By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
"Let me set up a, what do you call it, a hypothetical for you," Dawn Nettles says in her Texas drawl, her voice roughened around the edges by her daily pack of Misty menthols. "Let's say you're the boss of a company, and you give one of your employees a company credit card." She leans forward in her seat, her eyes sparkling in anticipation. The hypothetical employee, it turns out, charges a personal item on the card, and the card is taken away. As Nettles lays out the scenario, this nefarious individual sneaks into his boss' office, steals the credit card out of her desk and goes out and uses it again.
Even a hypothetical boss has no choice but to fire such a miscreant. Hearing this, Nettles leans back in her seat, a look of profound satisfaction on her face. "Not at the Texas Lottery Commission," she says. "At the Texas Lottery Commission, they get promoted to a fancy new job." A statement like that is bound to perk up a reporter's ears, a reaction Nettles provokes with Pavlovian regularity among the press corps in Austin.
Nettles is owner, publisher and reporter for LottoReport.com, a sprawling Web site devoted to all things Texas Lottery. The 54-year-old Garland woman puts a staggering amount of time into the site, constantly updating reams of numbers such as weekly sales figures dating to the lottery's 1992 inception or every number in every drawing from every lottery game since 1998. She also mails out a biweekly newsletter, and says she has about 5,000 subscribers at $37.50 a year. On drawing nights, which is to say six nights a week, she can be up until 1 a.m. or later waiting for official results to be released, but she is back at work in her home office at 8 a.m., tracking legislation, searching for news or touching base with a stable of inside sources at the Lottery Commission.
As a result, Nettles has converted herself into the only real expert on the Texas lottery not employed there, a perfect third-party source for reporters covering the lottery. "She's basically it," says George Kuempel, a statehouse reporter for The Dallas Morning News until his retirement last year. "I think everybody who was on that beat used her." In fact, Nettles has been quoted in at least 68 lottery-related stories since 1994, in virtually every major Texas newspaper.
Nettles' greatest joy is digging up dirt on the Lottery Commission itself, from the credit card-stealing tale to juicy tips about pornography on commission computers and lesbian love triangles. Her motivation, she says, is protecting her readers, most of them regular lottery customers. But her list of constituents shifts with the issues. When she talks about flagging Lotto Texas sales, she'll speak on retailers' behalf, but when it comes to scratch-off games and video lottery terminals, she pleads the case of the low-income Texans such games exploit. Nettles' stance on the lottery itself constantly seems to be shifting, but she is unequivocal on the people who oversee it: "I want to take the Lottery Commission down," she says.
Dealing with the Lottery Commission is a daily exercise in frustration for Nettles. Information freely handed out to the general public takes weeks to reach her, she says--if the commission admits having it at all. "They lie to me every day," she states flatly. Kuempel and other reporters have occasionally passed Nettles information that she has been denied. "They'd do everything they could to slow her down," Kuempel says. "I thought they were being real petty with her."
"I'm just so tired of them that I just want to see them fall flat on their faces--which they will," she says. "I haven't missed a lick yet, since 1992."
The dirt over that scandal was still fresh when the next one exploded at the commission. In September 2002, Linda Cloud, who had succeeded Littwin as executive director, admitted under oath that she had lied to reporters the previous spring. She resigned, and then charged that Governor Rick Perry's top aides had ordered her to lie to the press. When they denied it, she sued.
Last year, a group of lottery players finally got in on the act and sued both Gtech and the commission for selling scratch tickets after all the top prizes had already been claimed. Small wonder that earlier this year, Nettles closed her testimony at a commission meeting by saying, "For the record, I am not planning to sue the Texas Lottery Commission."
Through all this, Nettles gleefully documented the carnage on her Web site, but she also kept a close eye on the commission's day-to-day operations. "She really looks at our Web site thoroughly, and she finds things that may be mistakes that help us," says Bobby Heith, the lottery's director of communications. Nettles often passed what she found on to reporters. "If you keep talking to her, you're going to hear something pretty interesting and probably true," says John Moritz, who covers the lottery for the Fort Worth Star-Telegram.
But in her fight against the Lottery Commission, Nettles' salvoes sometimes miss their mark. One problem is that she has so much information she doesn't know where to start. In one conversation she will mention "cheated winners," "domain-name bullies" and "pseudo-random drawings," just a few of the projects she is pursuing at the same time. "These issues just keep coming up, and yes, I'm buried in them," she admits. Because her mental agenda is so crowded, her impassioned speeches can be hard to follow. "Frankly, a lot of it was over my head," Kuempel recalls. "She's so deep into this stuff."
