13 Million. 14 MR. ADAMS: So if that's the case, would 15 there be any consideration for simply doing away with 16 it? 17 MS. UDALL: We're currently looking at 18 all our product mix. We want to make sure that we give 19 our players what they're asking for. Texas Million was 20 introduced in '98 because players wanted a 21 million-dollar top prize game, in other words, our top. 22 And that was our goal was to establish for our players 23 who wanted a million-dollar prize. 24 We had heard up to that point in time 25 that they loved playing Lotto Texas but they felt that COURT REPORTERS ASSOCIATED 214/528-0808 58 1 it was unfortunate they couldn't play for another 2 jackpot. They could have twenty 1 million-dollar 3 winners and they wanted to have, you know, a 4 million-dollar top prize. So that was our task. We 5 tried to find a game that was different from Pick 3, 6 Cash 5, and the lotto and a good play style that would 7 increase our player rate and would be attractive to 8 players, and Texas Million is what we came up with. 9 We did focus groups and it tested very, 10 very well, but in order for us to have a million-dollar 11 winner, we need to have sales of about 80 million 12 dollars a week. And that's why we've had your point, 13 sir, so many winners for the very first drawing because 14 we did obtain that. We had over 80 million dollars in 15 that first drawing, and as a result, we had a lot of 16 million-dollar winners. However, since that point, our 17 sales right now are only half (inaudible), so it's 18 almost impossible to have enough sales to get that 19 million-dollar winner. 20 We still have a lot of 10-dollar winners 21 and 300-dollar winners and 10,000-dollar winners and 22 even some 25,000-dollar winners, so we give a lot of 23 lower tier prizes, but we don't have the sales that we 24 need to get that million-dollar winner as often as we 25 would like. So there's only 2.5 (inaudible) because we COURT REPORTERS ASSOCIATED 214/528-0808 59 1 don't have million-dollar winners, but we are looking 2 at other products but we want to find a product that 3 will give the players what they want and that's what 4 we're looking at right now. 5 MR. ADAMS: Okay. Thank you. 6 MS. UDALL: Thank you for your question. 7 MS. SMITH: For the record, sir, you were 8 Victor Adams? 9 MR. ADAMS: Yes. 10 MR. MACHALA: Excuse me. Okay. 11 MS. NETTLES: Thank you for seeing me 12 again. After hearing what everybody has had to say, I 13 felt compelled to come up and speak again. The people 14 in this room are your players. You-all are the Texas 15 lottery, so what some of these people have to say, 16 y'all don't have a defense. So believe it or not, I 17 want to come to your defense so people can maybe 18 understand something that I know as a player. I've 19 been to the Texas lottery. I was there -- been there 20 twice in the last month. I'm not a mother. 21 I have been to the drawings. I know 22 without a doubt there is no cheating. I have seen 23 their strict security. I've observed their pretest 24 drawings and after the pretest drawings. I probably 25 know more about every number in the lotto than anybody COURT REPORTERS ASSOCIATED 214/528-0808 60 1 except for this gentleman back here and he says he 2 knows an awful lot about it. And I just want the 3 people to know that how you do your procedure about 4 drawing that when they start, these balls are in filing 5 cabinets that are locked away. The people -- it takes 6 three people to go into this room to get those ball 7 sets and the envelopes to draw. 8 You draw an envelope for each ball set 9 that they're going to use. You draw an envelope for 10 each machine that's going to be used, and then they 11 pull those machines out. They're hooked up and the 12 drawings are conducted. It takes three people to do it 13 all. It is -- it's up and up as I have ever seen and I 14 have been there and watched it. And I was there last 15 week and saw it, and I have no doubt whatsoever as to 16 the integrity and the honesty that the Texas lottery 17 people sincerely tries to put forth to conduct honest, 18 forthright, fair drawings. 