Legal state lotteries do little to break organized crime's grip on illicit games

Legalized state lotteries have failed, in most cases, as a tool for busting up organized crime's control of illicit numbers rackets and bookie operations, according to state and federal law enforcement experts.

More than a decade after state politicians and policymakers began pledging that the legalization of lotteries would help put Mafia-run numbers rackets out of business, law enforcement experts are concluding that the effect has been minimal.

They note that in some cases states promoting multimillion-dollar jackpots, rather than competing with the illicit rackets, are reaching out through vigorous advertising campaigns to generate a new clientele of novice gamblers.

''To the degree that society and the government promote gambling, you ultimately turn Uncle Sam into the godfather,'' says G. Robert Blakey, a gambling and organized-crime expert at Notre Dame Law School. ''I think that is a tarnished image of the government.''

''Anyone who makes the argument that the reason to legalize the numbers business is that it will put organized crime out of business is being disingenuous at best,'' says Jeremiah O'Sullivan of the United States Justice Department's New England organized-crime field office. ''It just isn't going to happen.''

Estimates in Massachusetts are that the state-run lottery may have reduced profits in the illicit numbers betting games by 10 to 15 percent. But no formal studies have been conducted.

Lottery officials in New York say there are indications that the state lottery has cut into the illicit numbers business in the upstate region near Buffalo. Officials add, however, that it has had no effect on the thriving, well-organized rackets in New York City.

''The early rationale was that state lotteries would cut down on the illegal gambling,'' says New Jersey Assemblyman Chuck Hardwick (R) of Union County. ''There is no evidence to indicate that that has happened.''

These comments come at a time of heightened public interest in state-run lotteries after a string of well-publicized multimillion-dollar jackpots - including a $22.1 million New York jackpot early this month and an $18.3 million jackpot in Massachusetts in March.

Lottery critics argue that - as a result of publicity surrounding lottery winners - more people are being lured into playing lotteries without fully understanding their chances of winning. They say that little publicity is given to the millions who lose the lottery each week.

According to the odds, an individual has a better chance of being struck by lightning this year than of winning a weekly New York State jackpot. Lightning expert Richard Orville of the State University of New York, Albany, estimates the odds of being struck by lightning in a given year are roughly 1 in 2 million. According to New York lottery officials, the odds of winning the Lotto jackpot are 1 in 3.5 million.

Currently, 17 states and the District of Columbia run legalized state lotteries. Several other states are considering enacting pro-lottery laws. Lottery supporters in California have submitted a petition with more than 1 million signatures calling for a state constitutional amendment to permit a California lottery.

The rationale of state politicians has been that lotteries provide an opportunity to hurt the existing Mafia-run numbers betting games and, at the same time, to create a new source of state revenue without having to raise taxes. In recent years, the additional revenue has become the dominant attraction for state policymakers and voters who have pushed to legalize state lotteries.

The California proposal would earmark 34 percent of lottery revenue for public education. Existing lotteries follow similar formulas: New York allocates 45 percent of its lottery revenue ($400 million this year) to local education; New Jersey earmarks 30 percent ($290 million this year) to education and state institutions; Pennsylvania earmarks 40 percent ($480 million this year) to senior citizens' benefit programs; and Massachusetts distributes 27 percent ($ 100 million this year) to cities and towns as a form of local aid.

Lottery supporters argue that state residents want to participate in lotteries as a form of recreation. They say if the legal game did not exist, organized crime would continue to reap big profits from the illegal street games.

''It's not a question of whether there will or will not be gambling,'' says Martin M. Puncke, president of the National Association of State Lotteries. ''The question is, do you want to control it,''

New York lottery director John Quinn adds: ''The fundamental issue is that 72 percent of the people nationally support lotteries as a means to earn state revenue. If so many people support them, should an elite minority opposed to lotteries be able to direct the actions of the overwhelming majority?''

Several church and community groups have argued against legalized lotteries on moral grounds. But over the years, the moral issue has been muted by a wider public attraction to the idea that a percentage of lottery proceeds will help boost public programs or projects, says Mr. Blakey of Notre Dame Law School. Lottery advocates have also suggested that lottery profits will help keep state taxes down.

Critics such as Blakey and Mr. Hardwick question whether lottery proceeds are being allocated and spent in accordance with the expectations of the local voters who approved referendums to legalize statewide lotteries. They say some of the referendums have been written to suggest that lottery funds would help beef up certain state programs like education or senior citizen projects.

In many states, these critics say, lottery proceeds have simply replaced budgeted funding for existing projects, thus freeing up previously budgeted funds to be allocated where state legislators wish to allocate them.

Most of the state-run daily lotteries have been specifically patterned after the illicit numbers games that have thrived in American cities for decades. Massachusetts State Police Lt. Charles Henderson says such lotteries have been ''the bread and butter of organized crime.'' He says gambling profits are recycled into other underworld activities, such as loan sharking and narcotics.

Law-enforcement officials say the primary reason legal lotteries have not undercut the illicit rackets is because the illicit rackets still offer a better game. Officials say neighborhood rackets permit bets as low as a few pennies, accept bets on credit, and offer a higher payback than legal state lotteries. In addition, winners in the neighborhood rackets generally don't report their winnings to the Internal Revenue Service. (In the legal lottery, a significant win could boost a taxpayer into the 48 percent tax bracket.)

Massachusetts lottery officials say that when they first started the state's daily numbers game they were surprised at the number of Massachusetts residents who apparently already knew how to play. State officials saw this as a reflection of the extent of illicit gambling activity in the state.

One such racket in Boston was operated out of an office at 126 Prince Street in the city's Italian North End, according to documents on file in federal court. The operation was headed by Gennaro J. Angiulo, the alleged boss of the Boston underworld, the documents say.

The numbers-betting office was raided by federal agents in April 1981, according to a Federal Bureau of Investigation affidavit. The affidavit was filed in connection with the 1983 indictment of Mr. Angiulo and various associates. The charges contain a series of racketeering counts including murder , obstruction of justice, loan sharking, and illegal gambling. The case is expected to come to trial this summer.