No More Kona Lottery
The Ironman Corporation announced it is disbanding its Kona Lottery program immediately because of a conflict with the U.S. Department of Justice. The Government contended the program fell afoul of existing lottery and gambling laws. Ironman maintains its lottery is legal, but it bowed to pressure.
In a settlement with the Department of Justice Ironman forfeited, "$2,761,910 in lottery proceeds to the United States government," according to the Department of Justice release. Ironman, and its chief executive Andrew Messick, stated in a release today that it disputes the Government's legal premise, and feels it has case law on its side. In an memo explaining to the decision to its employees Ironman's leadership quoted the oft-used phrase, "You can't fight City Hall."
The settlement did not include any punitive amount, rather simply the proceeds from the Lottery program over a 3-year period. The Government did not bring any criminal charges against Ironman or its principals, past or present, nor attach civil liability beyond recouping receipts from the program. Ironically, a principal figure in the Government's negotiations with Ironman was Assistant U.S. Attorney Jimmy Muench, a 4-time Ironman Florida finisher [see appending note correcting this misstatement].
This does not affect Ironman's Legacy program, and of the 215 current Legacy qualifiers all will be granted an opportunity to race Kona this year or next.
Is the Lottery program gone entirely? Ironman is "looking at several models" that would pass legal muster. But there is a very good chance the 100 slots given over to the Lottery program are gone, leaving qualification via one's ability, and Legacy, as the two ways to get into Kona. The Consent Decree between the Department of Justice and Ironman states that Ironman agrees not to continue its Lottery program. It's doubtful whether Ironman would risk renewing a program that might fall afoul of its agreement with the Government.
This obviously opens 100 slots for some other use. Some might claim that the Lottery program was a money maker for Ironman and no doubt it was. But the alternative, traditional use of the slots, when properly understood, is more valuable. If the forfeiture yields an annual Lottery income of $900,000 (one-third of the settlement amount), about $900,000 is a pretty good estimate of what Ironman earns in gross profit at a typical 2000- to 2500-person race. If 100 slots "funds" two full Ironman races elsewhere in the world with 50 Kona qualifying slots each, the Lottery program yields half the profits were these slots to be apportioned in a traditional way.
By this reckoning in the long run it is not Ironman who is the loser, rather those who can't get to Kona via typical pathways.
[LATE ADD: The question arose in Facebook comments below, did the Consent Agreement establish that Ironman "broke the law," and should we have stated this, in these terms, in the piece? Our original reporting did not contain that phrase because we did not know whether the Consent Decree is a tacit admission of guilt, or whether the question of guilt is sidestepped entirely when the Government agreed: "not to bring criminal charges against (Ironman) and to release, hold harmless, acquit, and discharge each such party from any civil liability."
I asked this question of Will Daniels, spokesman for the U.S. Attorney's Office in Central Florida. His response is as follows:
"Our complaint makes clear we allege that Ironman broke the law and that the lottery proceeds are criminal proceeds subject to forfeiture. In the settlement agreement, Ironman agreed not to oppose the forfeiture of the proceeds (and, if fact, wired them to our account) without admitting that it broke the law. The case was settled without litigation so there is no 'finding' per se, but a judge will have to enter a forfeiture judgment giving the funds to the government. By entering a forfeiture judgment, a court finds that the defendant’s property (e.g. $2,761,910) is criminal proceeds. As indicated in the agreement, the government will not pursue criminal charges."
The above noted, I am still not sure whether it would or wouldn't be accurate to state that Ironman "broke the law." This legal question is what caused our reticence in using that phrase in the piece.
Mr. Daniels did, however, point to one unequivocal error of fact in the piece I authored above: "In your already published article you state that 'Ironically, a principal figure in the Government's negotiations with Ironman was Assistant U.S. Attorney Jimmy Muench, a 4-time Ironman Florida finisher.' In fact, Mr. Muench is an 8-time Ironman Florida finisher."]