Nettles is also, by her own admission, brutally blunt. Current lottery director Reagan Greer got the job only after the job requirements were loosened to accommodate him. The move raised a lot of eyebrows, but not many people are as frank as Nettles about it. "Reagan Greer is the governor's patsy-boy, and everybody knows it," she says. "[Deputy Director] Gary Grief runs that outfit." She says Grief "surrounds himself with yes-men."
"Austin is polite," Nettles says. "I'm learning to be polite." And Gary Grief? "He's so polite it'll kill you," she says.
The chief drawback to Nettles' style, however, may be that among the valid points she raises, she mixes in allegations that are difficult, if not impossible, to prove. For example, she says that scratch-off ticket distribution is rigged so that top prizes don't turn up until the end of the game. Another favorite theory is that when players allow the computer to choose their Lotto Texas numbers, the machines spit out number combinations unlikely to be drawn. Further evidence of wrongdoing, she suggests, is the fact that the number 44 is the most popular player pick for the Lotto "bonus ball" but is the least drawn. Nettles passes on these "educated suspicions," as she calls them, with the same gusto she shows for her strongest cases.
The mixture of effective watchdog and conspiracy theorist is embodied in Nettles' dramatic tale of the credit card-stealing employee. An inside source advised her which corroborating documents to request under Texas' public records law, but the report she received on March 18 doesn't completely support the scenario Nettles outlines. The report is a background check of lottery employee Robert Barnett. Background checks are routine for employees being considered for promotion. The report, dated February 1, 2005, contains a 1997 memo that shows Barnett was investigated in 1997 for charging personal expenses to his state credit card. The card was taken away on February 7, 1997, but more charges made by Barnett appear days later. The memo notes: "The card should not have been in the possession of [the employee] after 02-07-97."
But there is nothing in the report about sneaking into the boss' office, no explanation about how Barnett got the card back. The results of the 1997 investigation aren't clear--intriguing, but not necessarily damning. Nettles, however, ran with the details she says her inside source provided. In an e-mail sent to 15 state legislators on May 9, Nettles says that "no one ever dreamed" that the commission would "promote staff who not once but twice abused his state-issued credit card. (Recently that person was promoted to oversee the drawing studio and ticket validations. Why? Could it be because he has no conscience and will cheat on the upcoming computerized draws that people oppose or convince people that their ticket is not a winner?)"
Barnett was taken aback when he heard about the e-mail Nettles had sent. "You have to understand, we're talking about something that happened almost 10 years ago," he says. The first charges were personal, but Barnett says he simply mistook his state American Express card for his personal one. As for the second set of charges, Barnett says, "I had a trip, a business trip coming up; my boss said get the card, and I got the card and used it. The investigator was not informed that I had gone on the trip." There was no finding of wrongdoing in the case, he says. "Did I make a mistake? Yes." The background check itself concludes, "This writer did not develop any information that would prevent the applicant from becoming an employee of the Texas Lottery Commission." Barnett got the promotion.
When Nettles got the initial tip, she says, "I was really excited. I was like, 'I finally got them.'" She believed Gary Grief had seen to it that his friend Barnett was promoted despite his credit card violation. But instead of revealing cronyism at its worst, she may have given ammunition to her detractors. Current lottery officials are leery of criticizing Nettles on the record, but some former officials will. Former Executive Director Linda Cloud makes her distaste for Nettles clear. "She just didn't have all the facts right, or she just manipulated the facts the way she wanted to," Cloud says from her home in Colorado. "No matter what we did or how we did it, she contradicted everything and anything we did."
But some of those who have borne the brunt of Nettles' fervor show a sort of grudging admiration. Keith Elkins, communications director for the commission from 1999 until 2003, says he "butted heads" with Nettles many times during his tenure, but always respected her. "You cannot discount her," he says, "because as soon as you start thinking she's way off and out in left field, she finds something to stick."
At the time, Nettles was already in the publishing business. She began working for a rental management company just out of Richardson High School in 1969, but longed to be her own boss. In 1979, she started a real estate publication, calling it Unexaggerated Homes as an alternative to the flowery and deceptive sales brochures that dominated the market. "I only worked with the best builders," she says with pride. The magazine survived through several of Dallas' notorious boom-and-bust real estate cycles, and at one time Nettles was supervising seven employees.
