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LOTTERIES were endemic in the U.S. during the nineteenth century. By 1827 New York had two hundred lottery offices. Visitors, according to one newspaper, had the impression that "one-half of the citizens got their living by affording opportunity to the rest."
All over the country dreamers loitered around the lottery ticket offices waiting for a number drawn from the wheel to bring them a prize. The poor who could afford no other form of gambling bought shares in a single ticket, down to a sixteenth.
At least one grand lottery drawing was held each week during 1830, with prizes totaling almost $10,000,000. The next year more than $53,000,000 was realized by the 420 state-operated lotteries of New York, Connecticut, Maryland, Pennsylvania, Rhode Island, Virginia, and by Delaware and North Carolina, which ran joint lotteries.
One out of every four tickets, on the average, won an encouraging token prize and the top ticket might be worth 15 per cent of the entire take. In a big lottery first prize could be $100,000 with a second prize of $50,000 and a third of $10,500. Drawings were spread out as long as possible to enhance the value of tickets. It was not uncommon for a $6.00 ticket to achieve a value of $20 when the grand prize remained to be won.
The first major American racket, from which policy and numbers directly descended, was side-line lottery betting camouflaged as "insurance." Players bet that a particular number would come up. Higher odds were paid off to the "insured," who had put their money on a prize-winning number. Since neither newspapers, which devoted columns to the progress of lotteries, nor lottery managers reported any but the winning numbers, lottery insurance agents hired watchers to keep track of every number drawn from the wheel. Watchers dispatched runners, usually every hour, with lists of these numbers to the insurance office, where agents paid out a small portion of the millions they collected in tiny sums.
When the states tried to put an end to the racket, and New York even made agents liable to a $2000 fine or a year in prison, these sharps merely locked the doors of their offices and continued to do business "in secret."
The unscrupulous also sold the unsuspecting tickets that had been drawn on previous days, or ran crooked private lotteries.
As a result of abuses anti-lottery groups multiplied and became active. Charles Baldwin, editor of The Republican Chronicle, in New York, published an expose of a crude swindle in which a certain ticket, drawn on a specified day, had been "insured high in several different places." On examination, he said, another ticket pulled from a wheel to draw $10,000 was not clean and new but looked "as if it had been in the pocket several days." On occasions, he claimed, a number drawn from the wheel - actually a drum - was withheld by the submanager while a confederate tried to buy the matching ticket in the market. If it had already been sold, the conspirators could insure the number heavily before the submanager replaced the stolen number on an appointed day.
Baldwin's charges brought on a grand-jury investigation during which he was sued for libel. He was vindicated when several cases of fraud came to light -including one in which a submanager had contrived it so that a ticket he held with a friend won $35,000. When measures passed by their legislatures failed to stop fraud and dishonesty, most states, after a long span of pusillanimity, ended their lotteries. By 1835 anti-lottery provisions had been written into the penal codes in many states and legal lotteries largely became a thing of the past.
A colossal and corrupt exception to this was the richest and most politically powerful lottery that ever flourished in the United States. It was run by the Louisiana Lottery Company and known simply as "The Serpent."
Into the new constitution of Louisiana, impoverished by the Civil War, was written: "The legislature shall have power to license the selling of lottery tickets and the keeping of gambling houses." The ball began to roll and on August 11, 1869, the Louisiana Lottery Company was chartered and entitled to operate for twenty-five years, provided that it paid the state $40,000 a year toward the maintenance of the Charity Hospital in New Orleans.
The popularity of the Havana Lottery, which sold as many tickets in New Orleans as at home, was such that carrier pigeons flew from Cuba each month with a list of the drawings and the names of the eleven winners of big prizes. The state had tried to get in on a share of this business, but ticket sellers did not keep strict or honest records and avoided paying more than they had to. Now, to protect the home lottery from Cuban competition, Louisiana prohibited sale of all outside lottery tickets.
