OLIN KERR February 15 1931


OLIN KERR February 15 1931



An expose of the sweepstake or pool “racket" which annually is mulcting Canadians of millions of dollars

RACE TIPS, Lotteries, Banned from Mails.”

“Issue Warrants for Trio Behind Charity Sweep."

“Lottery in Windsor Distributes $228,159."

“Nova Scotian Holds $7,500 Sweep Ticket.”

“Alleged Lottery Brings Ottawa Raid."

“Candy Store Employee Wins D. R. A. Pool.” Newspaper headlines similar to the above might be reproduced almost indefinitely, but even a large number would convey to the reader little idea of the magnitude of lottery and sweepstake operations in Canada today. After a careful investigation covering several months, I have no hesitation in stating that Canadians during the past year have “invested" millions of dollars in “pool” tickets.

By “pool" I mean lotteries and sweepstakes of all kinds for the terms are interchangeable.

Of the six headlines, which were chosen at random from a bulky pile of recent clippings, two—the second and the fourth refer to one widely-patronized sweepstake possessing a reputation such that many ticket buyers even yet mistakenly believe it to be a legitimate charitable undertaking within the law. As a matter of fact, it has during its lifetime been conducted in such a way that a prominent member of Parliament recently proposed that it be legalized in order to eliminate annoying police interference. This advocacy was based on the contention that many army and navy veterans benefitted from the sweep’s donation of thirty-five per cent of total earnings to charities in their behalf.

This particular lottery has been more openly conducted than others, and until a short time ago it experienced little or no interference from federal, provincial or municipal authorities. What of its earnings and distribution of prize money?

As nearly as can be estimated from figures available at this time, this one sweepstake (which operates only twice each year) distributed over $1,200,000 to those who purchased its tickets during 1930. In June alone, it paid two persons $149,262 each; enriched two others to the extent of $49,754 each; returned to two others $24,877 for their one-dollur investments; and paid each of twenty-eight other lucky individuals $3,553.85, while over 600 other ticket holders received little windfalls of $127.98.

These winnings were returned after thirty-five per cent of the total amount wagered had been devoted to charitable work and operating expenses deducted.

The Windsor sweepstake was conducted under the auspices of the Trades and Labor Council of that city, which body received five per cent of the amount wagered from the Chicago concern which actually operated the lottery. The sale of tickets in Ontario was prohibited by the Attorney-General’s Department of that province.

The D. R. A. sweepstake headline concerns an annual event whose awards are based upon scores made at the annual shoot of the Dominion of Canada Rifle Association members in Ottawa. Major prizes in the last sweep totalled $48,033.

The Nova Scotian who received the nice plum of $7,500 won it by happening to draw a ticket on the Athletics in a sweepstake conducted by a fraternal organization during the last world’s baseball series. A Calgary man got about $2,500 because he was fortunate enough to draw the Cardinals.

We have already accounted for a total distribution in prizes by four sweepstakes alone, of a million and a half dollars. The significance of that figure becomes more apparent when it is remembered that these four sweeps are but a few of the many on which tickets are bought by Canadians. Fourteen lotteries were recently banned

use of the mails by the federal authorities. Prominent among them are:

Army and Navy Veterans’ Association in Canada, Unit No. 3, Verdun War Veterans’ Association, Columbus Club of Hull, Old Dominion Lottery, Club Social Antituberculex de Quebec, FrenchCanadian Great War Veterans in Canada, Royal Canadian, Limited, Old Olympian, Limited, Canadian Sweepstake Association,

Canadian Musicians’ Charity Sweep, Universal Providers’ Association, Registered, Hospital Trusts, Limited.

Post-offices throughout Canada are under the following orders as regards these known lotteries:

“Registered letters are not to be accepted addressed to the above, and all correspondence addressed to or coming from these addresses observed in the mails Í3 to be returned to the senders, when known . . or sent specially by first mail to the general superintendent of postal services Money orders are not to be made

payable to these organizations.”