19 I cannot see how it's fixed in any way, 20 shape, or form, and I'm on top of them more than any of 21 you ever thought about being, and I'm not their 22 favorite person. So we can just let that get on the 23 record, but I wanted y'all to know that. 24 Then the other thing I think the people 25 of Texas ought to know, the people of Dallas ought to COURT REPORTERS ASSOCIATED 214/528-0808 61 1 know, is that the three commissioners that oversee or 2 however -- I don't exactly know how it's structured, 3 but what I do know is that I have now attended their 4 meetings and I have observed in the past two months how 5 the system works, and we have without a doubt probably 6 one of the finest methods of running this organization 7 that you could find. 8 These commissioners sincerely ask 9 questions. They go by what they're told. If they're 10 told something, they weigh it. They think about it. 11 They ask questions. They probe. They do everything in 12 their power to represent the people in a very good, 13 honest way. And I think y'all need to know that 14 because I've been there and I was there last week and I 15 was there the month before, and again I'm not their 16 favorite person because I have -- I'm very vocal. 17 Then the other thing I'm going to do for 18 Pam up here or for a lot of people that don't really 19 understand this; a lot of the ideas have come forth 20 about having multiple drawings. Okay. The people 21 don't understand that -- and Pam, you may have to help 22 me with this one -- that what the lottery collects in 23 sales that first of all, it takes 50 percent that just 24 automatically goes to the state. There's 50 percent 25 left. Of that -- we can just pretend that's 100 COURT REPORTERS ASSOCIATED 214/528-0808 62 1 percent for us. I believe it's 64 percent is set aside 2 for the big one winner, okay. Then what percentage for 3 the five of six? 4 MS. UDALL: It's five percent. 5 MS. NETTLES: Five percent. Then five 6 percent of that is for the five of six, and a 7 percentage is for the four of six and a percentage for 8 the three of six. The reason in having multiple draws 9 for the 100 dollar -- 100 or 50 million-dollar jackpot 10 is because you have to remember that they're going to 11 have all those three of six, four of six, five of six 12 winners and it's physically not possible to take that 13 money and divide it up amongst all those winners. So 14 their entire structure just won't work for a lotto. 15 So I wanted to tell you those were the 16 issues, and I just thought of one more that was brought 17 up by this gentleman over here and that's on the Texas 18 Million. The first drawing, yeah, there was six 19 winners but the numbers were all under 50 on that 20 drawing and those were birthday numbers and that's why 21 they had so many winners. I think y'all are doing a 22 terrific job. I know I complain a lot and I'm sorry. 23 But I still have a job to do and I still have a lot of 24 players that call me and voice their opinions, and I 25 thank you again for having this meeting and I wish you COURT REPORTERS ASSOCIATED 214/528-0808 63 1 tremendous success in Houston. 2 (Applause.) 3 (Simultaneous comments.) 4 MS. MIERS: I wanted to ask a question of 5 the group, if I could, sir. And I'm assuming that most 6 of the individuals in the audience if not all are 7 players, is that correct, except for those who are 8 employees who according to the law can't play. Are the 9 people here players? 10 UNIDENTIFIED PERSONS: Yes. 11 MS. MIERS: Okay. And -- 12 UNIDENTIFIED PERSON: I play to the tune 13 of about 1500 dollars a year and that's why I'm 14 concerned about South Texas winning as much money as 15 (inaudible.) 16 MS. MIERS: They say that everything's 17 going to Dallas and Houston. 18 UNIDENTIFIED PERSON: If you look at your 19 figures and it will show that South Texas has the 20 majority of the winners. 21 MS. MIERS: Really people are playing 22 less than they were. Obviously -- is anyone playing 23 about the same? 24 (Audience responds.) 25 MS. MIERS: And how about playing even COURT REPORTERS ASSOCIATED 214/528-0808 64 1 more than you used to? 2 UNIDENTIFIED PERSON: More Pick 3. 3 (Simultaneous comments.) 4 MS. MIERS: All right. And I take it 5 some of the reasons that we've heard tonight for people 6 not playing as often was the experiences people were 7 having that they were winning they perceived less 8 often. Is that what you would judge to be the most 9 frequent thing that you hear, how often people win? 10 UNIDENTIFIED PERSON: How much. 11 MS. MIERS: How much. All right. How 12 much and how often? 13 (Simultaneous comments.) 