Andy and Judy Amada have taken a big spin.
Andy and Judy Amada have taken a big spin.
Paolo Vescia

Numbers Racket

Only the wise possess ideas; the greater part of mankind are possessed by them.

-- Samuel Taylor Coleridge

The modifier "Quixotic" is a too-convenient label for the benignly touched, the daft but determined, the delusional, the obsessed, the prophet of the hopeless cause. Even before Cervantes gave the condition a name, novelists bestowed their heroes with Quixotic qualities. In fiction, the misunderstood knight is romanticized and ultimately vindicated.

But Andy Amada is not a fictional character.

He is a boyish-looking 55-year-old entrepreneur who is convinced he possesses a great idea. It could make him a very wealthy man.

To that end, however, Amada believes he must slay a meddlesome giant -- specifically, the Arizona Lottery, which is a hideous gargoyle indeed.

Until he accomplishes this feat, he remains a man possessed by an idea.

Andy Amada has a thing for numbers. He holds an MBA in finance from Arizona State, 33 hours toward a doctorate at the University of Iowa. But Amada forsook academy for a business world replete with hulking windmills and apparitions.

He was a financial analyst for U-Haul and then a medical device manufacturer. He taught managerial accounting and finance at the University of Phoenix before going to work for Sun State Savings & Loan. In 1990, Sun State preceded every other Arizona thrift on the ash heap of unregulated speculation. Amada, a vice president, managed investments, not loans, and paid no penalty for the thrift's meltdown. Many Sun State officers did. Taxpayers expended some $400 million to clear the detritus of Sun State. Amada emerged from the S&L debacle to become a partner in Exxis, which peddled software. The partners sold that business in 1995.

That same year, Amada and his wife, Judy, a former court reporter, launched their brainchild. It's called PowerPick, a business that for a fee enters players in lottery pools. PowerPick's ads stress that by joining a pool, lottery players vastly increase their odds of winning a jackpot. The prize, however, must be shared with 25 or 50 others in the pool.

Courts have held that what PowerPick does is legal.

PowerPick claims to have serviced more than 10,000 clients. This despite the fact that the fine print in its brochures warns that players are likely to lose money. The Amadas attribute their success to added excitement (owning a share in more lottery numbers) and convenience (players need not venture out to buy tickets).

Individuals form ad hoc lottery pools all the time, and the Arizona Lottery has even promoted informal pooling among players. PowerPick apparently is the only business of its kind in the nation. The Amadas hope to expand to other states.

PowerPick's growth has come in fits and starts, depending on the government's assailant du jour.

And considering that a mere $5.10 of a client's $22 buy-in goes toward the purchase of actual Pick and Powerball tickets, it's a wonder PowerPick has any customers at all.

It seems inexplicable until I remind myself that lotteries are nothing more than state-sanctioned taxes on ignorance. Americans ploughed more than $36 billion into lotteries in 1999. So it can only follow that a service that dilutes lottery winnings would be warmly embraced.

The Arizona Lottery has always loathed PowerPick, and it's easy to understand why. Lottery officials see that nearly $17 of a PowerPick member's $22 minimum monthly ante going not to ticket purchases, but to PowerPick's overhead.

They see someone running a legal scam that eclipses their own legal scam. They see someone exploiting the exploiters.

From the start, Andy Amada has kept the state informed of exactly what he is doing. And from the start, the state has done little to disguise its contempt for Amada's business.

Amada met with lottery officials early on to explain his enterprise, and the record brims with letters from Amada stating his intentions, offering previews of his marketing materials and seeking feedback from lottery bureaucrats and lawyers. Nobody voiced any opposition.

The state tolerated the Amadas until they applied for a license to become a lottery retailer in December 1996. They wanted to actually sell the tickets they market to the PowerPick players. The Amadas had always schlepped to retailers to stand in line and buy up to 7,000 lottery tickets and 1,000 instant scratcher tickets a week. (The instant tickets are given to PowerPick players in their monthly statements.) A sinister character tailed Amada after one such foray. Security became a concern.

Furthermore, a retail license would give PowerPick a 6 percent commission on the tickets it was buying.