She was also displaying the tenacity that makes her the terror of the Lottery Commission. When a competing publication trumpeted a survey that billed it as the No. 2 source for home buyers, well ahead of Unexaggerated Homes, Nettles immediately suspected the study was bogus. She got copies of the survey and had a handwriting expert analyze the results. Many of the returns were deemed to be forgeries, and Nettles sent out a letter to builders demolishing the survey.
"That was my first experience with how someone can just out and out lie," Nettles says. The local head of the independent survey company was fired. As he explained to the Dallas Times Herald, Nettles had "made a full-time job of getting revenge." The comment would prove prophetic.
Despite the victory, Nettles was still facing a tight housing market and increasing competition, so the Lotto Report looked like a less stressful alternative. "Like a dumbass, I said to myself, 'Here's something I could do and not have to worry about,'" she says.
At first, she was right. Lottery sales were skyrocketing, and so was the Lotto Report's readership. Soon Nettles was selling 10,000 copies of each biweekly edition at $1.50 each in grocery and convenience stores. But as lottery sales began to slow in 1997, following a pattern of state lotteries across the country, more copies were staying in the racks. Nettles began to rely on less profitable but more reliable mail subscribers. She also began to spend more time working on her Web site, LottoReport.com.
"She was probably a blogger before the term was coined," says Moritz of the Star-Telegram. Nettles took computer courses at Richland College and put the knowledge to use. She posted page after page detailing the upheavals at the commission but still thought of the site as primarily a lottery player's tool.
All that ended with the four balls. "When they added the four balls--that's when the war began," Nettles says. The balls in question were Lotto Texas balls 51 through 54, and their addition to the game was first proposed in September 1999. Adding extra balls would generate bigger, more exciting jackpots--and increase the odds against winning one from one-in-15.8 million to 1-in-25.8 million. Nettles immediately set about defeating the proposal.
"At that time I didn't know you could go up there [to the commission] and comment," Nettles recalls. "I didn't know they were just real people up there like you and me. I just knew those four extra balls would kill Texas Lotto and it would kill the Lotto Report." She posted a form on her Web site to encourage readers to send comments to the commission, and they did, by the hundreds.
Before the commission could even vote on the proposal, then-director Linda Cloud withdrew it. "One point where there was no misunderstanding is a single message we have heard loud and clear, and that is 'Don't mess with Lotto Texas,'" Cloud said at a news conference. "I want to assure the public and all of our players that message has not been ignored."
Indeed, the commission did not ignore player opinion--it simply countered it. The rule change was proposed again six months later, backed by a survey of retailers that showed 90 percent favored the change to 54 balls. Nettles, on familiar ground, responded with handwriting analysis showing that most of the returns in the survey had been filled out by just four people. She also got records to show that only eight of 515 comments received by the commission favored the change, and revealed that the commission had already bought the new 54-ball sets.
The rule passed unanimously.
"[Nettles'] opinion didn't have anything to do with that delay," Cloud contends. "It was a matter of refocusing how we were going to go about adding the four balls."
For Nettles, the memory is still bitter. "They patted me on the back and said, 'See, Dawn? We really do listen,'" she says. "All that shit."
Shortly after the change, she was notified that she would no longer receive the information on drawings and payouts that the commission faxed daily to the news media. She was told she did not meet the criteria for being a journalist. In response, Nettles had herself listed in the Texas Journalism Directory and joined the Society of Professional Journalists. She bombarded the agency, the commissioners and the Legislature with phone calls and letters, almost pleading in some cases, to get the faxes back. She was told that the move was a cost-cutting measure.
"It was just me and two others from out of state," Nettles says. "How much money is that saving?" To her, it was obvious that the agency was retaliating for her opposition to the rule change--and that made her mad.
"I don't quit," she says. "When you burn me, I'm going to come after you."
LottoReport.com became a catalog of discontent. She revealed that more than a dozen lottery employees had been found with pornography on their computers but only a few had been fired. "How did the TLC Executive Staff manage to define porn when even the Supreme Court can't define porn?" she asked online.
Nettles had always posted Lotto sales for every drawing, but in March 2000, she began calculating the exact amount winners should receive based on sales. Retroactive calculations revealed that some winners had been shorted money while some had been overpaid. An internal commission memo dated March 30, 2000, noted that there was a conflict in the rules that allowed the discrepancy, and the problem was corrected--but the commission never acknowledged Nettles' role, and the excruciatingly technical imbroglio never made the papers.