14 UNIDENTIFIED PERSON: If they win a 15 dollar, they just go, That's nothing, but it is 16 something. But it's not the amount of the tickets. 17 They might as well -- but I think at every store it's 18 different. Just like in my store, the Texas Million is 19 good. People like it. It's just particularly -- you 20 know, just -- everybody doesn't like every game but my 21 customers, most think it's how much; it's not that they 22 don't win on 20 tickets (inaudible) prizes are low. 23 And like I said, they did dwindle down. The tickets 24 dwindled down, but I noticed this week they're picking 25 up again. Last week (inaudible). COURT REPORTERS ASSOCIATED 214/528-0808 65 1 MS. MIERS: How many think that we could 2 pick up the sales if people better understood where the 3 money goes? 4 (Audience responds.) 5 MS. MIERS: Okay. You-all have raised 6 some wonderful -- yes, sir. 7 UNIDENTIFIED PERSON: I don't remember -- 8 MS. MIERS: If you're going to speak, 9 please -- 10 UNIDENTIFIED PERSON: -- when the Texas 11 lottery started, but just remembering back, I think 12 when Governor Richards, Ann Richards was in during that 13 time, people were seeing some from the scratch offs, 14 the drawings on the Pick 3s and everything. And then 15 all of a sudden, after that is the problem. When you 16 changed some hands, then it looked like that's when 17 everybody turned their face the other way and it looked 18 like problems started from there. 19 There's no winning and people I talk to 20 every day that had been winning, you know, on scratch 21 offs and on the Pick 3, and it's been six months to a 22 year, and some of the same people I see haven't won a 23 thing, and it's just several things. It sort of dried 24 up like a spring on the stuff, so I think that once you 25 can get back to from the beginning what you did at COURT REPORTERS ASSOCIATED 214/528-0808 66 1 first, then that will bring the whole thing back up. 2 MS. MIERS: Well, we have been -- and 3 those are great comments, but I do think we have to be 4 realistic. We'll never be a start-up lotto again, so 5 the extent to which we had a lot of excitement right 6 when the games were brand new, we're not going to be 7 able to have that again because we are a maturing 8 lottery. One thing that I think the Lottery Commission 9 is very interested in emphasizing is that the games are 10 for entertainment and we hope that people do enjoy the 11 games and do play them for enjoyment. 12 And so what the commission can do to keep 13 the newness and the excitement and enjoyment, we will 14 continue to do. We do think that the lottery needs to 15 be kept in perspective and used as a form of 16 entertainment particularly. I know we need to move now 17 to answering or providing some information in response 18 to some of your questions, and then I understand that 19 there is an event tonight typical of the lottery. 20 We're going to have our own little minilottery here 21 tonight, so -- 22 UNIDENTIFIED PERSON: What are you giving 23 away? 24 MS. CLOUD: We have door prizes that we 25 plan to give away. You want to do it now before we COURT REPORTERS ASSOCIATED 214/528-0808 67 1 respond to your questions? I don't want you to leave 2 after you get the door prize. I want you to -- I don't 3 want you to leave this room until we've answered some 4 of these questions, okay? 5 MR. JOHNSON: Hey... 6 MS. CLOUD: Yes, sir? 7 MR. JOHNSON: I have one quick question. 8 I like to collect things. 9 MS. CLOUD: Uh-huh. 10 MR. JOHNSON: One thing I've noticed 11 since I have two of these. I used to get scratch off 12 coins and the envelopes. Where are those things going? 13 I've got three envelopes and I can't find the coins, 14 but you know, I mean, little trinkets things like that? 15 MS. SMITH: The lottery retailers are 16 receiving a shipment of coins this week. We're having 17 a scratch-off promotion, okay? They're on their way. 18 MS. CLOUD: Okay. Laura and Keith -- I'm 19 sorry. Okay. 20 (Simultaneous comments.) 21 UNIDENTIFIED MAN: There's nothing more 22 boring than watching the ball come out of the thing and 23 the guy just standing there. 24 MS. CLOUD: What would you like for him 25 to do? COURT REPORTERS ASSOCIATED 214/528-0808 68 1 (Simultaneous comments.) 2 MS. MIERS: Well, at least it's short. 3 MS. CLOUD: How many of you are able to 4 see the drawings? We have some problems with 5 television stations not airing the complete drawing and 6 that is something we're trying to resolve. Do all of 7 you see the drawings? Are you just getting numbers? 