60 Minutes - Sunday, January 27, 2019

Episode Date: January 28, 2019

A company has launched hundreds of small satellites -- capturing over a million photos of Earth for commercial use. David Martin reports on the unimagined possibilities and consequences. Scott Pelley hears from the former CEO of Starbucks -- who says Donald Trump is not qualified to be President. Plus -- Jon Wertheim reports on the lottery loophole that made a Massachusetts couple a million dollars richer. Those stories on tonight's "60 Minutes." Learn more about your ad choices. Visit megaphone.fm/adchoices To learn more about listener data and our privacy practices visit: https://www.audacyinc.com/privacy-policy Learn more about your ad choices. Visit https://podcastchoices.com/adchoices

There are very few things that you can be certain of in life. But you can always be sure the sun will rise each morning. You can bet your bottom dollar that you'll always need air to breathe and water to drink. And, of course, you can rest assured that with Public Mobile's 5G subscription phone plans, you'll pay the same thing every month. With all of the mysteries that life has to offer, a few certainties can really go a long way. Subscribe today for the peace of mind you've been searching for. Public Mobile. Different is calling. What's better than a well-marbled

ribeye sizzling on the barbecue? A well-marbled ribeye sizzling on the barbecue that was carefully selected by an Instacart shopper and delivered to your door. A well-marbled ribeye you ordered without even leaving the kiddie pool. Whatever groceries your summer calls for, Instacart has you covered. Download the Instacart app and enjoy $0 delivery fees on your first three orders. Service fees, exclusions, and terms apply. Instacart. Grocer seriously thinking of running for president. I will run as a centrist independent. Both parties are consistently not doing what's necessary on behalf of the American

people and are engaged every single day in revenge politics. Do you worry that you're going to siphon votes away from the Democrats and ensure that President Trump has a second term? 3, 2, 1 A private company named Planet Labs has put about 300 small satellites into space, enough to take a picture of the entire landmass of the Earth every day. I'm always astonished that almost every picture we get down, we compare it to the picture from yesterday and something's changed. Making it available to everybody, people are going to come up with uses of that imagery that you haven't imagined.

You worry about that? I worry a lot. For years, high school sweethearts Jerry and Marge Selby lived a quiet life in Everett, Michigan, a single stoplight factory town that collapses in the folds of a map, which is why investigators took note when Jerry and Marge made $26 million winning various state lottery games dozens of times. You went into this looking for organized crime.

Were you surprised by what you found? I wasn't surprised. I was dumbfoundedly amazed that these math nerd geniuses had found a way, legally, to win a state lottery and make millions from it. I'm Steve Croft. I'm Leslie Stahl. I'm Scott Pelley. I'm Anderson Cooper. I'm John Wertheim.

I'm Bill Whitaker. Those stories tonight on 60 Minutes. What's your next adventure? Everyone deserves a chance to do what they love. Pacific Life helps you reach financial goals while you go after your personal ones. Plans change over time and your financial solutions can too. Pacific Life has a variety of financial solutions that can help you complement your life goals and passions while managing the uncertainties. Backed by more than 150 years of experience, you can count on Pacific Life to be there so you can go out and keep living your best life. Pacific Life is one of the most dependable and experienced insurers in the industry and has been named one of the 2019 World's Most Ethical Companies by the Ethisphere Institute.

The freedom to go after whatever is next for you, that's the power of Pacific. Ask a financial professional about how Pacific Life can help give you the freedom to do what you love. Or visit www.pacificlife.com. Starbucks CEO Howard Schultz left his company seven months ago, which led many to wonder what the socially conscious executive was planning. To Schultz, Starbucks was never just a coffee shop. He saw his stores as meeting halls where customers came to chew over the great issues of the day. His activism is rooted in a rags-to-riches life, and tonight Schultz reveals traumas he has never discussed publicly. At the age of 65, he is preparing for the greatest challenge of his life. Many believe that Schultz would run for president as a Democrat.

His announcement tonight may come as a surprise. I am seriously thinking of running for president. I will run as a centrist independent outside of the two-party system. We're living at a most fragile time. Not only the fact that this president is not qualified to be the president, but the fact that both parties are consistently not doing what's necessary on behalf of the American people and are engaged every single day in revenge politics. Why run as an independent?

Your views have always aligned with the Democratic Party. It's true. I've been a lifelong Democrat. I look at both parties. We see extremes on both sides. Well, we are sitting today with approximately $21.5 trillion of debt, which is a reckless example, not only of Republicans, but of Democrats as well, as a reckless failure of their constitutional responsibility. Do you worry that you're going to siphon votes away from the Democrats and thereby ensure that President Trump has a second term? I want to see the American people win. I want to see America win. I don't care if you're Democrat, Independent, Libertarian, Republican.

Bring me your ideas, and I will be an independent person who will embrace those ideas because I am not in any way in bed with a party. We met with Howard Schultz this month in his adopted hometown of Seattle. It was here in 1981 that he arrived as a stranger in the Pike Place market to visit the original Starbucks, just a tiny store that sold coffee beans. You were selling coffee makers living in New York, and this was one of your customers. Why did you come out here to visit them? The thing is, I had never heard of Starbucks, and they were buying a ton of these products,

and I just thought, I've got to come to Seattle and see who this company was. How he created the phenomenon we know is a story longer than the line at Starbucks. Suffice to say, Schultz got a job behind this counter. He installed an espresso machine, and in 1987, with borrowed money, he bought the shop. How many stores are there today? Almost 30,000 in 77 countries. A sweet success with a few bitter notes. Starbucks almost went broke in the 2007 financial crisis.

