The Louisiana Lottery Scandal of 1868-1893 reveals a shocking tale of corporate corruption and governmental capture. This 25-year saga showcases how a private company effectively purchased and controlled an entire state government.
Key Takeaways:
- The Louisiana Lottery Company bribed officials at all levels of government for 25 years
- The company paid only $40,000 annually while generating millions in profit
- Federal intervention ultimately ended the lottery’s operations in 1907
The Birth of a Corrupt Enterprise
In 1868, Louisiana was in dire financial straits following the Civil War. Charles T. Howard, a former Kentucky lottery agent, approached the state legislature with a tempting offer. His proposed Louisiana State Lottery Company would pay $40,000 annually for exclusive rights to operate the only legal lottery in the state.
Desperate for revenue, lawmakers accepted the deal. What they didn’t realize was that they had effectively sold their state to a criminal enterprise that would corrupt every level of government for the next quarter-century.
The Octopus Takes Control
The Louisiana Lottery Company quickly expanded its influence beyond mere political lobbying. It systematically replaced normal governmental functions:
- Legislators served as paid lottery agents
- Multiple governors acknowledged the company’s control
- Judges consistently ruled in the lottery’s favor
- The company’s charter was written into the state constitution
By the 1880s, the lottery was generating over $8 million in annual profits. To maintain a veneer of legitimacy, it hired Confederate Generals P.G.T. Beauregard and Jubal Early to oversee drawings, paying them lavish salaries.
Resistance and Federal Intervention
Opposition to the lottery’s control grew in the late 1880s. Governor Francis T. Nicholls emerged as a key opponent, refusing to extend the company’s charter. The lottery fought back with propaganda and attempts to influence elections.
Ultimately, federal action proved decisive. In 1890, Congress banned the use of the U.S. mail for lottery purposes. Since 90% of the lottery’s revenue came from out-of-state sales, this dealt a severe blow to operations.
The Honduras Escape and Final Shutdown
Faced with extinction, the lottery attempted an audacious escape. In 1893, it relocated to Honduras while maintaining its Louisiana charter. This scheme was orchestrated by State Treasurer E.A. Burke, who embezzled over $1.5 million in state funds to aid the company’s continued operations.
For over a decade, this international lottery scheme persisted. Federal authorities finally shut down the operation in 1907 by seizing printing presses in Alabama and Delaware.
Legacy and Lessons
The Louisiana Lottery scandal had far-reaching consequences:
- It turned American public opinion against lotteries for 70 years
- Exposed weaknesses in 19th-century governance structures
- Highlighted the dangers of concentrated wealth and political influence
While today’s campaign finance laws and oversight make such complete corporate capture more difficult, the scandal remains a cautionary tale. The company’s techniques – systematic bribery, media manipulation, and regulatory capture – remain relevant to contemporary discussions about money in politics.
Over its 25-year Louisiana operation, the lottery paid the state approximately $1 million total while generating profits estimated in the hundreds of millions. In modern terms, Louisiana sold monopoly control over its government for about $25 million total – while the company extracted value equivalent to billions.
This scandal serves as a stark reminder of how democratic institutions can be subverted when proper safeguards are absent. It demonstrates the potential for a business arrangement to evolve into complete governmental capture when oversight mechanisms fail.
The story of the Louisiana Lottery Company stands as a case study in 19th-century corruption, from Charles Howard’s acquisition of the original charter to E.A. Burke’s flight to Honduras with stolen state funds. It shows how a private enterprise can purchase an entire state government, operate it as a subsidiary for 25 years, and when exposed, attempt to continue operations from another country while maintaining the fiction of legal operation.
While this particular lottery may have been a swindle, it’s worth noting that there have been many legitimate major jackpots in lottery history. The largest lottery prizes in U.S. history serve as a reminder that, when properly regulated, lotteries can offer life-changing opportunities without compromising governmental integrity.