8 Ma'am? 9 UNIDENTIFIED PERSON: Except on Friday 10 nights. 11 MS. CLOUD: Except on Friday nights? 12 MS. MIERS: I think we have pretty good 13 coverage here in Dallas. 14 MS. CLOUD: Okay. Good. 15 MS. MIERS: Okay. We're going to answer 16 some of the questions, but we're going to do... 17 MS. CLOUD: We're going to do the -- 18 provided you won't leave, we're going to do half of the 19 door prizes and keep half of them for last, okay. 20 MS. MIERS: Who's going to do the 21 drawing? 22 MS. CLOUD: Keith and Laura are going to 23 take care of the drawing tonight. 24 MS. PIERCE: Did everybody get one of 25 these and fill it in when you first came in the door? COURT REPORTERS ASSOCIATED 214/528-0808 69 1 This is your chance to win. Okay. The first one is 2 Dawn Nettles. 3 (Simultaneous comments.) 4 MR. ELKINS: Kindness pays off. 5 MS. CLOUD: This is an honest drawing. 6 You guys are seeing this. 7 MR. ELKINS: The security director's 8 watching over this. 9 MS. CLOUD: Yeah. 10 MS. PIERCE: Kim Koukos? Kim Koukos? 11 (Simultaneous comments.) 12 MS. PIERCE: She left? Oh, that's too 13 bad. All right. We'll do another one. Del Brookins? 14 All right. Ambrose Moreno. 15 MS. CLOUD: Okay. We're going to save 16 the next three for the end of this meeting, okay, so 17 you'll stay. The first thing I want to -- the first 18 person that I want to call up to respond to some of 19 your issues about our drawings -- that is very -- I'm 20 very concerned about your opinion about how we conduct 21 our drawings, so I want our security director to come 22 up here by me and I want him to walk you through the 23 whole -- the process. 24 Mike, we don't want to take 30 minutes 25 doing this, but we just want to let them know the steps COURT REPORTERS ASSOCIATED 214/528-0808 70 1 that we take to make sure this drawing is of the 2 highest security integrity it could possibly be. 3 (Inaudible comments.) 4 MR. PITCOCK: It's not 180; it's 368 5 steps, so it's a process that is long. We do this six 6 nights a week. We do it on holidays and the people 7 that are there are probably what takes integrity the 8 most, and I'm going to speak to that in just a little 9 bit. The people in the security division of the Texas 10 Lottery Commission are certified police officers, and 11 we carry a commission with the Texas Commission on Law 12 Enforcement Standards and Education. 13 We're sworn police officers. We're there 14 to install, to oversee, and make sure the integrity of 15 that drawing is protected. We're also present with 16 PricewaterhouseCooper's auditor, and our drawing 17 results are sent to an independent statistician, 18 Dr. Randy Eubanks, after each draw to verify that we've 19 followed and done this correctly. 20 Now, the draw break, we'll go real quick 21 because you've heard this already. At 9:45 -- if 22 you've watched the film, the machines are all stopped 23 and we make sure that all 17,000 retailers have stopped 24 placing bets. Until that happens and the tapes are 25 actually physically unloaded from the computers, then COURT REPORTERS ASSOCIATED 214/528-0808 71 1 we don't draw. We have a security specialist at the 2 GTECH facility, not a GTECH person, that we hook up 3 with live on-line so that we're talking to each other 4 as this all takes place. 5 Again, I think that's important also is 6 that the facility where we do the draw is downtown 7 Austin which is close to our headquarters and GTECH is 8 way out north, so we have people that are on-line live 9 talking back and forth to each other making sure that 10 the tapes have been unloaded and all bets placed. The 11 balls, if you watch tonight, don't drop until we go 12 live on the air. The machines drop the ball which 13 are -- you know, it's in the Lotto or Cash 5, are 14 rubber and solid balls that, you know, we drop down 15 into the machines and the mix starts. 16 It's all seen live on TV and we invite 17 you to come in person because it's open to the public, 18 and we're there to draw. Weekly we have five, six, 19 ten, fifteen people at a time who watch our draw and we 20 invite you to come and watch the draws. And that's 21 another protection for us is we never lock the doors. 22 We'll help you get to a place where you can actually 23 see the balls and watch the draw. You'll hear us do 24 the break with GTECH. 