Where Did The Sweeps Millions Go?

 Posted by on August 21, 2012  Add comments
Aug 212012
 

Some time ago, I wrote a post about the Sweepstakes fraud, a gigantic scam perpetrated by Joe McGrath and associates.  In recent days, that post has attracted comments of an extraordinary nature from somebody very keen to muddy the waters and distract attention from McGrath’s thievery.

Joe MacAnthony is the journalist who first wrote about the  world’s biggest lottery fraud, and he has kindly contributed the text of that  article for publication here.  The fact that it was published in 1973 makes the figures earned by the operators of the Sweeps even more staggering.

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Where Did The Sweeps Millions Go?

 

Disturbing secrets of the world’s most extraordinary lottery  Following months of investigation into the Irish Sweepstakes, it can now be established that Irish hospitals are receiving less than 10% of the value of tickets marketed in their name throughout the world by Hospitals Trust (1940) Ltd.

From interviews with the U.S. Postal Department and with police across Canada – where most of the tickets are sold – it seems clear that more than 90% of the value of tickets entered in each draw is being written off, mainly to expenses, at a rate of more than £150,000 a week.

Our investigations show also that the persons legally responsible for managing and controlling the Sweepstakes – The Associated Hospitals Committee – are not fully aware of the true figures involved in the operation of the Sweep. Nor are Dáil deputies – even though it is Dáil Eireann which provides the authority by which the Sweepstakes are run.

These disclosures are only part of what must be one of the most extraordinary, yet least publicised, stories in modern Irish history, for the facts show:

  • That the Act which licences the Sweep was so framed as to prevent the Irish public knowing the real amount of money spent in running the scheme.
  • That the figures published by Hospitals Trust (1940) Ltd after each sweepstake are considerably less than the true amount involved.
  • That the hospitals receive only 75% of the sum described as the Hospital Fund – because the only tax on the Sweep is taken from the hospitals not the organisers.
  • That agents of Hospitals Trust Ltd. are engaged in selling tickets abroad at prices far above those sanctioned by the Minister for Justice.
  • That leading shareholders in Hospitals Trust Ltd. have also been involved with a bookmaking group in buying up ticket shares which allows them to win their own prizes.

It is also true that while the leading family involved in the Sweep, the McGraths, are increasing their wealth at a rate of £8,000 per day, most of those who have retired after giving 25 years service to Hospitals Trust Ltd. are receiving a pension of less than £4 a week.

It was facts like these which led the Readers Digest to describe the Sweep – in the U.S. edition which never circulated in Ireland – as The Greatest Bleeding Heart Racket in the World.  Whether it could be so described, or as an act of enlightened philanthropy, there is no doubt that the Sweep has given its promoters enormous wealth and influence in Ireland.

The families of the three men of modest means who promoted the first Sweep in 1930 now could adversely affect the entire Irish economy if they chose to use their personal fortunes built up from profits on successive Sweeps in order to do so.

The owners of the Hospital Trust (1940) have amassed wealth close to £100 million which makes them not only the richest people in Ireland by far but also places them in a bracket with the wealthiest in Europe.

The leading shareholders in the group – the McGraths – have seen assets and earning increase at a rate of more than £3 million per year, which is the same as what the Irish hospitals received from the Sweeps in 1971.

Similarly, the next biggest shareholders – the Duggans and the Freemans – have increased their combined wealth by almost the same amount.  Even the smallest group – Mrs. Miriam Rees and Mrs. Yvonne Fogarty are the daughters of a former shareholder – hold assets worth over £2 million while Mrs. Mary McAvin with only 300 shares is also a wealthy woman.

These fortunes were built on an agreement signed by Hospitals Trust Ltd. in 1930 with a group of six Dublin hospitals which allowed the company to promote sweepstakes on the hospitals behalf.

Tax Exemption   As a result of that agreement, Hospitals Trust Ltd. is now being paid over £300,000 per year as a management fee for promoting the Sweep. Over the last ten years, they have received fees of £3,115,178.  The promoters also receive a salary in addition to the fee.  According to the Readers Digest report, the late Joe McGrath’s salary was £100,000 per year plus generous expenses.  No tax is deducted from the promoters’ revenue in the published accounts of the Sweep.  The hospitals – on whose behalf the Sweeps are run – are not so fortunate. Their allocation after each draw is taxed at 25% (in the form of Stamp Duty).

In the Cambridgeshire draw run last September, for instance, the hospitals’ share of the proceeds was assessed at £979,084. The Sweep promoters describe this sum as 25% going to the hospital Fund.  In actual fact, the hospitals receive nowhere near this figure. After tax is deducted, the hospitals revenue dropped by £244,777 to 18 2/3% of the proceeds.

Even this figure might be regarded as reasonable if it were a true proportion of the actual money spent on Sweep tickets. Again this is not so because the published proceeds do not reflect the real figure involved.

