Local Lottery Winner Wiped Out By Investment Losses
Milwaukee Journal Sentinel, April 20, 2007 (Derrick Nunally)
On the day he rode home in a limousine from his security-guard job 12 years ago with a winning $5.5 million lottery ticket in his hand, Andrew Cicero of Muskego figured he had it made.
But he finds himself now in far different straits than he imagined that May day when he accepted a giant Wisconsin Megabucks novelty check, took five secretaries to breakfast and planned both a trip to see his roots in Sicily and a college fund for his five grandchildren.
Cicero, 72, has sold his Waukesha County house and lives in a Milwaukee apartment on a pension and Social Security income while he takes an investment counselor to arbitration. This month, he sued a Milwaukee accounting firm over tax advice he claims cost him at least $170,000.
"I'm not driving a truck," Cicero says about his current money situation, "but it's to a point where it wouldn't hurt."
His fiscal downfall followed what has emerged as something of a pattern among lottery winners nationally: Someone with little training in dealing with vast sums of money gets a sudden windfall, only to see it tumble maddeningly into the wind.
"It's one of the classic kinds of lottery loss stories," said Andrew Stoltmann, a Chicago attorney handling Cicero's legal fights over parts of the squandered fortune. "This guy's a blue-collar factory worker. The only thing he did that you could even say is wrong is he trusted his financial advisers."
Both the Milwaukee office of Salomon Smith Barney, which Cicero claims led him into bad investments, and the accounting firm Sattell, Johnson, Appel and Co., which he sued April 9 over tax problems, declined to comment.
Court and arbitration documents tell part of Cicero's story. Under the state's rules at the time, the $5.5 million prize he won in 1995 was to be paid out as 25 annual payments that would start at $98,000 and increase each year. It was already enough money for him to retire from the part-time security job he had taken at the General Electric plant in New Berlin to make ends meet after 37 years as an Allen-Bradley Co. machinist.
"I thought I was set for life," Cicero said.
But by 2000, he decided on a different approach: sell the future annual payments off to a private firm for an immediate lump sum - in his case, about $2 million - that he could roll into investments. He'd just live off the earnings and interest.
"I figured I can make the money and still have all that money in the bank for the kids," Cicero said. "But it didn't work out that way."
He alleges that within a few months, the Smith-Barney advisers had 98 percent of his money invested in individual stocks, substantially technology companies.
The year was 2000, which would prove a spectacularly bad time to sink one's entire fortune into tech stocks. Stoltmann, Cicero's lawyer, has alleged the advisers were "breathtakingly irresponsible" to put a lottery winner's windfall wholly into individual stocks.
"Fifty to 80 percent of their income ought to be in bonds and other fixed-income investments," Stoltmann said.
The court and financial-arbitration filings tell the story in flat terms, claiming Cicero lost $600,000 or more in bad investments. And he ended up paying $240,000 more to the IRS for penalties and interest after he learned the hard way that a lump-sum lottery buyout doesn't count as capital-gains income. There was also a divorce.
"You want to talk about a sob story, he's it," Stoltmann said.
The arbitration case against Salomon Smith Barney is due for a hearing later this year, and the lawsuit against the accounting firm hasn't been set for a court date yet.
Cicero says he still has enough money to live on, but nowhere near the piles of cash he believed his computer-picked 2-14-17-20-24-38 combination would ensure him for life.
"Everybody says you lucky sonofagun, you won all that money," Cicero said, "but, you know, it didn't work out that way."
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