The next discrepancy Nettles says she found did make the papers--on the front page. This discrepancy couldn't be explained away as a rules conflict, and it would eventually cost Cloud her job. As Nettles tells it, she received an anonymous call in March 2002. "Why don't you call the Lottery Commission and find out why Walter Criner isn't a commissioner anymore?" the caller suggested.
"So I called over to the commission and asked them, 'Who's the new commissioner?'" Nettles says. "They said, 'What do you mean? We don't know anything about it.' So I called over to the AP, and I said, 'Do you guys have a press release about Walter Criner not being a commissioner anymore?'"
Nettles claims she called several more reporters looking for information, and, of course, they began calling the commission looking for answers, too. One of them, Jay Root of the Star-Telegram, got Cloud on the phone. She denied any knowledge of Criner's departure--on the instructions, she later claimed in a lawsuit, of Governor Perry's chief of staff. Criner, a Perry appointee, had been implicated in a sexual harassment investigation and had resigned in February. Months later, Cloud admitted under oath that she had lied to the press and resigned a short time later.
"I never intended to get her fired, but they shouldn't have lied to me," Nettles says. It was a sweet moment nevertheless, offering proof of what she had been saying all along: The commission lies. And a short time later, her faxes were reinstated.
Problem is, others don't recall it that way. Neither Root nor Moritz at the Star-Telegram remembers speaking to Nettles about Criner, nor does Kuempel from the Morning News. Keith Elkins, then communications director for the commission, doesn't recall Nettles playing a role, while Cloud answers the question in no uncertain terms. "No, she didn't," Cloud says. "She wants to take credit for a lot of things that she had nothing to do with."
So wrote George Orwell of the lottery in the dystopian world of 1984. Echoes of that grim vision could be heard in the March 2005 Demographic Study of Texas Lottery Players done for the commission by Texas Tech University. Those with less education spent more on the lottery. Minorities spent more on the lottery. And while the data for income levels isn't as striking, on the whole, lower-income players were spending more, meaning they were spending a far greater percentage of their income.
Those conclusions were reinforced by a Dallas Morning News study that shows higher lottery sales in low-income areas. For lottery opponents, the results simply confirm what they have been saying since the lottery was first proposed in 1991.
"We're taking significant money out of the hands of the people that can afford it least," says state Representative Charlie Howard of Sugarland. When it comes to the lottery, Howard is a leading abolitionist, and it's no secret from where he draws his inspiration. "I think it is morally wrong. I think it is devastatingly wrong," he says. "If you research the Bible, you will not find but two mentions of gambling." It would be hard to argue that both mentions aren't decidedly prejudicial: In one, fishermen cast lots to decide to throw Jonah to the whales, and in the other, soldiers gamble to determine who will get the dying Jesus' clothes.
The Bible doesn't leave much wiggle room on the lottery, but Howard recognizes that the Legislature has to render unto Caesar as well. "Now we have the lottery, and what I'm trying to do is stop the expansion of gambling," Howard says. "Getting rid of the lottery is a much higher hill to climb."
Sales figures show that on-line games, as the traditional number-picking lottery games are called, are stagnating. Lotto Texas sales peaked in fiscal year 1995 at nearly $1.2 billion but have declined steadily to $477 million last year. The move to 54 balls provided only a fleeting boost. In 2002, the commission lengthened the odds against winning even further, to one-in-47.8 million, in the hopes of larger jackpots. Before the change, Nettles again testified before the commission, armed with a thick sheaf of printed e-mails from her readers critical of the proposal. It again passed unanimously. "One has a better chance being crowned King of Texas than he does winning the lottery," Nettles wrote in disgust on her Web site.
Overall lottery revenues inched up last year, but even that isn't completely good news. A growing percentage of that money is coming from scratch-off tickets, a fact that is troubling for both camps: Instant games are the most addictive form of lottery, and they are also less profitable than on-line games.
Yet the call of lottery money in a cash-strapped state with a tax-averse Legislature is all but irresistible, especially under the banner of education. The connection is, in a sense, illusory: Lottery money that goes to education replaces money from the general fund that can then be used elsewhere. The education card, however, is powerful when it's played.
"A child is drowning, and we have it in our power to throw them a rope," says Representative Sylvester Turner of Houston. "Let's not allow the children to drown." Turner is in favor of allowing lottery ticket sales on the Internet, and argued his case on the House floor earlier this month. "Two hundred million dollars. Two hundred million dollars. Two hundred milliondollars!" Turner repeats an estimate of Internet sales revenue like a mantra.
"My friend Mr. Turner says we are going to save a drowning child with this amendment," counters Representative Bill Zedler of Arlington. "Well, my friends, with gambling, we are not throwing that child a lifesaver; we are throwing him an anchor."
