In order to lasso Lotto, it takes a $7 million rope Then hope no one ties you for payoff

February 26, 1992|By Frank D. Roylance | Frank D. Roylance,Staff Writer

If you want to try to turn the Maryland Lotto drawing into a sure-fire bet, as Australian investors may have done in Virginia, it will cost you only $6,991,908.

And officials at the State Lottery Agency say they won't mind a bit.

"We'll take it," said Carroll Hynson Jr., an agency spokesman. "We're in business to generate revenue and ticket sales."

But you'll have to arrange to fill out nearly 1.4 million play slips, and to find retail outlets willing to run your slips through 25 ticket machines 17 hours a day for three days.

And even if it worked, you'd probably be better off putting your money into the stock market, a financial adviser says.

The prospect of more huge runs on their Lotto game prompted Virginia lawmakers on Monday to consider ways to limit such block sales, which they fear might discourage regular players from patronizing the games.

Mr. Hynson said he knew of no such plans "at this time" in Maryland. Nor has there been any hint that anyone is trying to organize such a purchase here.

An Australian syndicate told its investors last week that it had won a recent overseas lottery. Speculation immediately focused on Virginia, where huge block sales had been noted for the Feb. 15 Lotto drawing.

Virginia lottery officials said an organized group bought about 5 million of the 7,059,052 possible combinations before it ran out of time. There was one winner in that game, but no has come forward to claim the $27 million jackpot.

Maryland's Lotto game requires players to match six numbers from 1 to 49, creating 13,983,816 different possible number combinations, Mr. Hynson said. With two sets of numbers per $1 ticket, investors in a Lotto syndicate would have to raise $6,991,908.

Investors or their representatives would have to fill out 1,398,382 paper slips to be fed into the lottery computer terminal.

Theoretically the play slips could be processed in less than the three or four days available between the Saturday and Wednesday drawings.

"If a play slip is completed in advance, we can produce a transaction once every three seconds, or 20 per minute," Mr. Hynson said. That's 20 $5 play slips -- $100 -- per minute, or $6,000 an hour.

The lottery computer runs from 6 a.m. to 11 p.m. daily, or 17 hours a day, long enough to generate 102,000 tickets a day from a single ticket machine.

If the organizers could get ticket agents to agree to give them full-time use of 25 ticket machines, and all the machines operated flawlessly, they could produce all 6,991,908 tickets in less than three days.

Of course, it's quite possible that someone else could guess all six winning Lotto numbers with a simple $1 bet. In that case, the syndicate would have to split the jackpot with the other winner, 50-50.

The Maryland Lotto game has had split jackpots 118 times since the game was launched in 1983, nearly half the 244 times there has been a jackpot winner.

A syndicate would need a $6.9 million jackpot to break even, and nearly a $14 million prize to hedge its bet against the possibility of a second winner. There have been four jackpots of $14 million or more since1987, lottery officials said.

And, of course, there is always the chance there could be more than two winners sharing the pot.

If the syndicate organizers cornered all possible combinations and managed to find the winner buried among their 6.9 million tickets -- and didn't have to share it -- they would make money. But they would have to win big.

Consider the Maryland-record $21 million prize won by David K. Moreland, of Lothian, last Aug. 10.

Moreland's prize is paying him a 20-year annuity of about $1,054,000 annually before taxes.

At that rate, our hypothetical Maryland Lotto syndicate would recoup its $6.9 million investment in the seventh year.

Ignoring the effects of inflation and compounding on the winnings, by the end of the 20-year Lotto annuity the investors would have made $14.1 million in profits. That's an average of $705,000 annually, a return of roughly 10 percent per year on the original investment, before taxes.

Significantly, that 10 percent return is the historic benchmark used by investment firms as the expected return over time from a diversified portfolio of common stocks, such as the Standard and Poor's 400.

"They would get a better return just investing that money in the stock market, in any sort of balanced fund," said a spokeswoman for a Baltimore investment firm, who asked not to be identified.

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