The list is interesting for several reasons, including the fact that the headquarters of the majority of the “organizations” in question are located in the Province

of Quebec. However, to those familiar with the extent of lottery operations in Canada it is “a laugh” by reason of its incompleteness. There are pools on baseball, soccer, hockey, hor3e races and various other similar events who3e outcome is uncertain until the game is played or the race won. Some operate on a basis whereby the value of each ticket issued depends upon the outcome of a single event, such as the running of the classic English Derby or a feature race on a Canadian track. These, obviously, can be conducted only at certain intervals. Several others operate on a weekly basis, whereby the value of one’s ticket (or draw) changes from day to day according to the varying fluctuations of a ball or hockey team’s fortunes.

Pools can be operated quite as fairly as other games of chance, and many of them are conducted in this way,

while others are as crooked as a dog's hind leg. In either case, the percentage against the players is great, aside rom the mathematical odds, for the operators naturally consider that they are entitled to a heavy “cut” in return for the risk they presumably run.

The Poker Pot Lottery

THE ™ost glaring example of public gullibility regarding pools is provided by the history of one highly successful lottery in which the odds against the p ayers were arbitrarily regulated by the operator ra er than left to chance. It was originated by a ormer employee of a Montreal sweepstake operator, loroughly organized and boldly operated. Its story provides entertaining and illuminating reading.

Perhaps you’ve noticed one of these little classified advertisements in your local paper:


MEN at present employed in local factories to handle popular sure-fire pocket sideline good for $5 to $10 a week without effort. Apply Mr.

Smithers, Room 603, Blank Hotel, between 6 and 10 p.m., Tuesday and Wednesday.

Let’s assume you answer one of the advertisements, as the writer did. Here’s what happens:

On knocking at the door of Mr. Smithers’ room, you’ll likely find him engaged. He’ll greet you cordially, and very likely impress you as being a “good fellow.”

He’ll apologize for the fact that he can’t receive you immediately, consult a little notebook, then explain that two other applicants are ahead of you.

“I’ve got a good proposition, and can take on quite a bunch of men here, so I think you’ll find it worth while waiting a few minutes,” he informs you after taking your name.

You wait while a succession of visitors go up to his room.

Finally, your turn comes.

Smithers travels very comfortably, judging by the various appurtenances of pleasant living in evidence in his quarters. He tenders you a fat cigar and invites you to have a drink.

The “approach” concluded, he leisurely comments on the weather, enquires regarding employment conditions in the industry employing you, and carelessly fingers a pack of playing cards.

“I suppose you fool with the pasteboards?” he asks.

If you admit occasional indulgence in a penny-ante poker game, Smithers settles down to business.

“Have you ever seen any of these around here?” he enquires, tossing you a little sealed manila envelope. On one side is the picture of a jovial-looking chap who is holding five cards that apparently are sure to take the pot.

You turn the envelope over, and read that it has something to do with the “Reliable Poker Pot,” whose impressive premiums are payable weekly. Apparently the person drawing the highest hand gets $1,000, the second highest $500, the third $250, the fourth $100, and so on down the scale to ten hands good for a dollar each.

You observe that one royal flush is guaranteed every week, that jacks or better are required to stand a chance at all, that “the Reliable Dealer has not forfeited a payment in twelve years.”

“Open it, and see what your hand’s good for,” suggests Smithers, and opens another envelope for himself.

“That should be worth something,” he says. “An

ace high full house should stand a chance.” He tosses over to you the little card that he has drawn from the envelope. Sure enough, the punched spaces indicate a hand value as stated.

You proceed to see what yours is. It is just two pairs; queens and jacks.

“We’ll try it again,” says Smithers.

You do better this time, drawing a full house, although not so high as the one Smithers got on his first draw.

You begin to get the idea, and Smithers is all ready to answer your enquiring look.

“Ever played any of the lotteries or pools?” he asks.

If you have, Smithers asks which one, and when you tell him his remark is sure to be:

“Oh, yes. That’s one of ours, too. Ever cash in on it?”

No, you haven’t. But Bill Jones, up in the cabinet shop, got $50 a month or two ago; and Sam Smith, in the machine room, won $300 last year. Several other fellows have won smaller amounts from time to time.