25 On the Friday nights, which is our COURT REPORTERS ASSOCIATED 214/528-0808 72 1 toughest night, we do three draws. Friday nights we do 2 Texas Million, Cash 5, and Lone Star, and I feel like 3 that that night and when you go through the steps and 4 it's a difficult process on that night for our people 5 because if you watch on TV, they've got to go from one 6 set to the next set to the next set in a minute and a 7 half which is to say the least a feat of a marathon to 8 us because when we get there, we have to do it with a 9 professional manner. 10 And since we've done the draw, and I've 11 said this before to our executives that we haven't had 12 an occasion yet where we've had to disqualify our solid 13 draw since the lotto started. All the draws have taken 14 place and all the money's been given away. I have a 15 procedure book with me. I would be glad to speak with 16 people afterwards if you wish to see where we do the 17 draw breaks, where we stop. We record the times and 18 they're certified by an independent auditor, 19 PricewaterhouseCoopers, and that information is kept on 20 record. 21 Ms. Nettles can probably attest we've 22 sent out information upon request by (inaudible) for 23 your review just to see this information. And the 24 Pricewaterhouse people certify our draws. They don't 25 certify it if the draw is not an official draw, and you COURT REPORTERS ASSOCIATED 214/528-0808 73 1 know, they're sitting there protecting your rights as 2 citizens but also watching us to make sure that we 3 cover those steps and make sure we do the things we're 4 supposed to do. 5 And I think I'll just answer questions. 6 If you have a question about the draw process, and 7 again, the best way to get an answer is for you to come 8 to watch our draws and we invite you. Six nights a 9 week except for Sundays we do the draws. We start 10 about 7:00, 7:30, and we'll finish probably about 11:00 11 to 11:30. And it's a process if you haven't seen, you 12 can't appreciate. Dawn can appreciate it because she's 13 been there and watched it. 14 It's meticulous. It's like a surgery. 15 We have people wearing rubber gloves when we handle the 16 balls or just touch them. We try not to influence the 17 balls any way whatsoever. Machines are wiped and wiped 18 clean several times. You'll see the security 19 specialist making sure they're set up and leveled 20 correctly and that they're in proper operating 21 condition. If we find a flaw in that, we pull that 22 machine down and we'll pull another machine out, but 23 we're going to make sure that that's going to be there 24 on each and every draw we do. I'll answer questions if 25 anyone has any. COURT REPORTERS ASSOCIATED 214/528-0808 74 1 MS. CLOUD: Okay. Thank you, Mike. 2 Pam is going to address the on-line games 3 and questions and concerns that you have. 4 MS. UDALL: Probably the most common 5 question that I heard tonight and probably the most 6 frequent that I've heard over the last five years that 7 I've been with the lottery is: Why do you only pay 3 8 dollars on the three of six? So I kind of anticipated 9 that might come up and I think it's almost easier to 10 answer with a visual, so I did a little presentation 11 real quick that I think you can really see the prize 12 payout. But the reason that we -- 13 MR. WILCOX: (Inaudible.) 14 MS. UDALL: Well, we might have a visual 15 presentation here. If not I'll just walk you through 16 it again, but because Lotto Texas is designed to be the 17 main jackpot game for the state. We all know that 18 everybody wants to play the game in order to win the 19 jackpot, so we do have a prize pool set aside. When 20 you spend a dollar for Lotto Texas, the total dollar 21 does not go to the prize pool. It's actually 50 cents 22 of that dollar goes to prizes. Find the next slide. 23 Here's a dollar. So we're going to start with one 24 dollar. 50 cents of your dollar goes to the prize 25 pool. 5 cents goes to the retailers and 38 cents on COURT REPORTERS ASSOCIATED 214/528-0808 75 1 all the prize goes to the state and the 7 cents is what 2 we operate on. 3 That 50 cents, that goes to the Lotto 4 Texas prize pool. Of that 50 cents, how that's broke 5 down, it's 33 cents or 65 percent of that 50 cents -- 6 33 cents goes to the jackpot prize pool. Of the five 7 of six, 5.5 cents -- excuse me, 2.5 cents goes to the 8 five of six pool; and 9 cents goes to the four of six 9 pool; and the 5.5 is the 3 dollar prizes. So it's real 10 important for us to get as much money of that 50 cents 11 to the jackpot prize. If we don't have a lot of money, 12 that jackpot prize money goes for that jackpot. 