Part of the reason for this lies in the Public Hospitals Act 1933 which governs the running of the Sweeps.  Section 2 provides as follows: -

When calculating for the purposes of this Act the amount of the money received from the sales of tickets in a sweepstakes, the value of the tickets issued free of charge by way of a reward to a seller of tickets shall be excluded from the calculation and there shall be deducted from the nominal selling price of all other tickets all commissions, prizes and other remuneration given in relation to the selling of such tickets.

Thus, the number of tickets given by way of reward can be deducted before making up the proceeds which are published by Hospitals Trust Ltd.  The Section also excludes from the tally ‘commissions, prizes or other remuneration given in relation to the sale of tickets.  It is described as a limitation on the organisers but it is in fact an open invitation to maintain an expense account which need never be shown to the public.

Because of this, the Sweep promoters operate two sets of expenses, only one of which ever appears in the published balance sheets. And even the published accounts are restricted to Dáil deputies and those directly connected with the Sweep.

Smuggling Ring  There are strong indications that the hidden expenses take a hefty slice of the Sweeps revenue.  Police officers in Canada, for instance, who have built up an intimate knowledge of the workings of the Sweep through successive raids on its agents, believe that more than a third of the money raised in Montreal, Toronto and other cities there never finds its way back to Ireland.

There are good reasons for believing this is so. For one, the Sweep gives 16 2\3% of all tickets as commission in the form of free tickets. Most of these tickets are sold in Canada but the money never returns to the Sweep.  In addition, there are main distributors and sub-distributors who receive payments which the police believe is at least $3 per book of twelve.

The Sweep, in their ticket distribution also operates the largest smuggling ring outside of the Mafia which involves payments to seamen, longshoremen, railway, postal officials and sometimes customs officers, according to a French Canadian police officer in Montreal in a published newspaper report.

Certainly, many people in Canada have done very well out of the Sweep.

Police Raid  A police officer told me of a raid he made on the expensive home of a distributor in Quebec.  During the raid, he noticed that the house dog had soiled one of the expensive Oriental rugs on the floor. When he mentioned it, the distributor laughed and said: -When he does that, I just roll up the carpet and throw it out. Then I buy another one.

Another distributor, who was not a main agent, worked as a floor sweeper in Sarnia, Ontario before he died.  During his time with the sweep, he made enough to take back more than $10,000 a year to Ireland to deposit in a bank there.  The police knew he also used a safety deposit box in a bank across the border in Michigan but they were unable to find out how much was in it.

Another agent in Toronto, who had hundreds of sellers working under him, was making more than $20,000 a year from his activities. Police had found so many examples of this type of prosperity around the country that they could only conclude that a large amount of the money spent in Canada and the U.S. on tickets remained in the hands of the people who sold them and was not going back to Ireland.

Bribery Costs  At the very least, the commissions to sellers and distributors would represent 25% of money spent on Sweep tickets in Canada or $9 out of a $36 book.  But the police also say that there are high smuggling and bribery costs plus tickets sold but not returned to Ireland which send expenses even higher.

As an example, a former head of Montreal’s Morality Squad said the seizures he initiated uncovered more tickets in Canada alone for one Sweep in 1966 than made up the entire proceeds listed for that draw.  In another raid, he found receipts supposedly from Dublin for tickets which had been sold only four days previously and couldn’t have made the round trip in that time. He felt people had a right to receipts from the organization in Dublin and said it was not controllable if sellers and distributors were allowed to write official receipts in its place.  This officer also recalled seizing over 3000 stubs – worth over $10,000 – after a tip-off which he believed had come from the agent himself because the man involved did not want to send the money back to Dublin.

Tickets Burnt  In another case in London, an aspiring distributor simply posted books of tickets to everyone whose name appeared in the phone book, thus flooding the city with tickets over which nobody had control. The police, after countless phone calls from those who received tickets, finally advised that they be burned as the best way out of the problem. No one could even guess at the amount of money raised on tickets like these which never went back to Dublin.

The looseness, which seems to characterize the operations of the Sweep promoters in Canada, has allowed occasional criminals to creep into the network.  The police in Toronto confirm this although they say that most of the organizers have no criminal records and are descended from the original Irish ring of former I.R.A. men who distributed the tickets back in the 1930′s.

The illegality surround the sales of tickets in Canada and some of the dubious operations linked with that sale make Canadian policemen critical of the Irish Commissioner of Police for allowing his name to be associated with the scheme, since each ticket for the draw states it is held under his supervision.

After all, we know here that the bulk of the money is not going where it should be going, the head of the Morality Squad in Toronto said. Police in London, Ontario and in the nearby town of Sarnia, expressed the same opinion.

