Note to Mega Millions lottery winner: Beware!

Here's a cautionary tale for anyone dreaming of winning the record $640 million Mega Millions jackpot Friday night: It’s a dangerous world out there for lottery winners.

The winner, warns Chicago lawyer Andrew Stoltmann, will be besieged by con artists, investment scams, family members whom they haven’t seen in decades, and scores of charities – some legitimate, some imaginary. 

“It is tragic,” says Mr. Stoltmann, who represents a man whose $5.5 million lottery winnings were wiped out due to what the lawyer says was bad investment advice.

Others say what's tragic is that more people don’t pay heed to the miniscule chance of winning the Mega Millions. According to lottery officials, the odds of possessing the winning ticket are 1 in 176 million – meaning an individual would be more likely to get hit by lightning or be eaten by a shark. One statistician notes that the Chicago Cubs have a better chance of winning the World Series this year.

“People know there are long odds,” says Scott Hoover, a professor of business administration at Washington and Lee University in Lexington, Va. “But people are irrational in buying. They see it as a form of entertainment because if you look at it as an investment, it’s a horrible thing to do.”

Some buyers are well aware that winning is a very remote possibility. At New York’s Port Authority bus terminal, Henry Wallace is among the lottery players lined up Friday at a Hudson News kiosk. 

“I figure it’s about the same as the chances of Nicole Kidman walking into the Port Authority and handing me an Oscar,” says Mr. Wallace, who works for the Bergen County (New Jersey) government. “But why not? It’s just a dollar and a dream.”

But this week, for every American who sees buying a ticket as a waste of good money, there's another who is eager to be parted from his or her earnings. The pace at which Mega Millions tickets have been selling is phenomenal. Since Tuesday, Mr. Hoover estimates, people have spent about $600 million on tickets – and perhaps as much as $1.2 billion since the last winner on Jan. 24. In Massachusetts, tickets were selling at the rate of 14,000 per minute on Friday, says Beth Bresnahan, a spokeswoman for the Massachusetts Lottery.

“This is unprecedented,” says Ms. Bresnahan. “The scale of this thing is driving the increase. People are coming out of the woodwork.”

Hitting the jackpot is not necessarily the salvation from financial problems, at least for those who've won more modest amounts. In a 2009 study of people who had won between $50,000 and $150,000 in the Florida Lottery, three economists found that if a winner had been in dire financial straits beforehand, the lottery money only postponed bankruptcy.

“What our study suggests is that bankruptcy is about something other than money,” says Mark Hoekstra, a professor at Texas A&M University in College Station, Texas. “Whatever got you into trouble did not change after you won the lottery – it was not just bad luck.”

One problem for lottery winners, he suggests, may be that many are not adept at managing large sums of money.

That seems to be the case for some of Stoltmann’s clients. He has worked on behalf of four different lottery winners, most of whom got bad financial advice. He counsels winners not to take the lump-sum payment. “If [instead] you take a stream of payments over multiple decades, you can make a catastrophic mistake or mistakes, learn your lesson, and be OK,” he says.

Lottery tickets are not ordinarily considered good investments. But from a purely mathematical standpoint, buying a ticket for $1 is a good investment so long as there are no other winners, says Phil Yates, assistant professor in mathematics at St. Michael’s College in Colchester, Vt. “With the jackpot at $640 million, assuming you are the only one to win, your expected profit is positive,” he says. “Typically these jackpots don’t get this large.”

But Mr. Yates, who has never played the lottery, says he’s not tempted. “I’d rather spend the dollar on something I would enjoy, like a cup of coffee.”

If no one wins the lottery Friday night, the next jackpot will be $975 million or more, according to Bresnahan. But given the blizzard of ticket sales, mathematician Yates says he would be shocked if there's no winner.

The potential drawbacks of winning has indeed dawned upon some lottery players. At the Port Authority, five people who work in the IT department at 1199 SEIU Benefit and Pension Funds each put in $200. All five declined to give their names, saying they wouldn't want their names to be public if they end up winning the jackpot. 

Mr. Hoover of Washington and Lee, who acknowledges that he has bought Mega Millions lottery tickets, he says he won’t let many people know if he wins. “My first call is to my wife; my second call is to my lawyer,” he says. “You don’t want to have the risk of kidnapping, charities hounding you, friends asking for money.”