Highlights

• For 25 years (1868-1893), the Louisiana State Lottery Company essentially owned the Louisiana government through systematic bribery of legislators, judges, and governors
• The company paid only $40,000 annually to the state while generating millions in profit - equivalent to paying $900,000 today for a monopoly worth hundreds of millions
• Company tentacles reached so deep into government that legislators served as paid lottery agents, the mayor of Baton Rouge sold tickets, and multiple governors acknowledged the company's control
• When threatened with shutdown, the company attempted to relocate to Honduras while maintaining a Louisiana charter, creating a bizarre international governmental arrangement
• State Treasurer E.A. Burke fled to Honduras with over $1.5 million in stolen state funds to help the lottery continue operations - one of the largest embezzlement cases in American history

The Louisiana Lottery Scandal: When a Private Company Bought an Entire State Government

How systematic bribery allowed a criminal enterprise to control Louisiana's government for a quarter-century

BATON ROUGE, La. (KPEL News) — For 25 years, Louisiana wasn't governed by its elected officials. A private lottery company had purchased the state government through systematic bribery, with paid legislators, corrupted judges, and governors who acknowledged their powerlessness against what newspapers called "The Octopus."

The Louisiana State Lottery Company scandal represents one of the most complete examples of governmental capture in American history. Court records, newspaper accounts, and congressional investigations document how a private corporation purchased and controlled an entire state.

Get our free mobile app

The Deal That Sold Louisiana's Soul

In 1868, Louisiana was desperate. The Civil War had devastated the state's economy, Reconstruction politics were chaotic, and the treasury was empty. When Charles T. Howard, a former lottery agent from Kentucky, approached the Radical Republican-controlled legislature with an offer, lawmakers saw needed revenue.

Howard's proposal was straightforward: Grant his Louisiana State Lottery Company an exclusive 25-year charter to operate the only legal lottery in the state. In exchange, the company would pay $40,000 annually to Louisiana's treasury—about $900,000 in today's dollars. The state would also exempt the company from all taxes, and the lottery would have complete monopoly power, making all other gambling illegal.

According to court records, Howard had been given $50,000 by a Kentucky lottery firm to secure this charter. When the Louisiana legislature approved the deal on August 11, 1868, Howard refused to turn the charter over to his employers. A lawsuit filed by his former employers alleged that Howard had bribed "a large number of legislators" as well as an ex-governor, but the case was dropped because the courts ruled that illegal gambling contracts couldn't be enforced.

What lawmakers didn't understand was that they had sold their state to a criminal enterprise that would corrupt every level of government for the next 25 years.

The Corruption Machine

The Louisiana Lottery Company didn't just influence politics—it replaced the normal functions of government. Federal investigations documented a level of corruption that penetrated every branch of state government.

Legislators as Lottery Agents: The company's paid agents served as elected officials in both houses of the legislature. According to federal investigations, multiple state representatives and senators received lottery paychecks while simultaneously voting on legislation affecting the company.

Executive Branch Control: The company gained control over multiple governors throughout its existence. When anti-lottery forces tried to pass legislation in 1878 and 1879, the lottery used its political leverage to ensure friendly officials remained in power. Federal records show the mayor of Baton Rouge served as one of the company's "regular agents for the sale of tickets."

Judicial System Compromise: When facing legal challenges, the lottery repeatedly won favorable court decisions. Federal District Court rulings consistently favored the company despite clear evidence of charter violations.

Constitutional Manipulation: When anti-lottery forces gained momentum in 1879, the company successfully influenced delegates to the state constitutional convention to write the lottery's charter directly into Louisiana's constitution, making it nearly impossible to eliminate through normal legislative processes.

The scope of this corruption was unprecedented. As one federal investigation concluded, "In less than a year the company was enabled to put under its control the Legislature and the politics of the entire State."

Building the Octopus

By the 1880s, the Louisiana Lottery had become one of the largest businesses in the United States, generating over $8 million in annual profits by 1890. The company sold tickets nationwide through the U.S. mail system, making it a national lottery despite its state charter.

To maintain legitimacy, the company hired Confederate Generals P.G.T. Beauregard and Jubal Early to preside over the drawings. These military heroes were paid $10,000 annually—$300,000 today—for the few days per month their services were needed.

The lottery engaged in extensive public relations campaigns. Charles Howard donated to charities, flood relief efforts, and public institutions. His family helped establish what became Tulane University's Howard-Tilton Memorial Library. When the Metairie Jockey Club refused him membership, Howard bought their racetrack and converted it into Metairie Cemetery—where he's buried under a statue of "Silence" with its finger to its lips.

The corruption continued. The company influenced newspapers through advertising revenue, banks through business relationships, and judges through direct payments. As one federal report described it, the lottery's influence reached into "all aspects of state government."

