Windfall Too Slow? Companies Offer To Buy Out Lottery Winners For Lump Sum Now

The pushy mimes in the state lottery’s television commercials aren’t the only “trouble with money.”

Some past winners of the Washington State Lottery are getting junk mail and telephone solicitations from companies that want a piece of their good fortune.

“We’ve gotten three (offers) in the mail in the last three weeks,” said the spouse of one Spokane winner.

At least six out-of-state insurance and investment companies started contacting winners in recent weeks, anticipating a bill Gov. Mike Lowry signed Thursday.

The bill, which was pushed by the firms and met little opposition in the Legislature, would make it legal for winners to cash out their winnings if the IRS sets aside some tax questions.

The firms offer winners a wad of cash - typically about 40 percent of the actual jackpot. In exchange, winners sign over future prize payments, which the state dribbles out over 20 years.

Such deals are attractive to people who have unmanageable debt or those starting businesses. Elderly winners sometimes take the offers because they’d rather spend the prize in their lifetimes.

“It’s just offering players another option,” said David Gale, executive director of the North American Association of State and Provincial Lotteries, a non-profit organization whose members are lottery officials.

Bach Investment Co. of Phoenix has signed contracts with 12 Washington winners, said owner Don Bach. Those agreements will be finalized as soon as the transactions are legal, he said.

Singer Asset Finance Co. hasn’t started contacting Washington winners, said company attorney Robin Shapiro. But the firm sent a representative from Florida to watch Lowry sign the bill.

“For us, this is like the Magna Carta,” Shapiro said. “I don’t know if we’ll open an office in Washington state or try to serve that market from California,” where Singer has a branch.

Cambridge Funding Group of Eagan, Minn., “hopes to be a service to people” in Washington, said senior partner Katherine Bentle.

Spokane’s Metropolitan Mortgage & Securities Co. cashes out lottery winners in states where it’s already legal. The company probably will extend the practice to Washington, said president Paul Sandifur Jr.

Many winners are skeptical of the deals.

“Why would I want to take a 60 percent loss?” asked one Spokane man.

Like other winners, he spoke on the condition of anonymity. Three of four winners who agreed to interviews said they’ve been contacted by firms offering a buyout; none accepted offers.

New York, New Jersey, Montana and several other states already allow lottery players to sell their winnings, said Bentle. It’s illegal in Idaho, Oregon, Nevada and several others.

Players in some states must choose when they buy their tickets whether they would take annual payments or a single check worth about half the jackpot. In Arizona, more than half the players choose the cash, said a lottery spokeswoman.

Washington’s law hinges on an Internal Revenue Service decision on whether allowing such transactions means all winners must pay taxes on their entire jackpot when they get their first check.

The bill will take effect only if the IRS ruling, which several states requested last year, doesn’t require such payments. Otherwise, most winners who stick with the annual payments could not afford the taxes.

The IRS ruling was delayed by government shutdowns this year and last.

Washington’s bill would require winners to appear before a judge before cashing out their winnings to prove they’ve thought over their decision and received tax and investment advice.

Sen. Kevin Quigley, D-Lake Stevens, was the only legislator to vote against the bill. He was unavailable for comment Thursday.

State law prohibits the lottery from releasing the telephone numbers or addresses of winners to anyone who plans to use the information for commercial gain, said Rich Paulson, spokesman for the Washington Lottery Commission.

In one case, a company representative tried to get around that law by passing himself off as a graduate student working on a thesis about winners. Paulson learned it was a ruse when he returned the man’s call and the person who answered the telephone gave the company’s name.

Dean Schiernbeck of Mutual Funding Group in San Diego said the business of buying lottery annuities is “a fairly new industry.”

Schiernbeck’s company got involved in 1992. Most other firms started since then.

As states gain a large pool of winners and jackpots grow, firms lobby for less restrictive laws. The two primary proponents for Washington’s law were lobbyists hired by investment firms.

States like Idaho, where the lottery started in 1989 and pots are relatively small, receive little attention.

“It’s not worth our time,” said Schiernbeck.

, DataTimes