| | | This Michigan couple spotted a lucrative lottery loophole
CBC Radio
Sometimes, the way a product is marketed gives clever customers a loophole they can take advantage of. (CBC)
Jerry and Marge Selbee lived in a small town in Michigan. They ran a convenience store for 17 years, then retired.
One day in 2003, Jerry walked into the store they used to own and noticed a marketing brochure for a new state lottery called Winfall. He read it, and in less than three minutes, he spotted a loophole. Unlike other lotteries that keep building until there was a winner, once the Winfall jackpot reached $5 million – and no one had matched all six numbers to win – a "rolldown" would happen. That meant the money rolled down and was split between winners who matched just five, four or three numbers.
Jerry quickly calculated that if he spent $1,100 on 1,100 tickets, odds are he'd have one four-number winner that would pay out $1,000, and at least 18 or 19 three-number winners that paid $900. That meant his $1,100 investment would yield a $1,900 return, for a tidy profit of $800.
64-year-old Jerry Selbee had a bachelor's degree in math, and he loved solving puzzles. Though because the loophole logic was based on rudimentary arithmetic, he feared a lot of other people would figure it out, too. But for the longest time, no one did. So Jerry decided to test his theory. When a "rolldown" was announced, he purchased $3,600 dollars in Winfall tickets. Sorting through 3,600 tickets took hours, he made a $2,700 profit. That confirmed his math.
Next, he purchased $8,000 worth of tickets and nearly doubled his money. But he still hadn't told his wife Marge.
One night, while sitting around a campfire, Jerry let Marge in on his secret. He was playing the lottery. He knew how to beat it. He had a system. He had already won over five figures. Marge didn't react. Jerry told her he wasn't doing anything illegal – he was just playing the game the way it was meant to be played. Except he had found a loophole.
Marge was all in.
As it turned out, rolldowns would happen every six weeks. He and Marge knew all the convenience store owners in the area, so they weren't bothered when the Selbee's would stand at a lottery machine for hours on end buying thousands of tickets.
The strategy became so profitable, the Selbees invited their six grown children to participate. Then Jerry created a corporation called GS Investment Strategies and sold shares for $500-a-piece to friends and neighbours. After 12 weeks of big rolldown profits, the Winfall lottery was shut down, due to declining ticket sales. But a friend alerted Jerry to another similar Winfall lottery in Massachusetts – nearly 700 miles away. So the Selbees traveled to Massachusetts every time there was a rolldown. Going as far as spending $720,000 on $2 dollar lottery tickets. Then they would rent a motel room and go through each and every one of the 360,000 tickets, looking for winning numbers.
After nine years, the Selbees had grossed over $27 million in winning tickets – for a net profit of $7.75 million before taxes. That's when a Boston newspaper started investigating locations where lottery tickets were being sold at an extraordinary volume. That triggered an investigation by the Inspector General. But, the Selbees had been playing by the rules. The lottery had worked the way it was designed to work.
The Selbees had discovered a very lucrative, legal, lottery loophole.
For more on Marketing Loopholes and other stories from Under the Influence, click or tap the play button above to hear the full episode. Find more episodes on the CBC Listen app or subscribe to the podcast. |
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