 

Lot of Tripe  I was really surprised to see the small amounts going to the hospitals and to the prize fund when I read one of the reports a while back, a police sergeant who made a large haul in Sarnia on one occasion told me.  The man he charged – he was fined $1000 – produced a large wad to pay his fine and invited all the policemen out to lunch afterwards.

A Montreal lieutenant was even more emphatic. You can’t control an operation like what the Irish Sweep are doing here without a lot of money sticking to people’s fingers. It’s a lot of tripe to say it’s on the up and up. From what I’ve seen, I’d put the money going back to Ireland at around 90 cents out of every three dollars spent on tickets.

Because of the high expense involved in the Canadian operation, counterfoils which come from there are referred to as cut price tickets in the Sweep itself.  Even so, the loss in revenue on such tickets does not end there. Further deductions are made in Ireland before all returns from North America reach the Sweep itself.

Although not generally known outside the Hospitals Trust organization, the promoters also maintain what are called transit agents who receive 15 pence per book on tickets arriving at their accommodation addresses in Ireland from outside the country.

Mythical  It is difficult to understand why the Sweep should pay out commissions to such people when they maintain their own staff to do such work.  The money taken from Sweep funds in this way runs into tens of thousands of pounds a year although the public never hears of it.

It is true that some agents like Mitre Sports Goods of Capel Street and Mr. J. Egan of Blackrock do a great deal of work for the more than £15,000 ($45,000) per year they receive.  But it would be worth hearing justification from the promoters for agents in Ireland who get fresh overriding commission on foreign tickets without doing anything beyond providing a convenience address. It would be especially worth hearing about the subject from the mythical Mr. Moran, of Merrion Road (actually Patrick McGrath, the chief executive of the Sweep who was receiving secret commissions).

The heavy loss of revenue involved in such operations, together with foreign commissions – which, as explained, are not included in published figures for proceeds – eat heavily into the money supposed to go to the hospitals and prize funds. A conservative estimate would place them at around a third of all money spent on tickets abroad.

There is justification for adopting this figure. On the one occasion (in the Stanhope case in the Irish High Court in 1936) when the Sweep were forced to reveal the value of tickets going into the drum for the Grand National Draw in 1932, the value of tickets was £911,853 more than the published proceeds. These sent expenses up from the published figure of 8.22 per cent to an actual figure of around 40%.

Second Bite  When this figure is added to the second bite at the cherry which the Sweep promoters are allowed of official expenses – over £1 million on the Cambridgeshire alone – then the overall allowance is much higher than that allowed to ordinary lotteries in Ireland.

Under the provision s of the Gaming and Lotteries act 1956, not more than 40% of the total proceeds, including free tickets, are allowed on any lottery. When the Sweep’s published and hidden expenses are added to the prize fund and taxes, there seems no doubt that less than 10% is left over for the hospitals in whose name the scheme is being run.

The Sweep promoters have found ways to maintain such heavy expenses, which have doubled in the past ten years. To do so, however, they appear to be going outside the law which is supposed to control their activities.

Under Section 65 (p.e.) of Public Hospitals Act, 1933, the Sweep is obliged to inform the Minister for Justice of the price being charged to the public for tickets. Since the price marked on the tickets sanctioned by the Minister is £1, one can assume that this is the figure he allows the tickets to the sold at.

 

Charge $3  In fact, this is not the price which the Hospitals Trust are charging in North America. According to a document in our possession, they charge $2.75 or 15% more than the legal price which should be $2.40.   In addition, agents in North American add a further 25 cents to make a round figure per ticket of $3 which is far above the prevailing rate for £1 sterling.

An example of the Sweeps attitude on this issue is that tickets arriving in their Dublin officer from America are accepted at a legal price of $24.50 per book of 12.  If, however, an innocent subscriber sends in $27.50 for a book, the promoters will not return the extra money but will transfer it to their credit department. It is not known where the money goes from there.

Indeed, it would be extremely difficult for the outsider to find out, for the Sweep does not lodge all its money to the same account. To go further, the promoters do not lodge all the money in the same financial house.  As a matter of fact, the companies which receive Sweep lodgments are not even of the same nationality.

The complicated procedure is as follows. On one day, the cash received from abroad goes to the Bank of Ireland.  On the following day, the cash received is lodged with an American company. The day after that, the money goes to a British company.

 

Breaking Law  This system of alternating lodgments with companies of different nationalities is followed all year round. Thus, any American, British or Irish investigator would have difficulty in assessing the full sums lodged to Sweep accounts.  The amount involved in these lodgments is substantial for the Sweep receives an enormous flow of mail from foreign subscribers. In dealing with it, they are covertly assisted by the Department of Posts and Telegraphs who break international postal law in doing so.

Many of the letters arriving in Ireland for the Sweep are sent to accommodation addresses. Most of these letters are easily distinguishable by the simplicity of their addresses.  Some of the addresses do not even exist.