“Well, here’s a new one, organized by the same people and absolutely on the level, just like the rest of them.”

The Local Organization

T-JERE Smithers comes right out in the open, provided he figures you’re “right.” He explains:

“I’ve got the agency for the Poker Pot lor this district, and I want to get it organized as fast as I can. There’s good money in it for me and for you, and there’s a fair break in it for the players,

“You can knock out at least ten bucks a week in your plant if you want to handle it there. There’s no danger in peddling them if you use your head. The police aren’t bothering the fellows selling in the factories.”

If you show signs of interest, Smithers then explains the whole proposition.

The tickets sell at twenty-five cents each. They come in “decks” of fifty-two hands, subdivided for convenient handling in “deals” of thirteen each. Purchasers draw their hands at random, and from each twenty-five cents invested in them an agent receives six cents as his normal commission. However, to make it worth while until you get going properly, Smithers will allow you ten cents per ticket for three weeks.

“It will take care of itself once winners start coming through,” he explains confidently. “But I’ll allow you the full actual marketing cost of each ticket until you get your customers coming in earnest.”

Perhaps you hesitate. In that case, Smithers has another argument.

“I know what the pool’s paying. You don’t. I’m so sure you’ll get at least four winners in every deck that I’ll give you this ten-spot when the prize list is issued if you don’t have that many. Remember, I’m not saying they’ll be large or small. I don’t know that any more than you do—but I do know that the percentage paid by this pool Is far larger than any of the rest of them.”

Assuming that you succumb to Smithers’ powers of persuasion, you take one deck with you agreeing to report to him a week later.

You have comparatively little trouble getting rid of it and you make $5.20 easily.

At the appointed time you give Smithers the proceeds of the sale, less your commission, and he says:

“I’ve got the advance list of winners. We’ll see how you came out.” He produces a long list of numbers.

Continued on page 36

Continued from page 13

“Let’s see”—he consults his record— “You had Deck B-20-R ”

He runs his eye down the list.

“Here’s one. B-2067-R. Ten dollars. How’s that for a starter?”

You are glad that one of the fellows at the shop has cashed in.

“Here’s another, good for five dollars. Here are two more; just a dollar each, but that’s something.”

Four winners in the deck. That looks pretty good.

“I’ll give you the money right now,” he continues, “and you can pay the boys tomorrow. Get their tickets back, and write their names and addresses on the back, for we’ve got to use them in the printed list of winners.”

Smithers points out that the distribution of these prizes will make it easy for you to sell more tickets the second week, so you take three decks instead of one.

Before you leave, Smithers explains that he has arranged to have a permanent distributor represent him who will supply you with as many decks as you need, issue prize lists, etc.

“He’ll look after you, no matter what happens. There isn’t a chance in a thousand of being pinched for handling our pools, for we’re taking care of the boys. But if you ever do get tripped up, sit tight and don’t say a word. They won’t do any more than fine you—and we’ll look after that.”

News of the winners’ luck quickly travels through the shop, and selling tickets becomes easy. Within the week you get rid of your three decks and make $15.60.

When the next prize list comes out you find that there are not so many winners, proportionately, as you had the first week, but the total amount is larger, one being for $25, a second for $5, four others for $2 and $1. On the strength of this, you decide to take four decks for the third week.

Meanwhile, you find that Smithers has apparently done a pretty thorough job of organizing the pool locally. News travels quickly, and it is evident that he has agents in almost every industry employing a considerable number of men. They’re all selling quite a few tickets and getting a reasonable percentage of winners. So far as the locality in which you live is concerned, the players are getting a good run for their money. The thing is apparently on the level, and you’d miss the regular weekly commission. So you stay with the game. Fifteen to twenty a week is a nice pickup.

Occasionally you see Smithers, but you do your business with his local representative. The big boss is busy elsewhere. You wonder, perhaps, how much he gets out of the pool, how much the local distributor pulls down each week, how much the vaguely-mentioned “headquarters” figures it’s entitled to—and what percentage of each twenty-five cents is returned to the players.

