Beginner’s Luck: Potential Fraud by the Virginia Lottery

Case Solution

Scott A. Hoover, Jeffrey P. Shay, Sandy L. Reiter
North American Case Research Association (NACRA) ()

The Virginia Lottery offered scratch-off games in which consumers could instantly win a variety of prizes. In the summer of 2007, finance professor Scott Hoover discovered that the lottery’s website had misrepresented the amount of outstanding winnings on some scratch card games. After a ten-month investigation, Hoover and a team of attorneys had gathered evidence to support a specific fraud charge. The lottery sold scratch cards that were not eligible for big prizes, but its website posted information indicating that big prizes were pending. Hoover and his attorneys worked behind the scenes to seek reforms and repairs through the lottery, but those efforts were unsuccessful. He is considering going public with his allegations and filing a lawsuit against the lottery. Several important ethical questions arise. Does Hoover have a moral obligation to inform consumers of apparent fraud? Should Hoover demand the return of allegedly illegal lottery winnings if those winnings were supposed to benefit Virginia’s education system? Are there other approaches that prevent Hoover from being released that might motivate lottery officials to correct the information?

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