A few years ago, there was considerable panic when a bundle of letters addressed to one of these mythical houses arrived at the Irish Press by mistake. Under postal regulations, agreed by international convention, letters sent to non-existent addresses must be returned to the sender. Instead, a postal official was dispatched to pick them up for delivery to the Sweep.

Officials in the Department of Posts and Telegraphs routinely pass many such letters to their real consignee, the Sweep. In some cases, letters are sent to real addresses – a Sweep car collects such letters at certain Dublin hotels every day – where they are passed straight to the Sweep by arrangement.

Non Hostile  The flow of illegal mail from North America has received only cursory attention from the postal authorities on the other side of the Atlantic. The last serious crackdown was made by Robert Kennedy as Attorney General in 1962 when he charged that lotteries like the Sweep were an encouragement to organised crime.

Today, the post offices of Canada and the U.S. are more interested from a technical point of view in how the Sweep letters get into North America than in how they get out.  Most of their discoveries have been accidental as when customs officers in San Francisco Airport seized 200 letters from Hamburg suspected of containing pornographic material. The opened letters were found to contain 50,000 receipts for sweep tickets, all addressed to Californian residents.

Such hauls are exceptional because the Sweep mailing system is highly organised. For instance, in the United States, they class seven states including Arkansas, Michigan, New Mexico and Wyoming as non hostile and post letters to them from Europe, including Ireland.

 

Smuggled  Continental, British and Irish airmail letters are used in such cases, although the majority are sent in plain envelopes.  All letters to Hawaii, for example, go in plain envelopes. For the 10 states which are hostile, including New York, California and Texas, the letters are actually smuggled into the United States before being posted from cities like New York.

How the Sweep smuggle letters into North America remains a mystery, although Hospitals Trust Ltd have considerable expertise in the legal movement of cargo at their disposal.  At least two of their executives are ex-seaman.  Another, Con O’Farrell, is the largest single shareholder in Aer Turas, an air transport company which works out of Dublin Airport.

Interestingly, the last extraordinary general meeting of this company was held in the Hospitals Trust Building at Merrion Road.

If there is difficulty in discovering how letters with receipts are smuggled into North America, there is less confusion about how the Sweep tickets themselves reach their destination.  Stocks of tickets are moved by sea to Canada and usually off-loaded at a small port on the St. Lawrence Seaway for distribution in the U.S. as well as Canada.

Disguised  Formerly, the Sweep organisers relied heavily on Irish shipping personnel but this practice was stopped after the Irish Elm was seized by U.S. Customs in 1961 when four members of the crew were implicated in smuggling over £1.8 million worth of tickets into Newport, Virginia. Now foreign freighters are used. The last ship accused of carrying Sweep tickets was Icelandic.

Once the cargo reaches port, the tickets are then dispatched by rail to all the main centres of population. Distributors then break them down into smaller lots which go to sub-distributors who pass them on in 20 to 30 books at a time to direct sellers. The tickets are always disguised as other cargo. In the last big seizure in Montreal, they were labelled as table jellies and as product of the United Kingdom.

All these activities of the Sweep – paying heavily for ticket smuggling, charging high prices for tickets, giving non-working commissions to those closely connected with the organization – might be expected to cause some concern to those who are legally responsible for the Sweepstakes.

In fact this is not so. For there is evidence to suggest that the people legally obliged to manage and control the Sweeps don’t even know what is going on, far less control it.

 

Real Power  Under the 1933 Act, the body which is supposed to control the Sweep is the Associated Hospitals Committee, a group of distinguished medical practitioners and laymen. As the law stands, they hold the real power to run the Sweeps.  Although they gave Hospitals Trust Ltd. permission to promote and organize the Sweep through an agreement signed on June 29, 1930, it remains difficult to understand how they could abrogate their responsibility in law for overseeing all the Sweeps finances.

Yet the Associated Hospitals Committee is little more than a rubber stamp in the running of the Sweep. An example of their role can be seen from the notice summoning them to their last meeting on December 19, 1972. Members of the executive committee were invited to hear a report on the proceeds of the Sweeps Hurdle and to approve the number of prizes.  They were also asked to approve that the horses to be drawn in the last Sweep were the 74 horses entered for that race.

But there was no question of their receiving a report on the millions which circulate between Ireland, Canada and the U.S. in the buying and selling of tickets.  All they ever receive in regard to the Sweep’s spending is the same limited report on proceeds which go to all Dáil deputies and which exclude, as explained, important commissions.

The Committee could demand details on such matters but they have never chosen to do so as far as can be ascertained.  This is probably due to the tradition of not asking questions which developed around the Sweep when it first began back in 1930.

