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$5 lotto tiff to cost state $1.1 million

From Hussein Saddique
CNN

Indiana's Hoosier Lottery has spent nearly $500,000 in legal fees over a claim for $5.

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(CNN) -- A dispute over a winning lottery ticket would have cost Indiana's Hoosier Lottery $5 to resolve in 1997. Now it will cost more than $1 million to settle in court.

Tom H. Smith, of Indianapolis, Indiana, bought an instant-win, scratch-off lottery ticket in 1996, which awarded him a $5 prize.

Smith didn't redeem his ticket until several months later when, he was told, it was too late to collect the prize. Smith appealed to the Indiana State Lottery Commission, insisting that he had no way of knowing when the game ended.

When his claim was rejected, he sued the agency for damages. His suit eventually became a class-action suit that brought in other ticket holders.

Hoosier Lottery Executive Director Esther Schneider told CNN the agency has spent almost $500,000 in legal fees on the case since 1997. A proposed settlement will create a $600,000 fund to resolve this and other disputes with lottery claimants, she added.

"This was probably mishandled from the beginning," Schneider said. "In nine years there weren't any any attempts made to come to a reasonable settlement ... [because] the previous administration's policy was not to settle."

Schneider was appointed in 2004 by Republican Gov. Mitch Daniels, who unseated a Democratic administration. "When I came into this office, I said, 'How can we put an end to this?' " she said.

The proposed settlement, which a judge still has to approve, will award Smith $15,000 in damages to be provided from the $600,000 fund.

In addition to the award paid out to Smith, the fund will cover plaintiffs' attorneys fees in the class-action suit and fund administration costs, according to Schneider. "Whatever is left will be for claimants," she said.

The lottery has changed its practices since the lawsuit was filed and now prints the dates by which lottery ticket holders must claim their prizes, Schneider said.

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