The $40,000 annually assured from the lottery only made the state legislature greedy for further income from its gambling citizens. The legislators passed a law permitting public gambling houses to operate for a $5000 yearly fee. Unlike earlier licensing laws, this one imposed no restrictions and guaranteed the customers no protection against crooked games on legal premises.
"Within a few weeks," wrote John Quinn of the new law, "St. Charles Street blossomed into one vast gambling hell. These resorts, some forty in number, and popularly known as the `forty thieves' did a `land office business.' They were open night and day from the ground floor up. . . . There were no screens, the saloons opening immediately on the street; no limit was fixed, and boys and octogenarians were alike welcomed."
The local professionals resented the competition that flooded into the wide-open city from other states. The public was fleeced and the general reputation of the New Orleans fraternity was damaged by newly arrived "skin" gamblers like the ante-bellum river sharps. The resident gamblers, rather than reformers of the community, took steps to repeal the law that made their business legitimate.
Deciding to rid the city of invaders, they were able to apply enough political pressure to have the licensing law recinded. The state auditor refunded fees already paid in and there was an exodus of newcomers. The old pros resumed their system of paying bribes to the police instead of licensing fees to the state, making "some pretense ... at secrecy, although the houses were all well known, and one could hear in the street below the rattle of chips and the droning call of the dealer."
No such reverses beset the Louisiana Lottery Company's course, although the anti-lottery, anti-carpetbag New Orleans TimesPicayune thundered that it was "conceived in the miscegenation of reconstruction and born in iniquity." The company began with a capital of $250,000 and the stock sank from a par of $100 as low as $35 a share on the New Orleans Exchange during its early days, but soon after its incorporation the franchise of the company passed to Messrs. Howard and Simmons. With Howard as manager, the capital stock was fixed at $1,000,000 with 10,000 shares outstanding, and it began to boom.
At first lottery tickets were sold only in the state, mainly in New Orleans, where the company maintained 180 places for the population to purchase them, and drawings were daily. By 1877 tickets were sold in every state and territory in the Union. There were two "grand extraordinary" semiannual drawings and ten monthly ones that created as much national interest as the Kentucky Derby.
The daily-except-Sunday drawings were largely for the continued benefit of New Orleans players, with pay-ofEs generally on the ternary combination of numbers. Company shops, in areas trafficked by workers and where women and servants did household shopping, peddled dream books and fortunetelling slips to encourage a state of credulity. The shops worked with at least an edge of 20 to 40 per cent over the players, and one newspaper, a bitter opponent of the Louisiana Lottery, claimed that the odds were 1 in 67,525 when 75 numbers were in the wheel.
Nothing discouraged the policy addicts, and Charles Howard, brains of the company, saw to it that everything was done to promote a benign public image of The Serpent. The company lavishly supported charity and public works, newspapers were bought outright or influenced by the,company's heavy advertising, and a political machine, with the company's fortunes its primary concern, was carefully built up. The best legal talent represented the company against rivals and anti-lottery elements wherever its tickets were sold, and men prominent in public or financial life were assiduously courted.
When the friendly administration of Radicals, or "carpetbaggers," under Governor Packard, who had not only backed the Lottery Company but insured its monopoly, was threatened, Howard and his associates "played it right." The public was anticarpetbag, so the company cheerfully poured in a reputed $250,000 to oust Packard and to establish in office Francis T. Nicholls, former high officer in the Confederate Army and the darling of the Democrats and other white-supremacy supporters. Less than two years later they had cause to regret Nicholls's political victory.
Three times in 1879 the company fought for its life: first when the state legislature deprived it of its charter; secondly when it victoriously contested this action in a federal court; thirdly when the state constitutional convention granted legal life to the company until 1895. Miles of print and countless thousands of dollars were mobilized for favorable publicity. In the end The Serpent won its case but lost its monopoly. This hampered the company only theoretically, as no other lottery ever managed to get started.