The men who began the Sweep, Joe McGrath and bookmaker Richard Duggan, with the help of Spencer Freeman as organizer were reticent about the manner in which they organised the lottery from the very beginning.  Duggan, who originally conceived the idea, did not even lend his name to the company which organised the first Sweep in November, 1930.  Partly because two Sweeps which he organised in 1922 and 1923 – on which the promoters’ profits were never published – had aroused hostility in the Dáil and his presence as an organiser could have raised criticism.

Because the first Sweeps were such an enormous success and brought in a good deal of money for Irish hospitals, few people were prepared to question the working methods of the promoters, least of all the Hospitals Committee charged with running the Sweep.  As a result, the promoters received considerable freedom in disposing of the Sweeps revenue in selling tickets. Since they did not have to explain to the Hospitals Committee – their overlords – who was receiving commissions and since the law allowed them to keep such facts concealed from the public, they were only responsible to themselves and their auditors, although they were required to supply the Minister of Justice with the actual figures involved.

The promoters were already receiving over £200,000 per year for managing the Sweep. Their freedom with expenses allowed them to supplement the income of their families and friends. Joe McGrath – who had a shrewd political brain – saw that the way to ensure the community did not turn against the Sweep was by bringing prominent people into something of a partnership with the enterprise.

 

Biggest Agent  In the thirties, deputies like Dan Breen and Senator J.J. Parkinson received commissions as did a former Sinn Fein chief, Father Michael O’Flanagan. An ex-chairman of the Revenue Commissioners, a Principal officer of the Department of Justice, a former private secretary to the Minister for Finance and other civil servants also profited from agencies.  Even an I.R.A. chief was on the books.

There were others who were closer to the promoters. A relative by marriage of Patrick Duggan was listed as an agent. A Herr Muller of Liechtenstein had an agency worth £9,000 a year which was closely supervised by Mr. Spencer Freeman.  The biggest agency by far was held by a man very closely tied to Joe McGrath himself.  He was Joseph McGarrity, a prominent Irish American republican. Sums of over £250,000 passed into his account between 1933 and 1938.

The huge bonanza which unsupervised commissions brought to those associated with promoting the Sweep was not the only method used to make money from the enterprise. The bookmaker’s eye of Richard Duggan saw there was a potential goldmine also in buying up shares in tickets drawn on horses in the races used by the Sweeps.

The Sweep promoters had one advantage over other share buyers in this field. They knew the names of those who had drawn tickets before anyone else.

 

Tax Trouble  A brother of Spencer Freeman – his name was Sidney Freeman – took to travelling to America before each draw took place.  Once there, he would receive a coded message from Dublin giving him the names of people who had drawn horses. Freeman, using an attorney called Mahony of 40 Wall Street, would offer a fixed sum for a half share in each of the potentially winning tickets.

The system of buying shares in Sweep tickets in this manner is unfailingly successful if correctly operated. The Sweep’s prize structure, broken into blocks of £120,000, facilitates the buyer.  Simply put, if all the horses in a race stand to share prizes of £120,000, the way to make a profit would be to buy half shares in the most likely prizewinners for less than £60,000. Skilled bookmakers can and do reduce the numbers of likely winners, and thus reduce their outlay.

Sidney Freeman, like Richard Duggan, was nothing if not skilled.  He became a well known figure in New York where he would set up an office in the Ritz Carlton Hotel.  On one occasion, he brought the sum of $1,000,000 and eventually made 320 deals for about $700,000.  The only horses he refused to touch were 100\1 shots.

By 1938, Freeman had run into trouble with the British tax authorities for non-payments of taxes on his sweepstake winnings. Although Freeman was notoriously modest in describing his profits, it is believed he offered the British Revenue £250,000 if they would waive all claims and it is understood that they accepted.

Immediately after Freeman was nailed, the Irish Revenue authorities got an order for the discovery of documents against Hospitals Trust Ltd.  But apart from a published notice of this, the subject of their enquiry was never publicised.

(As mentioned the ex-chairman of the Revenue Commissions was to receive commissions later.)

Sidney Freeman’s share buying was not his only activity in New York.  Freeman also visited those who actually won prizes and told the winners that it would take several months before they would get paid from Dublin. Without giving any reason for the delay in prize distribution (or that his brother was in charge of it) he told winners that he had funds available immediately if they were prepared to pay him a commission of 5%.  Many accepted the offer and thus the plucking of the chickens went as close to the bone as humanly possible. Some must have wondered if there was much point in collecting their prize at all.

One American, Charles Kranefuss, of Massachusetts, would have wished he hadn’t.  Kranefuss sold a half share in a potentially winning ticket to an unidentified bookmaker for $10,000 in the mid thirties. When the horse won, he paid $75,000 or the half share of his winnings to the bookmaker who then disappeared.  Immediately afterwards, Kranefuss was slapped with a massive tax bill for the whole amount which he had to pay because he couldn’t find the bookie. He thus became penniless within a short time of winning what was then the largest sweepstake prize existing in the world.