The Resistance Emerges

By the late 1880s, opposition to the lottery had reached a breaking point. The company's control over Louisiana sparked a reform movement.

Governor Francis T. Nicholls emerged as the lottery's primary opponent. Elected in 1887, Nicholls declared he would not support extending the company's charter when it expired in 1893. Despite facing pressure, Nicholls held firm.

The lottery fought back. Company head John A. Morris, who had taken control after Howard's death in 1885, offered to increase the state's annual payment from $40,000 to $750,000—a 2,000% increase—in exchange for a 20-year charter extension. The offer revealed the operation's profitability.

When Nicholls rejected this offer, the lottery launched a propaganda campaign, flooding the state with advertisements and hiring agents to influence voters. The company spent large sums trying to defeat anti-lottery candidates in the 1892 gubernatorial election.

Murphy J. Foster, running on an anti-lottery platform, won the 1892 election. His victory represented a mandate from Louisiana voters to end the company's control over their state.

The Federal Hammer Falls

What destroyed the Louisiana Lottery was federal intervention. In 1890, Congress passed legislation prohibiting the use of U.S. mail for lottery tickets and advertisements. Since 90% of the lottery's revenue came from out-of-state ticket sales, this federal action proved devastating.

The company tried to circumvent the postal ban, using private delivery services and hiring people to carry tickets in their luggage. Federal authorities proved persistent in their enforcement.

Investigative journalists and congressional committees exposed the full scope of the lottery's corruption. Federal investigations revealed the systematic bribery, the extent of political control, and the massive profits being extracted from a nationwide operation.

By 1893, the combination of federal pressure, state opposition, and public outrage had made the lottery's position in Louisiana untenable.

The Great Escape to Honduras

Faced with extinction, the Louisiana Lottery Company attempted an unusual escape. In December 1893, as its charter expired, the company moved its headquarters to Honduras—but continued operating.

The architect of this scheme was Edward A. "E.A." Burke, Louisiana's state treasurer and the lottery's most powerful political ally. Burke had protected the company throughout the 1880s, using his position to shield it from investigation and prosecution.

Burke made his move in 1891, fleeing Louisiana with over $1.5 million in stolen state funds—equivalent to $50 million today. This embezzlement represented one of the largest political thefts in American history.

Burke used the stolen money to establish himself as a power broker in Honduras, where he helped the lottery company continue operations under the name "The Honduras Lottery Company." The scheme maintained printing presses in Alabama and Delaware, shipped tickets throughout the United States using private carriers, and conducted the actual drawings in Honduras to avoid U.S. jurisdiction.

For more than a decade, this international lottery scheme continued to operate, circumventing federal law through jurisdictional manipulation. The company made millions while Burke lived as an exile in Central America, protected by the government he helped sustain with stolen Louisiana funds.

Get our free mobile app

The Final Shutdown

The Honduras scheme collapsed in 1907 when federal authorities seized the company's printing presses in Alabama and Delaware. The U.S. Department of Justice had spent years building cases against the operation, and the 1907 raids ended the Louisiana Lottery Company's 39-year run.

Burke never returned to Louisiana to face embezzlement charges, dying in Honduras as a fugitive from American justice. His theft of state funds was never recovered, representing a permanent loss to Louisiana taxpayers that in today's dollars would amount to approximately $50 million.

The Lasting Impact

The Louisiana Lottery scandal had consequences beyond the state's borders. The company's corruption and the federal crackdown turned American public opinion against lotteries. They remained illegal nationwide for 70 years. Not until New Hampshire established a state lottery in 1964 did legal lotteries return to the United States.

The scandal exposed weaknesses in 19th-century governance structures. The lottery's success required Reconstruction-era political chaos, limited federal oversight, and the reach of the U.S. postal system.

Contemporary Relevance: While today's campaign finance laws and federal oversight make such complete corporate capture more difficult, the Louisiana Lottery scandal serves as a cautionary tale about concentrated wealth and political influence. The company's techniques—systematic bribery, media manipulation, jurisdictional shopping, and regulatory capture—remain relevant to contemporary discussions about money in politics.

The Financial Reality: Over its 25-year Louisiana operation, the lottery company paid the state approximately $1 million total while generating profits estimated in the hundreds of millions. In today's dollars, Louisiana sold monopoly control over its government for about $25 million total—while the company extracted value equivalent to billions.

The Louisiana State Lottery Company scandal represents a case study in how democratic institutions can be captured by private interests when proper safeguards don't exist.

The story documents 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 demonstrates how a business arrangement can evolve into complete governmental capture when oversight mechanisms fail.

The company purchased an entire state government, operated it as a subsidiary for 25 years, and when exposed, moved operations to another country while maintaining the fiction of legal operation.

This lottery jackpot may have been a swindle, but there have been plenty of major legitimate jackpots. Here are the biggest.