The lottery director denied the application, a decision the Amadas appealed. During a May 1997 hearing, the lottery's director of security testified that the license was denied because he was not certain whether PowerPick was a legal business. Andy Amada took the stand and explained his business thoroughly. On June 11, 1997, an administrative law judge sent the lottery director his recommendation: Give PowerPick a license.

State regulations give an agency chief 30 days from the receipt of such a ruling to act. The then-director, Jody Spicola, did nothing until PowerPick's attorney informed him that the 30 days had elapsed. Under the circumstances, the agency was bound to follow the judge's recommendation. Instead, Spicola issued an undated decision, again denying the license. The Amadas bolted to Superior Court.

Geoffrey Gonsher replaced Spicola as the Arizona Lottery's executive director. With things going badly for the state in court, Gonsher was forced to relent and grant PowerPick a retail license. The state admitted that the lottery had been "arbitrary and capricious" and agreed to pay PowerPick $14,000 in legal fees and costs. PowerPick was given a terminal which allowed the business to electronically register its sales with the lottery.

While the court battle raged, PowerPick was attacked from the flank. The United States Postal Service claimed that PowerPick -- by definition an agent for state lottery players -- was an illegal lottery itself. A federal judge agreed, and PowerPick's mail was cut off. The Amadas appealed to the Ninth U.S. Circuit Court of Appeals, which ruled in January 2000 that PowerPick was not an illegal lottery. The two-year detention of PowerPick's mail retarded the company's growth, and the legal fees were staggering. Amada believes that Arizona Lottery officials asked postal inspectors to intervene. I'd be surprised if this were not the case.

The lottery began another sortie last April, notifying PowerPick that its retail license was in jeopardy due to myriad violations, including selling tickets to itself, paying prizes to itself (PowerPick owns 2 percent of all pools it creates), granting some players credit instead of paying them by cash or check, and selling tickets off-premises (over the phone).

PowerPick inquired whether lottery officials would be satisfied if it divested itself of the pooling service. The Amadas got no response, but in May went ahead and shifted the pooling service to a second corporation -- one firm would run the pooling service, one would be the licensed retailer.

Two weeks later, Gonsher informed the Amadas that their retail license was being revoked. PowerPick demanded another hearing. This time, however, an administrative law judge upheld the license revocation. In November, lottery agents descended on PowerPick's office and seized its on-line terminal and instant-game tickets inventory.

The lottery issued a triumphant press release. The tenor of the dispatch raised questions about the legitimacy and future of the pooling service, which was unscathed by the retail license revocation. A Superior Court judge quickly ruled that the state had improperly shut down the Amadas' retail ticket sales operation. The lottery was forced to return the equipment, and the Amadas resumed selling tickets pending their appeal to the Arizona Lottery Commission.

Amada appeared before that panel last Friday. Neither he nor his attorney were allowed to make a presentation. Two commissioners asked a few questions, and the body then voted unanimously to uphold the license revocation. PowerPick will take the case back to Superior Court.

Pardon PowerPick's pugnacious president for his paranoia.

"They just go at you and at you and at you, and it's no skin off their nose, because it's not their money. It's taxpayer money," Amada grouses.

Curiously, no lottery officers or commissioners will utter a bad word about the Amadas' pooling service. Gonsher says there is "no basis" for Amada's claim of a lottery vendetta against his company -- a statement that seems disingenuous at best.

As for the Amadas' retail license, the official mantra is that rules are rules, and PowerPick has violated them. This is an arcane area of law with little legal or administrative precedent in Arizona. It's a semantical thicket. A close reading of the record convinces me that PowerPick has made a good-faith attempt to follow the rules.

Yet, today, PowerPick -- which rates No. 5 in sales volume out of more than 2,500 sites statewide -- can sell no tickets.

Amada quips about the lottery's "Sales Prevention Department."

So why doesn't Amada just surrender and open a coffee shop?

"I guess it's because we enjoy working with our customers, and we believe we can grow the business and expand to other states," he says. "I'm a very idealistic person, and it just burns me up that we have people in the government like these people in the lottery. I can see why people begin to detest their government."

If Andy Amada is a reincarnation of Cervantes' Knight of the Woeful Figure, a man possessed by an idea, he has the good fortune of succor not from a squire named Sancho, but from an esquire named Charles Buri -- a barrister who was once director of the Arizona Lottery.

Don't bet against them.


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