If Kranefuss couldn’t hold onto his money, there were others in Ireland who could.

 

Euphoria  With profits accumulating from all their activities, the promoters of the Sweep seeing war clouds on the horizon in 1939, were determined to make sure that nothing would interfere with their earnings.  They persuaded the Government to bring in an Act that would cover their costs if the Sweep ever lost money. In the euphoria which existed about the Sweep at the time, they had no difficulty in getting the law passed as Act No. 15 of 1939. The following year – in April 1940 – the Sweep suddenly lost £61,628.

The Government was treated to the spectacle of the hospitals whom the promoters were supposed to help, suddenly being forced to compensate the promoters for their losses. While the Hospital Fund had to pay the £61,000, the Government’s response was immediate. Within a month they brought in an Act which repealed the 1939 legislation.

In future, the promoters would have to pay their own losses.

Tough

On the next Sweep in August, 1940, the bottom fell out of the market because of the war and takings fell from the millions of prewar days to less than £100,000. The promoters fees fell to a few thousand pounds, although commissions and share buying still continued.

Joe McGrath himself bought half shares in tickets from his office in Merrion Road while Spencer Freeman worked with Lord Beaverbrook in the British war effort. The other principal shareholders, the Duggans and Philip O’Reilly, solicitor, helped to keep the engine ticking over.

When the war ended, business picked up again as the North American market re-opened to the Sweep. In 1947, an incident occurred which showed how tough the boss of the Sweep – McGrath could really be.  Regarded by those who met him as a bluff charming man, always ready to help a friend, his enemies had cause to rue his long memory. In many respects, he was an Irish Godfather. Indeed, there is a story told of his meeting leaders of the Mafia in New York in the thirties when they were making efforts to muscle in on the Sweeps activities.  McGrath, accompanied by tough ex-I.R.A. gunmen who were his comrades in the Irish War of Independence, was reputed to have made them a stern offer they couldn’t refuse. His connections with the Irish police of New York may also have helped. The mobsters took the hint and never went near the Sweep again.

 

Gullible  In 1947, McGrath had a different competitor in the shape of the Mexican authorities who announced they would start a sweepstake themselves in North America.  According to the New York Post, the Irish Sweep co-incidentally announced that they were giving up selling tickets in North America because of exchange difficulties.  The gullible Mexicans immediately approached the Sweep and asked would they help them organize their lottery.

The Sweep authorities were diffident. They might just do it if the Mexicans solemnly swore not to interfere in their other markets around the world.  Finally, agreement was reached and six Sweep experts were dispatched to Mexico to work on the scheme. Things appeared to go well and the Mexicans were delighted. As the draw time approached, however, their delight turned to anguish and then outrage as the U.S. postal authorities showed an uncommon efficiency in seizing mail for the draw.

They finally exploded when they found that counterfoils and their money was somehow mistakenly being sent to Ireland instead of Mexico city. The draw turned into a shambles and put paid to their hopes of building up an international lottery.

McGrath – when questioned by an American reporter on the transatlantic phone – simply shouted that the Mexicans got what they paid for and abruptly ended the conversation. Not only taken for a ride, the Mexicans seemed also to have paid the fare.

Apart from the Mexican incident, the post war years were halcyon days for the Sweep. There was brief embarrassment when, as a U.S. postal inspector recalled, they got a tip off about a conference being held in the Commodore Hotel in New York.  When the postal officials investigated, they were told it was a Congress for the Advancement of Celtic Peoples. As they discovered, it was a secret conference to re-organize the Sweep network in the United States.

 

Red Faces  The U.S. postal authorities took a liberal view of the Sweep’s activities. This stemmed from the decision of the Irish American Postmaster General of the thirties, Jim Farley, who announced he was prepared to view the matter of lotteries like the Sweep from a liberal viewpoint.   Farley, after his retirement, was an annual visitor to Dublin and was fond of calling on his old friends at the Sweep on such occasions.  For what purpose was never disclosed.

The Farley policy was to cause red faces in the U.S. postal service when Ed Sullivan announced to millions on television that the best place to buy a Sweep ticket was from the clerk on the counter of the Central Post Office in New York.

Such incidents did not unduly disturb the Sweep’s promoters. At home, criticism of the type made at a Church of Ireland Synod in 1938 and by the chief medical officer of Co. Dublin at the same time that our hospitals were no better off than they were before the Sweep, were never again raised.

Objections faded as the wealth and influence of Hospitals Trust grew.

The promoters were making enormous sums. Their published fees were climbing (£2,752,105 from 1952 to 1962) and they were making big profits from share buying as well (by 1956, their company was buying around 60% of all tickets sold in Ireland and England.) Commissions were also rising as sales rose steadily from £1.5 million to £6 million through the sixties.