Hiring two of the South's most admired war heroes, Generals Pierre G. T. Beauregard and Jubal A. Early, to supervise the drawings was a shrewd move to promote public confidence. Their nationally acknowledged integrity lent respectability and prestige to the proceedings. Whether each was paid $10,000 or $30,000 annually for one day's work a month is not certain, but either sum was good pay for out-of-work generals and worth it to the company. The state of Louisiana ratified the 1879 constitution and the lottery company from then on advertised itself as "the only lottery in any State ever voted on and endorsed by the people."
Monthly and semimonthly drawings became great public ceremonies, conducted in the Charles Theatre before a large audience. The wheel at the center of the stage was six feet in diameter and through its glass walls could be seen 100,000 numbers, each in a rubber tube. The money wheel was smaller and held slips, each in its own tube, numbered with the amount to be given as prizes. The wheels were locked and spun before and after each drawing. The generals watched as a blindfolded boy drew tickets from the big wheel and another boy pulled prize prices out of the smaller one. General Early usually called out the winning numbers and General Beauregard read off the sums of prize money. Three solid citizens presided at the daily drawings of tickets carrying three printed numbers and "policy" tickets on which purchasers wrote their own combinations of three numbers. Players paid 25 cents, 50 cents, or $l; 75 to 78 numbers went into the wheel and 11 to 14 numbers were drawn for the printed tickets. Winning policy tickets were determined by "gigs," "saddles," or "day numbers."
Charles Howard continued to see that liberal donations were made in the company's name for all sorts of "good works." One gift was of $350,000 to turn the Metairie race course into the lovely, landscaped Metairie Cemetery. The story goes that Howard, refused membership in the exclusive racing club, had vowed to make the course a resting place for dead rather than living snobs.
After Howard's own death his family continued to court favor for the lottery company by building the Howard Memorial Library. Miss Anne T. Howard paid $155,000 for the building in addition to giving books and equipment. Another relative spent $40,000 for the Confederate Memorial Building next door. Under President M. A. Dauphin, who succeeded Howard, the company came up with $200,000 when floods several times threatened river districts, and gave New Orleans $65,000 to raise its levees. Money was forthcoming for asylums, for the relief of epidemics, and for the cleanly purposes of the Auxiliary Sanitary Committee, which wanted to set up free public baths and to have the city's gutters washed regularly.
By 1890 a share of stock in the Louisiana Lottery Company sold on the exchange for $1400. A whole ticket for either of the two "grand extraordinary" drawings cost $40 and an anti-lottery group claimed that The Serpent sold an annual $1,250,000 worth of written policy tickets alone.
If all tickets to all drawings had been sold the company would have stood to handle $51,000,000, but this never happened. About 70 per cent of the monthly tickets, the chief source of income, were generally disposed of in spite of the miserable odds to a public enticed by the possibility of winning $3750 for a 25-cent ticket, $7500 for 50 cents, $15,000 for $1, and $30,000 for $20. Though no one had a legal right to check its books, The Serpent showed, by 1889, an annual profit of $13,000,000, and dividends moved up accordingly, 110 per cent in 1887 to 170 per cent in 1889. An estimated five million people outside Louisiana bought full or part tickets each year and accounted for more than half the work done by the New Orleans Post Office.
Litigation was frequent. Whenever there was trouble in the Louisiana legislature, the company's slush fund took care of the expenses of making a majority see it their way. Many legislators also had their favorite constituents or poorer kinsfolk on The Serpent's pay roll, for the employment policy of the company required that an applicant be recommended for a job by two members of the legislature or other prominent men.
To sweeten the national press, The Serpent had spread money all over the country for newspaper advertisements. One ungrateful recipient of this largess, Colonel A. K. McClure, editor of the Philadelphia Times, was so incensed when he found that $50,000 was spent in his city "notwithstanding the law of Pennsylvania that prohibited such advertisements" that he took the matter to court. Further incensed, by the court's decision that no penalty attached to the publisher for accepting such illegal advertising and the opposition of men "certainly not influenced solely by their regard for public interests," he battled editorially until the Pennsylvania legislature enacted a new law penalizing publishers of lottery ads.