Regulating the Prize*

UXCEPT to his employees and a few L-* intimate friends, Smithers has been generally understood to be a successful security salesman during the years he has travelled the country, steadily extending the scope of operations of the pool he originated and operated. He is out of the “game,” now, however, so his story may be told without betraying a confidence.

He started with “the pool racket” more or less accidentally when casting about for employment following his return from overseas service, and once initiated into the system, decided to organize a lottery of his own.

“I was operating only three weeks when I discovered that running a pool wasn’t half as easy as it appeared to be,” he told

the writer. "In spite of the odds against them, the boys drew winning tickets with uncanny precision. I was ready to quit when I got the idea of a poker pot. Why not operate a lottery on a basis whereby each player would receive the equivalent of a poker hand, and consequently share in the distribution from the "pot” according to the value of that hand? It was a sweet idea and it certainly paid me sweet dividends for ten years.”

With less than $500 and the help of only one trusted employee, he undertook to figure out the working plan of his pool without the assistance of any formula that would guide him in preparing tickets in orderly sequence. Not until he had been operating for over a year did he learn that it is possible to arrange no less than 2,598,960 different hands of five cards each from a standard deck of fiftytwo cards.

“All I knew—all I wanted to know— was that a whale of a lot of combinations could be arranged. Far more important to me was the fact that I could deal as many hands as I wished to suit myself and absolutely regulate the distribution of prizes.

“By carefully arranging each deck, and inserting winners at my pleasure, I could spread the prize money around where it would do most good in stimulating sales. I could send the capital prize to Toronto one week, Winnipeg next, Halifax the following week, and so on.”

Smithers was at that time located in Ottawa—within a stone’s throw of the Parliament Buildings—and it was from there that he extended his operations until his poker hands were being regularly distributed every week throughout the Dominion. Dealing from a “cold” (fixed) deck, he returned to players winnings in proportion to the total weekly play, after first deducting a generous profit on every deck sold.

The actual preparation of the hands Smithers entrusted to his one assistant, who had to exercise considerable ingenuity in arranging the decks until they managed to work out a systematic formula. The original method consisted, practically, of setting out five cards on a table, systematically altering the arrangement by changing one at a time, and then marking the piinted tickets to conform with these arrangements. Later, the system was put on a purely mathematical basis.

Distributing the Tickets

ASIDE from the necessity for working “in the dark,” pool tickets must be marketed in the same manner as other commodities, and Smithers first concentrated on the logical outlets for them— pool rooms, barber shops, tobacconists’ stores, bowling alleys, hotel employees. Some time later he came out more openly, using the method previously described in order to select as agents men employed in various industries.

“While I kept an applicant who had answered my advertisement waiting for me to see him, I got a pretty good line on him from the hotel clerk, bell hop and city directory. If I couldn’t get any dope from those sources, I usually stalled him by explaining that I had taken on sufficient men for the time being. Thus I avoided outlining my proposition to Sunday School teachers, floaters, and other undesirables.”

In the early stages the distribution system was a very elastic one which mainly depended upon the under-cover assistance of express messenger and other employees of these companies, who, for a consideration, smuggled the tickets through while on their runs, passing the “books” from one to another in an endless chain. Payment was on a percentage Continued on page 1,1

Continued on page 41

Continued from page 36

basis, and comparatively small in view of the penalty which detection meant— instant dismissal !

In cases where express men declined to become accessories, the tickets were forwarded in a variety of guises—as candy, butter, cheese, office supplies, books, and almost everything imaginable, depending upon the size of the individual shipment. Many dodges were resorted to in order to reduce the danger of detection to a minimum.

The development of the automobile and the extension of good highways, however, has changed the system. For several years now operators have handled the bulk of their distribution through the medium of travelling representatives, each of whom can cover much ground in a day by use of a car. In various guises they travel the country on a regular schedule, supplying distributors with tickets, collecting receipts, distributing piize money, and generally keeping in close touch with the situation in each locality throughout their territories. The risk they run is slight.