The only difficulty faced by the promoters concerned their own staff. A number of workers employed by the Hospitals Trust Ltd had joined the Workers Union and tried to negotiate on wages and conditions with their employers.

Joseph McGrath, a veteran official of Ireland’s 1913 general strike, refused point blank to have his former boss’s union organise Sweep workers. A deputy raised the matter in parliament, pointing out that Hospitals Trust Ltd. by refusing the right of free association were breaking an international agreement to which the Irish Government was a party.

 

Outflanked  The deputy said that Sweep promoters held their job at Government sufferance and that they should force Hospitals Trust Ltd. to comply with their wishes. Then, in 1950, McGrath completely outflanked trade union opposition by recognising a house association within the Sweep and could say that he was not embarrassing the Government in denying his workers the right of association.

The house union, which is not associated with any outside union, soon outnumbered Worker Union members in the Sweep.

Part of the reason for this lay in the composition of the work force employed by Hospitals Trust Ltd. In the early years of the Sweep, McGrath had been employing relatives of influential people but there was criticism in parliament and when the permanent Act setting up the Sweep was being discussed and this policy was abandoned.

Instead, the promoters employed middle-aged women, many of whom were widows, a remark of McGrath’s – when someone suggested he use machines to speed up processing tickets – that he would prefer to give work to people rather than machines was widely quoted as evidence of his humanity. There is no doubt that humaneness was part of McGrath’s character.  But there was innate shrewdness in his actions as well.

Strangely, his tactics reflected exactly the three predictions once made by a former Labour Party leader and strong opponent of the sweepstakes idea, Thomas Johnson.

Johnson, watching the ferment gathering over the idea of lotteries said: -The professional promoters are tumbling over themselves to get hold of a charity. They are like the professional beggar who gets hold of the most decrepit child for exciting the charity of the public- – The Sweep promoters were to use blind children before the world’s press to draw tickets from the drum in the first sweep in November 1930.

 

Only 100 Men  Johnson also predicted that the Sweep would become a powerful vested interest. As it turned out, the use of influential public figures and their relatives as commission agents did turn the Sweep into a powerful vested interest.  Finally, Johnson said that once the sweepstakes created employment it would become virtually impossible to close them down and throw people out of work. This last argument became more powerful when the employees were middle aged women, particularly widows.

Hospitals Trust Ltd. employs around 1,000 people on average, of whom less than 100 are men. Most of the women are getting on in years and a number of them could be described as passengers in the enterprise. The pay is higher than average, the women receiving between £18 and £23 per week.

The policy behind this system would seem to be a mixture of good public relations and humanitarianism. However, when the women finish working for the Sweep, the humanitarianism ends.  Lower ranking women employees are pensioned off at an average of £3.60 a week. Even with a state pension it would be impossible for them to survive if they had families to support.  The promoters took care to ensure that the same problem would not face their families.

 

Inherited

Richard and Patrick Duggan, the most anonymous if the second wealthiest of the promoters families – Patrick sits on the board of 20 companies, – inherited their father’s holdings in Hospitals Trust and both have taken care that duties will be avoided in the event of their deaths.  Their shares are now held mainly by the New Ardee Investment Trust.

In 1962, Joe McGrath began preparing for his own demise by shedding his holdings in favour of his children. A series of companies bearing the name of the McGrath family properties were set up in December of that year. Between them and the McGrath offspring – Patrick, Seamus, Joseph Junior and Mrs. Breide Kelly – the McGraths hold 52.75% of Hospital Trust Ltd.

Spencer Freeman has begun the process of transferring his shares also by winding up Ardenode Enterprises and the Freeman Trust which held part of his wealth.  His son, Dr. Brian Freeman, who is an executive director of the Sweep, is taking over the holdings which are 18.75% of Hospitals Trust.

The remaining shareholders in Hospital Trust Ltd., include the daughters of the late Philip O’Reilly, an original shareholder from whom they inherited their shares. The woman are Mrs. Miriam Rees of Blackrock and Mrs. Yvonne Fogarty of Dolce, who hold 9.75% shares between them.  The smallest shareholder is Mrs. Mary McAvin, who inherited her 300 shares from John McAvin who was an original shareholder.

The holdings in Hospitals Trust no longer represent the true wealth of what the promoters have built up over the years from the running of the Sweeps.

Their main holding company, owned by Hospitals Trust Ltd, is the Dodder Investment Company, which among other assets, holds £25 million worth of Waterford Glass shares. The promoters also have substantial holdings in property – the McGraths own the largest walled estate in Ireland – and in companies like the Irish Glass Bottle Co and the Newbridge Cutlery company.  Patrick McGrath is a director of 35 companies.

McGrath’s holdings have become so immense that he has hired a former assistant managing director of Jefferson Smurfit – a company one quarter the size of Waterford Glass – to act as his personal assistant. His salary is in excess of £7000 per year.