The company took immediate steps to maintain its Pennsylvania revenue, prevent other states from following suit, and to revenge itself on Colonel McClure by filing suit against the Times. When the United States Circuit Court for Eastern Pennsylvania sustained McClure, the lottery company applied to the Supreme Court for review, counting on a two- or three-year delay, during which time it could keep right on advertising and selling tickets in Pennsylvania.
Then Colonel McClure was invited to New Orleans by Mr. Burke, editor of the Times Democrat, a_ paper completely controlled by The Serpent. The New Orleans Exposition was in trouble, said Mr. Burke, and the directors wished to confer with the colonel.
As McClure's train pulled into New Orleans, he was served with a writ issued by the United States District Court at the request of the Louisiana Lottery Company, which asked $100,000 for libel.
McClure knew the pickle he was in. His old friend, Colonel Rivers, at the St. Charles Hotel, could not even recommend an honest and capable lawyer to handle his case. "We are all in it here," he admitted, but did arrange for Governor Nicholls, no admirer of The Serpent, to come to see McClure that evening.
"The Governor," said McClure, "confessed that he did not see how it was possible for me to escape without paying a round sum in damages to the Lottery Company; that the sentiment of the community was with the lottery; that the officials of the city, executive and judicial, were generally in sympathy with them, and that it would be impossible to get a jury that would not resolve all doubts in their favor; and finally concluded that I should get an adjustment on the best basis I could." Rather hopelessly the governor did recommend a Mr. J. McConnell as one of the very few good lawyers in New Orleans who might conduct a competent legal fight against the lottery company.
The story of McClure's being served with the writ, given to the AP by President Dauphin of the Louisiana Lottery, had hit Page One of papers all across the country. A number of important men in New Orleans and elsewhere, most of them strangers to McClure, visited or telegraphed him to offer help. Before breakfast next morning three lawyers came to tell him that the New Orleans bar would take his case at no fee. A publisher m another state wired offering "$50,000 to your credit in Philadelphia National Bank for any security you may be required to give."
McClure consulted Lawyer McConnell, who confessed "that there seemed to be no possible means of escape from judgment, as the judges, the Marshal who draws the jurors, and the community generally were in sympathy with the Louisiana Lottery, which was lavish in its beneficent gifts to charity and to the public." An appeal to the Supreme Court seemed the only chance.
Back in Philadelphia, the colonel had Rufus E. Shapley, a gifted legal eagle, frame a plea, published in a seventy-six-page pamphlet, claiming $25,000 damages and justifying his alleged libel. A list of formal questions was filed in court for Dauphin. If he answered truthfully, he would lay the company, himself, and all his agents open to legal proceedings in virtually every state and territory where lotteries were punishable by imprisonment and fines.
The lottery company had not foreseen that McClure would take the aggressive and carry the judgment straight up to the Supreme Court. The legality of the company's charter might be denied in the course of such an appeal. The colonel was approached to drop his suit, which he agreed to do if the lottery company paid him $8500 to cover his expenses. A check was delivered within twenty-four hours.
However, echoes of the libel suits had affected United States congressmen during the unfavorable publicity for The Serpent. They saw the Louisiana Lottery Company as controlling the American press, the Government itself, and anybody or anything that stood in its way. A battle was undertaken in the House of Representatives to enact more stringent postal laws that would prevent the buying and selling of lottery tickets via the U.S. mails.
The Louisiana State Constitutional Convention of 1879 had granted the lottery company a franchise to run till January 1, 1895, but in 1890 the company's top officials decided to make certain of its future in advance. In a letter dated April 17 and published in the New Orleans Daily Express, John A. Morris, an old associate of Howard's and one of the main stockholders of the company, wrote: "At the approaching session of the Legislature of this State, I shall submit a proposition for the privilege of maintaining a lottery in Louisiana. . . . I will offer to pay the State, quarterly in advance, the sum of $500,000 per annum for the franchise for twenty-five years. This annual license of half a million dollars, I would propose to have devoted: One-third to the public school system of the State; one-third to existing charitable institutions and such others as may be created; and the remaining third to the construction, maintenance and repairs of levees . . ."