13 And so that's how the prize pool is 14 divided up, and you see where the 3 dollar -- you only 15 have 50 cents; it doesn't go very far. Go to the next 16 slide please. Each week we have over 150,000 people 17 who match three of six numbers. In order to pay them, 18 it costs about half a million dollars a week to pay 19 those winners. If we were to take and increase that 20 3-dollar prize to a 5-dollar prize, that would -- we 21 would need to have at least 750,000 dollars, almost a 22 quarter of a million dollars, and so we have to come up 23 with an additional 300,000 dollars each week to pay the 24 three of six winners. 25 And to do that, that would come from the COURT REPORTERS ASSOCIATED 214/528-0808 76 1 jackpot prize pool because as you know, the four of six 2 prize pool is somewhat small and so is the five of six. 3 We would need to take from the jackpot prize pool. We 4 have talked about that over the years. We have looked 5 at that and thought, gosh, do we want to take 2 dollars 6 of that prize pool or not; however, we really watch 7 consumer behavior and we know that when the jackpot 8 rolls, we spend more money and you get more prizes out 9 of the game and all that. 10 So we really never wanted to jeopardize 11 that jackpot prize pool and take money from that. So 12 that's why we have left the 3-dollar prize alone. Our 13 answer instead was to introduce games like Cash 5 where 14 you got 25 dollars on the average if you got three of 15 five numbers. Texas Million, you get 10 dollars if you 16 match two numbers, so those are kind of how we 17 addressed those concerns of yours. Since we couldn't 18 increase the 3-dollar prize without jeopardizing the 19 jackpot prize pool, we've introduced other games 20 instead to give you higher prizes. 21 We know that you want larger prizes in 22 the lower tiers. When we introduced a new (inaudible) 23 that was part of the plan to try to increase that 24 3-dollar prize to 5. I know you'd probably like to win 25 more than 5, probably 10 or 15, and we're kind of COURT REPORTERS ASSOCIATED 214/528-0808 77 1 thinking about that. And if you see more games, that's 2 what we want to address that also. We recognize that 3 concern. We know that's not the best prize and perhaps 4 we can (inaudible) on a quarterly basis but that's the 5 reason. I mean, I think you could increase that prize 6 to 5 dollars, but you'd have to jeopardize the jackpot 7 prize pool, and it would only be a 2-dollar increase, 8 but that's what we are always looking at. So I hope 9 that kind of gives you a better visual as far as what 10 happens there. 11 The other question that I heard come up 12 tonight was about why we advertise the 4 million you 13 know. And the 4 million-dollar jackpot is probably in 14 my mind the most important jackpot prize we have 15 because the more sales we get at 4 million the more 16 aggressively we can roll the jackpot. So if it doesn't 17 get past 4, perhaps we roll from 4 to 10. But if we 18 get everybody playing at 4 million, our sales will be 19 bigger and we can roll so much quicker and give you 20 bigger jackpots, and so we really would encourage 21 everybody to play at 4 because the more that play at 4, 22 the more that jackpot rolls, the more money we have in 23 our prize pool. 24 It grows faster and we have more winners 25 and bigger jackpots and it makes the game more exciting COURT REPORTERS ASSOCIATED 214/528-0808 78 1 for all of us. And one reason we don't bring former 2 winners on our advertising to show what you can buy 3 with that is because we've kind of got some mandates 4 that are in place to tell us as far as how we 5 advertise. One thing we cannot do is show change of 6 lifestyle in our advertising or show what 4 million 7 dollars would do to you and stretch the pocketbook so 8 we have to do kind of campaigns that really don't 9 demonstrate that. So that's why you can see -- because 10 4 million dollars is a lot of money. We actually 11 cannot show you on TV a new house or a new car or any 12 kind of change in your lifestyle; otherwise, we would 13 love to do that. It would be very effective. 14 UNIDENTIFIED PERSON: Why is that again? 