Later the same day, Nettles talks about one of her concerns, the possible replacement of mechanical drawings with computer-generated numbers. Her rhetoric doesn't soar quite as high, but the sentiment is no less heartfelt.
"I would give my right arm if the state could incorporate into the legislation that the Texas Lottery could not ever go to computerized draws," she says.
Nettles has good reason to be worried. In May, 650 players of California's Derby lottery game had their odds of winning reduced to zero by a glitch in the computerized draw software. Even so, her fixation on such esoteric issues leaves her anti-gambling credentials in doubt, which may explain why Nettles has yet to make common cause with the lottery's most prominent opponents in the Legislature. Instead, she piques the interest of legislators by highlighting the possibility of lost revenues for the state.
Her efforts result in a steady trickle of letters to the commission from legislators not involved in lottery oversight. Most of the letters end up on Nettles' Web site.
"I don't think there's a legislator or a senator or a governor that doesn't know who I am," Nettles says proudly. "When it's Nettles coming, they know who I am."
On May 4, the House Committee for Licensing and Administrative Procedures meets to discuss, among other things, the Sunset Bill reauthorizing the lottery for another 12 years. As Nettles steps up to the podium to testify, Chairman Keno Flores of McAllen looks down at her over the top of his reading glasses.
"You've written here that you're neutral on this bill?" he asks. A few chuckles sound in the room--most of the lottery high command is present, including Executive Director Greer.
The committee clerk, Milda Mora, has heard from Nettles many times before. "I think there's some valid things that she brings over," she says later. "It's just that there may be a little overkill." Tonight, Nettles' testimony will touch on computerized draws, cheated winners, rules changes, even the intimidation of Web site owners whose domain names resemble the lottery's.
After Nettles has spoken for about 20 minutes, Flores interrupts.
"Are you still neutral on the bill?" he asks dryly. Many of the legislators on the committee have begun to fidget. Some get up and leave during her speech. Others converse among themselves.
"Dawn kind of tends to get off the subject and ramble a little bit," says Gerald Busald, a math professor at San Antonio College. "It's hard. You're under a lot of pressure when you're up there testifying." Busald has plenty of experience testifying himself. He and his students confronted the commission in 1997 with proof that the figure for the average prize in its Cash 5 game, touted in ads for the game, was too high. The commission changed the ads, stressing the sheer number of winners instead--until Busald and his class pointed out that that number was too high as well.
"They decided to pull their ads, but they didn't admit we were right, which was typical," Busald says. In fact, Busald echoes many of Nettles' complaints, even though he says Nettles does "100 times more than I do."
"I don't have a lot of respect for the Lottery Commission's decisions," he says. "The thing that hurts them is they do something, and they get caught at it and don't 'fess up."
Many on the House committee, however, are strong supporters of the lottery. During Nettles' testimony, state Representative Tony Goolsby of Dallas breaks in with a challenge. "Dawn, do you like the lottery?" he asks.
During the back-and-forth exchange, Goolsby makes his views clear. "I'll tell you, they're doing a great job," he says, but Nettles manages to get the last word.
"Do I like the lottery?" she repeats. "I did, but now I know too much about the way they do business."
Flores also argues with Nettles. "You won't convince me to get rid of the lottery," he says. Nevertheless, after Nettles finishes, he calls Greer back to the podium and questions him sharply about some of her points.
"Our agency is under a great deal of scrutiny," Greer says. "We welcome that. We want the sun to shine in."
In the audience, Nettles' eye-roll is almost audible. But if Greer is sincere, he'll get his wish: The Sunset Bill reauthorizing the lottery fails to pass the full House. The commission will continue to operate but in two years will again come under the reauthorization spotlight.
"I know they're not going to get rid of the commission," Nettles says. "It would take a fool to think that." But the failure of the bill is a victory for which she can claim at least partial credit. As Nettles' old adversary Keith Elkins puts it, "Sometimes she comes off looking a little nuts, but that doesn't make her wrong."
In a world of professional politicians and smooth-talking flacks, the woman in her home office in Garland, taking on a state agency with no company but her two parakeets and her dog Shelby, may indeed come off looking a little nuts. But for Dawn Nettles, it's not looks that matter--it's the end result. She is still digging for information on Bobby Barnett's credit card case, hoping to bring down the commission. But even if that tip doesn't pan out, Nettles is confident the next one will.
"I've got faith," she says. "They're going to have their day."