During his lengthy experience, Smithers found the danger more imaginary than real, for the reason that the police have apparently been inclined to regard pools tolerantly.

“In ten years,” he told me, “only five of our employees were nabbed and fined. It wasn’t because the police couldn’t have naiied a lot more—myself included, perhaps—for the cops know a great many more things than the public gives them ciedit for.”

Smithers’ pool finally assumed the dimensions of a national business, efficiently organized and operated, with headquarters in Toronto and divisional offices in each territory, covering the country from coast to coast.

Long before operations reached their peak, Smithers was distributing to winners in his poker pot $8,000 a week, or $416,000 a year. To do that, his organization had to take in approximately $32,000 a week to cover expenses and generous profits— or $1,664,000 a year!

The figure is startling in itself, but becomes far more significant when one remembers that his pool was but one of several operating at the time in question as strictly commercialized gambling propositions rather than under various charitable guises.

Winners’ Small Percentage

ONE guess is as good as another when it comes to estimating the total yearly takings of these well-organized and efficiently operated pools. Smithers himself put the figure at about $18,000,000 or about $2 per capita. Looking at it from another angle, the fellow who weekly invests only twenty-five cents for a ticket on a single pool in a year contributes $13—and the majority of “good” customers are regular buyers of tickets on several pools, week in and week out. What are the odds against them?

A few paragraphs back, it was stated that a pool had to take in $32,000 weekly in order to distribute prizes totalling $8,000. In other words, there is returned to players each week approximately twenty-five per cent of the total amount wagered !

The seventy-five per cent represents cost of operation and profits. Actual operating expenses take about fifty per cent; the other twenty-five is profit.

These figures are not arbitrary, for some pools operate more efficiently than

others, just as do legitimate businesses. The most efficient can either return to patrons a larger percentage than usual or take a larger margin of profit. The first-named course is usually pursued, not from philanthropic motives but as a matter of good business. The more a pool can distribute, the more it can take in; for an increase in either the amount of the individual prizes or in the total number of prizes is the suiest possible means of increasing sales.

An illustration of the actual mathematical odds against drawing a winning combination is provided by the first pool Smithers operated. At that time, for lack of experience, he gave the players a far better “break” than his competitors were offering, letting buyers individually select their own combination of four hockey teams from a total of twenty-two. As inducements for them to do so, he offered prizes ranging from $5 to $1,000 and totalling $3,100.

The odds in this case against a person selecting the four highest-scoring teams was just 20,475 to one! Moreover, if no one happened to choose the actual combinations representing highest score, second highest, and so on, the prizes reverted to the pool itself.

“A Sucker’s Game”

TqVIDENCE that the authorities have •*-' awakened to an appreciation of the enormous annual levy made by the pool operators has been provided by the daily press in recent weeks.

After being raided several times, the operators of two well-known and heavilysupported pools were forced to abandon an operating base in which they had been long established and worked without interference, even holding their periodic drawings publicly and inviting patrons to attend. From the Province of Quebec, they moved to Ontario. Then followed the public announcement that ceitain known pools had been deprived of the use of the mails.

A few days later, local agents throughout Canada were notified by mail to this effect:

“We regret to say that, having had a little interference in Ottawa (and) from the Quebec provincial officers, due to the declaration made by The Honorable Premier of Quebec, and we will say that everything has been adjusted satisfactorily, furtheimore we have ceased all operations in the Piovince of Quebec.

“We have much pleasure to inform you that the drawing will take place, and the results will be published in the press. Hoping you are still interested in disposing of your certificates.”

While the language is somewhat mixed, the meaning is clear enough. Pool tickets can be purchased without difficulty and pool operators are doing little worrying. Their attitude is one of resentment that they should be interfered with in the conduct of a business which is legitimate in some countries but illegal in Canada.

Smithers quit the game because the money that came so easily went into the stock market. His final comment, before quietly dropping out of sight, was: “Crooked? I suppose so. But you don’t have to play the game unless you want to—and if you do, you’ve got to take the cards dealt.”

From all of which, one may reasonably conclude, I think, that it’s a sucker’s game.