15 Why can't you do that? 16 MS. MIERS: Well, I'd just like to -- the 17 public policy of the state is to not allow that so that 18 we're not representing to people that if they buy a 19 ticket that it will change their lifestyle. It's 20 public policy. 21 MS. UDALL: And one other question I 22 heard in the audience was why can't we have -- when the 23 jackpot hits 10 million, why can't we have additional 24 drawings? And the reason we can't do that is to kind 25 of demonstrate in the prize pool. There's all that COURT REPORTERS ASSOCIATED 214/528-0808 79 1 money that goes to the prize pool that's set aside for 2 that one drawing, and once we have that drawing that 3 night, that Wednesday or Saturday, once we have that 4 drawing, that prize money has already been allocated to 5 that jackpot prize winner and to the lower-tiered prize 6 winners, so there's no money left for any additional 7 drawings for that evening. When we advertise 20 8 million dollars, we have just money enough to pay those 9 prizes and there's no additional money to pay for 10 prizes beyond that. So we have one drawing, and that 11 money goes to that one drawing only. 12 MS. MIERS: Well, we have the experts 13 here tonight and a lot of the questions in my mind were 14 with three -- if you get three of six, you're a winner. 15 There are 150 of those and so those are 3-dollar 16 prizes. I wonder what the reaction the people -- of 17 people would be if we eliminated a win at all at three 18 of six and instead increased four of six to win more? 19 Is what you're saying that winning three is so -- 20 UNIDENTIFIED PERSON: Minuscule. 21 MS. MIERS: -- minuscule that you'd just 22 as soon not have the three of six? Dawn? 23 MS. NETTLES: Well, if nobody else is 24 going to answer that one, I will. We need winners. 25 That's the reason you've lost players is because COURT REPORTERS ASSOCIATED 214/528-0808 80 1 there's not very many winners. It's very difficult to 2 win four of six. You need that three of six because 3 you need winners. That's how come your sales are down. 4 People have quit playing is because they can't win and 5 then when they do get that 3 dollars, they don't feel 6 like it's worth it -- it's worth something. It's worth 7 something, but it's not what will keep them playing it. 8 They lose at Cash 5 to get the 25-dollar payout for 9 three numbers out of that (inaudible). 10 MS. MIERS: Okay. I heard actually that 11 question answered both ways, so I'm going to take an 12 informal poll here. How many would just as soon see us 13 reduce the three or eliminate the three of six winners? 14 UNIDENTIFIED PERSON: And increase the 15 four? 16 MS. MIERS: And increase the four as a 17 result. 18 UNIDENTIFIED PERSON: By how much? 19 MS. MIERS: Well, we'd have to do it 20 mathematically. I'm not sure. How many think that 21 having 150,000 three of six winners is important and 22 want to keep that? 23 MR. JOHNSON: I have a question on that. 24 Isn't it true that a lot of people don't even turn in 25 their 3-dollar winnings? Doesn't six months expire and COURT REPORTERS ASSOCIATED 214/528-0808 81 1 a lot of people don't -- I read that back in '95 or 6 2 that a lot of money does not get turned in on the 3 3-dollar winners, right? 4 MS. UDALL: That's true. We do have a 5 lot of people that do not claim their prizes. This is 6 at all prize levels. We even had a jackpot prize go 7 unclaimed, so that happens. 8 MS. CLOUD: That's just the way the game 9 works. 10 MR. JOHNSON: Right. 11 MS. MIERS: Okay. Linda? 12 MS. CLOUD: Okay. Thanks, Pam. 13 (Inaudible comments.) 14 MS. CLOUD: Pam's going to have to leave. 15 She's got a plane to catch here, and Toni's going to 16 talk quickly about the instant ticket questions that 17 were brought up. 18 MS. SMITH: The first thing I'd like to 19 address is how hard it is to scratch some tickets, some 20 of the older games, particularly the Fiestas that were 21 brought to our attention. At the time these tickets 22 were manufactured -- printed, the manufacturer who 23 printed those in an effort to be environmentally 24 conscious was trying a new system with a water-based 25 ink. Most of the latex which is the scratch off COURT REPORTERS ASSOCIATED 214/528-0808 82 1 material that lays on the part of the ticket that you 2 rub off is usually made with a solvent-based ink. 3 It would be like oil paint versus a water 4 paint. So in order to be environmentally conscious, 