The development of financial interests outside the Sweep is partially due to the difficulties arising for an illegal lottery in Northern America in the sixties.

 

Takings Hit  When the decade dawned, the Sweep was enjoying the highest revenues in its history.  Nevertheless, many American states were discussing ways of starting their own lotteries.  In 1964, New Hampshire started its own lottery and soon other states began making plans to follow.  The sweep itself tentatively approached the Irish Government about starting its own national lottery after New York passed a bill to organize a similar enterprise in that state in 1967 and which they realised would hit their takings.

Objections from pools promoters, but more likely a civil service document critical of the running of the Sweep which was circulated to all Government Ministers in 1966 was probably responsible for the Government turning down the request.

 

Influence  The Sweep revenue has fallen steadily but not heavily since then as more and more states started their own lotteries. The reason why the Sweep now concentrates so heavily on Canada is because the province of Ontario has not provided a more attractive prize than the Sweep’s Super Prize of £200,000 and because sweepstake winnings in Canada are not subject to tax.

As far as hospitals are concerned, the Sweep revenue has decreased in importance over the years. According to the Government Information Bureau, of the hospitals £64 million annual running costs, just over £1 million comes from the Sweeps.  A similar amount goes to capital costs.  A department of Health spokesman described the Sweep’s contribution to Hospitals costs today as “insignificant”.

Despite the decreasing value of the Sweep to the hospitals, the influence of the promoters in the community has increased as their wealth accumulated. Even today, at least one of their companies makes financial contributions to all three major political parties thus following the practice of the founder, Joe McGrath in the thirties.

McGrath who died in 1965, did not live to see his successors build up assets on a massive scale as they have done since that time. He would surely have approved.

For the Irish people as a whole, approval might not be so wholehearted once they have discovered what is being practised in the name of their social services around the world as well as at home.  They might, in fact, feel it was time for a change.  The opportunities are there to make moves in this direction for many countries in the world are now successfully running national lotteries which are bringing in useful finance without laying any international stigma on their nation’s name.

If Ireland were to do the same, the people working for Hospitals Trust Ltd could be absorbed in a service that could truly be described as being in the national interest.

 

Joe Mac Anthony,

(First published, Sunday Independent, January 1973)

 

______________

Elsewhere: The Irish Sweep

  9 Responses to “Where Did The Sweeps Millions Go?”

Comments (9)
  1.  

    A shur, aren’t we all in the same aul’ boat, yarra?

  2.  

    There is a class of ruthless sharks in Ireland and make no mistake. We’re seeing the same now with the Quinn’s, and to a lesser extent with developers the likes of Treasury Holdings. There is a cutthroat, clan based amorality at play in Irish business, closer to the Mob than the Market. Our complicit judiciary is to blame.

  3.  

    We’re a nation of sleepwalkers shur.

  4.  

    McGrath must have been an evil greedy cunt who,I believe,is at the root of
    all the corruption in this country.
    His family owned The Glass Bottle factory in Dublin’s docklands – where did the money to build that come from?
    But he nailed his colours to his mast when he was the bosses union buster/enforcer
    during the building of the Ardnacrusha power station. A clear case of poacher turned
    game-keeper.
    By the way Bock I’m surprised that no-one has written about Limerick’s “Molly
    McGuires” as there is the makings of a great storey there.

  5.  

    Joe McGrath got the money for the bottle company from the Sweepstakes fraud.

  6.  

    Of equal interest to this story is the fate of the courageous journalist Joe MacAnthony himself following these revelations. It is fair to say, I think, that the Irish media establishment closed ranks against him. We (MediaBite) interviewed him a few years ago about his life and work since then. Joe’s account of events should inspire everyone to understand just how complicit and shallow our media truly is – and hopefully to challenge it too: http://www.mediabite.org/article_Don-t-Shoot-the-Messenger—Part-1_469407436.html

  7.  

    The mass media commentators for several decades now in Ireland have been putting themselves forward as champions of the common good, as harbingers of social progress. They claim the right to question every profession except their own. Oh yes, they sometimes criticise shoddy reporting by individual journalists or certain publications. They spill the beans on the church, the medical profession, the cattle trade and (fairest of fair game) the politicians. They don’t spill the beans on the behind-closed-doors practices of media editors. The ultimate inside story is still inside.

    Great investigation by Joe MacAnthony. Thanks for printing it.

    Wasn’t it George Bernard Shaw who stated that “every profession is a conspiracy against the laity”? Let’s have sensational revelations about the profession of journalism.

  8.  

    Thanks Miriam, found this too –
    http://www.mediabite.org/article_In-media-exile—Part-2_562178395.html

    Seems to be the interview with Joe MacAnthony you mention.

    (just a load of waffle from Eamon Dunphy on part 2 of that link you gave)

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