Governor Nicholls promptly opposed granting the charter. Morris rebutted by publicly offering to double the $500,000. At this, one Neugass of London got into the act by submitting a bid of $1,250,000 a year for the lottery franchise in the state. Morris met the offer.
A pro-lottery stalwart, Representative S. O. Shattuck, on June 4 introduced a bill that provided that the people vote two years later on an amendment to the state constitution, designed to legalize lotteries. They would, in effect, accept or reject Morris' offer.
The majority committee favored the bill. The minority report called Morris' proposition "a bare offer to buy a State and to bribe the people to enter into an infamous bargain." Supporting this position, an anti-lottery league was formed, got out its own newspaper, The New Delta, and held mass meetings.
Morris took up quarters in Baton Rouge for the duration of the legislative session and to his rooms subservient members of the legislature flocked for instructions. The bill was brought up three times and debated bitterly. The third time, it passed the house. Angry debate also prefaced its passage in the senate.
Governor Nicholls then threw a monkey wrench into the company's smooth-running machinery: He vetoed the bill. To pass over his veto, it needed a two-thirds majority in the legislature. Of the thirty-six senators all but twelve were willing to vote favorably. Unfortunately for The Serpent, one of the senators who had swung over to the bill when it passed the first time had gone down to New Orleans to have a good time. The senator, never known as a man of more than moderate income, squandered money like a veteran high-roller and collapsed from dissipation just when his vote was crucial to override the governor's veto. His doctors cautioned that a move might be fatal. Nevertheless he was transported to a hotel in Baton Rouge. The rest of the pro-lottery senators planned to vote by his sickbed in spite of violent protests from the anti-lottery faction. The sudden death of the senator (wearing a money belt containing $18,000) ended the controversy and frustrated passage of the bill.
The twenty-three remaining pro-lottery senators held a council of war in Morris' headquarters, then played a parliamentary trump. They requested in the house that the bill be returned to them, and when this was done went on record as refusing to recognize that the governor had power to reject an amendment to the state constitution, which could be made or unmade only by a referendum of "the people." The legislature sent the message to the secretary of state to be proclaimed formally to the public, then adjourned.
Louisiana's secretary of state would not promulgate the bill. It was not a law, said he, since the governor's veto had not been overridden. John Morris took the issue to court and, when the court decided against him, appealed to the State Supreme Court, which reversed the lower court.,/p>
During these shenanigans feeling through the country had become so exacerbated that President Benjamin Harrison sent a message to Congress urging the enactment of legislation to keep lotteries from using the U.S. postal service.
In September 1890 the national government was empowered to institute legal proceedings against all lotteries using the mails and to exclude newspapers carrying lottery advertising from the mails. A test case was brought and the law upheld by the Supreme Court in 1892.
At the same time Louisiana faced a gubernatorial election and vote on the amendment on the extension of the Louisiana Lottery Company's charter. The election campaign was hard fought, with the lottery company pouring thousands upon thousands into newspaper publicity and to promote the Progressive League, which covered the state with campaign orators proclaiming the lottery's benefits and fighting the Anti-lottery League.
On the other hand the clergy and reform-minded citizens joined forces to exterminate "The Bloated Financial Monster," crusading at mass meetings, singing vigorous religious songs, and enlisting the support of fellow citizens to vote for their candidate. With the zeal of fanatics they won against the company's unlimited funds.
The Louisiana Lottery Company dragged out its existence till its charter expired. Its revenues, curtailed by federal law, barely met operating expenses. Finally, Paul Conrad, who became the company president after Dauphin's death, moved his headquarters to Puerto Cortes, in Honduras. In 1907, when company agents in the United States were relentlessly prosecuted by the federal government, the Serpent finally died.