5 they started out trying to use a water-based ink and 6 did find that it was a harder scratch. And we worked 7 with them and they worked with their chemist and they 8 did show some improvement there, but the tickets that 9 were introduced about that time frame, that's why they 10 were harder to scratch. On the issue about the bar 11 codes, once in a while we do hear that, and we want to 12 hear these things from you. And that's why you tell 13 your retailers so that we can investigate them. 14 Sometimes the bar code density is not 15 dark enough. It could be a lighter stamp. We need to 16 hear that from you so we can go over and talk to the 17 ticket manufacturers and correct those issues. It 18 could be a hardware issue. I think the gentleman who 19 spoke earlier said that GTECH came and worked on the 20 terminal and it was fixed. So it could be several 21 things, but you need to let your -- if you're a player, 22 let the retailer know if there's a problem that way. 23 Or if you're a retailer, you know, call the hot lines 24 and let them know and let us know so we can check it 25 out for you and improve those things. COURT REPORTERS ASSOCIATED 214/528-0808 83 1 And there was one other -- a gentleman 2 talked about second-chance drawings at the retail 3 level. We do offer all of our retailers various 4 packages of in-store promotions, one of which includes 5 a second-chance drawing. We have the same box that 6 Laura and Keith have used for the drawing here that we 7 offer the retailer to do or we supply the goody bags 8 and those type of things. So if your retailer is not 9 doing that, you may want to check with them and have 10 them talk with their sales rep about doing those 11 in-store promotions in your local retailer. 12 MS. CLOUD: Okay. Are we ready to have 13 the final drawings? 14 MR. MACHALA: Wait. Excuse me. What I 15 have never learned; what is y'alls cost of a scratch 16 off ticket from the small one to the big one? I mean, 17 a penny a piece? 18 UNIDENTIFIED PERSON: Yeah. 19 MR. MACHALA: How much does it cost 20 y'all? 21 MS. SMITH: We're paying on a per 22 thousand basis. It depends on the size of the ticket 23 and then the area of the -- the play area and the prize 24 level -- 25 MS. CLOUD: We can -- COURT REPORTERS ASSOCIATED 214/528-0808 84 1 MS. SMITH: We can find out for you. 2 We've got your name and address and we can send you 3 that information. 4 MR. MACHALA: Arthur Machala. 5 MS. SMITH: Okay. Thank you. 6 MS. CLOUD: Okay. Let's have our 7 drawing. Anybody else have any questions? We're going 8 to be here after -- Toni and I will be here after this 9 meeting for anybody that wants to stay and continue 10 asking questions or have other things you want to 11 discuss and we'll be glad to talk to you. We're going 12 to have the drawings. Okay. Go ahead. 13 MS. NETTLES: Can I put my name back in 14 there? 15 MS. SMITH: Ted Luft. Ted, are you still 16 here? He spoke earlier. Kathy Scott. Mark Jacoby. 17 And A. E. Wallace. 18 MR. WALLACE: I'll be darned. 19 (Simultaneous comments.) 20 MS. MIERS: I do want to thank everyone 21 once again for coming. This has been helpful. We 22 appreciate your interest. And if you have continuing 23 questions ever, you know how to find us in Austin. I'm 24 here in Dallas of course. Tom Clowe is in Waco, so if 25 you need to find us, you can, and we look forward to COURT REPORTERS ASSOCIATED 214/528-0808 85 1 seeing you again sometime. Thank you very much. 2 I will declare the Lottery Commission 3 meeting this evening adjourned. 4 (End of meeting.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COURT REPORTERS ASSOCIATED 214/528-0808 86 1 C E R T I F I C A T E 2 This is to certify that I, AMELIA BLANTON 3 AUDISH, Certified Shorthand Reporter and Registered 4 Professional Reporter in and for the State of Texas, 5 reported in shorthand the proceedings conducted at the 6 time and place set forth in the caption hereof, and 7 that the above and foregoing 85 pages contain a full, 8 true and correct transcript of said proceedings. 9 CERTIFIED TO on this the day of 10 , 1999. 11 12 13 AMELIA BLANTON AUDISH, 14 Certified Shorthand Reporter in and for the State of Texas 15 Certification No. 7048 Expires December 31, 1999 16 17 Court Reporters Associated Post Office Box 191329 18 3616 Maple Avenue Dallas, Texas 75219 19 (214) 528-0808 20 21 22 23 24 25 COURT REPORTERS ASSOCIATED 214/528-0808