Starbucks coffee is anti-black! And last year, a store manager set off a furor when she called police on African-American men who were just hanging out at a table. Schultz closed all the U.S. stores for hours of racial bias training. Race had been an issue even before when Schultz asked employees to talk to customers about racial justice. We had a moral obligation as a company to discuss this. And then you were excoriated for having a coffee shop tell people what it thinks about humanity. The execution was flawed. And who owns that execution? I do.

Because I was the one who was pushing us to not play it safe. But from the beginning, his 350,000 employees caught a break with Schultz's social agenda. Thanks, Harvey. They enjoy health insurance, tuition aid, and stock. Hi, Markyado. Hi there, welcome. Schultz likes to say he created the company his impoverished parents never had the chance to work for. When I read statistics that says that over 40% of the American people don't have $400 in the bank and only a crisis away from bankruptcy, or that 5.5 million kids in America,

many of whom are African American and Latino, are not in school and not in work and don't have a chance, and one out of six people in America are food insecure. This is what I think about. Those grim numbers describe his own childhood. This place has never left me. I think it has defined my character, my vulnerability. Schultz took us back in time to his boyhood home. And this is the way up to the seventh floor. A Brooklyn, New York public housing project. His family was already poor when his father was injured on the job. With no insurance, they were destitute, and bitterness led to violence.

Your father beat you with his fists. There were moments where there was physical abuse, yes. He beat you up when you were taking a shower, and you ended up crumpled on the floor of the shower watching your blood go down the drain. At that moment, you thought what? I was 15. I was disrespectful to my mother.

He came home and beat me to a pulp. I couldn't go to school for a couple of days. I was angry, upset. Did you hate him? I'm sure there were moments when I did. And then there were glorious moments of being in the right field bleachers at Yankee Stadium with him. There is a level of hate that does emerge, but it didn't stay. His journey is mapped in a new autobiography titled From the Ground Up. If your father was the darkness, your mother was the light.

She was. And my self-esteem came from my mother. And I could say that if my mother was here, if my mother, for her it would just be the greatest moment of her life to think. Because one of the things that has been so hard for me is that both my parents did not see my success at Starbucks. Maybe I'm here because of her. Well, let me see if I can find out where you are on some of the issues that are pressing in the country. Sure. The country, first and foremost, is based on humanity, fairness, goodness. We have been for 200 plus years a country of immigrants. And for the 11 million people here unauthorized, there should

be a fair and equitable way for them to get in line, pay the taxes, pay a fee, and become citizens of the United States. Climate change. Tremendous mistake again by President Trump to leave the Paris Climate Accord. Health care. Every American deserves the right to have access to quality health care. But what the Democrats are proposing is something that is as false as the wall, and that is free health care for all, which the country cannot afford. The 2018 tax cut. I would not have given a free ride to business from 35 or 37 percent to 21. It would have been more modest, but I would have significantly addressed the people who need tax relief the most, which is the people I talked about earlier who don't have $400 in the bank.

Many people are going to ask, what does the coffee entrepreneur know about being commander-in-chief? I have a long history of recognizing I'm not the smartest person in the room, that in order to make great decisions about complex problems, I have to recruit and attract people who are smarter than me, more experienced, more skilled. And we've got to create an understanding that we need a creative debate in the room to make these kinds of decisions. His worldview is shaped by his experience as a global CEO. Is it in our national interest to have a fight with Mexico, Canada, the EU, China, NATO? Is it in our interest?

Give me a break. No, it's not in our interest. These are our friends. These are our allies. We are much better as a country being part of the world order. Schultz formed his alliance with his wife Sherry when they were married more than 36 years ago. Today they have a son and a daughter, two grandchildren and another on the way. Sherry Schultz oversees the family's 200 million dollar charity that links disadvantaged youth and veterans to jobs.

This is a long, rocky road running for president. Is this something you want to do? Well, it wasn't in my plan, my long-term life plan, for sure. Did he tell you or did he ask you? No, he asked. He came to the family. We knew it was serious. I'm still asking.

He's still asking, and there's been many family meetings. Then I'm going to steam a little milk for you. He's still asking himself whether to run. But he has assembled a campaign team and he has done the homework. Can you get on the ballot in all 50 states? If I decide to run for president, not only will I be on the ballot of every state, all 50 states, but we'll be on the ballot in every county and every district that we have done that work. Would the stores be part of this? Is there going to be a Schultz 2020 button on

every green apron across the country? No, there would be a complete separation between me and the company. What we know is that no independent has ever come close to winning. What we know factually is that over 40 percent of the electorate is either a registered independent or currently affiliates himself as an independent because the American people are exhausted, their trust has been broken, and they are looking for a better choice. What effect do you think being Jewish would have on your campaign? I have great faith in the goodness and the kindness of the American people. We elected an African-American president. I'm old enough to remember in 1960 when John F. Kennedy was running, and there was an outcry of hate that no one Catholic should be president. I am Jewish. I have faith in God. I'm not running

as a Jew if I decide to run for president. I'm running as an American who happens to be Jewish. Your net worth is something close to three and a half billion dollars. And Forbes magazine would tell you that that's more money than Donald Trump has. Are you willing to spend what it takes to win? Well, I'll say it this way. We'll be fully resourced to do what's necessary. Winning could cost $300 million, $500 million. Do those numbers change your mind?

No. Would you release your tax returns? A hundred percent, yes. Well, Donald Trump said that. Oh, we can do it today if you want, Scott. This is where it all started for the company. Decades ago, housewares salesman Howard Schultz fell for the traditions of Seattle's Pike Place Market. Are they going to throw you a fish? Some, no. Some traditions slimier than others. Now, he's challenging tradition. Yeah, right here.

Asking whether Americans want to toss old politics into fresh hands. All right. You know, if you dropped the fish, your political ambitions would have been over. Oh, completely. You know, it's on after this interview. President Trump is going to be tweeting by about 8 o'clock Eastern time. You know, I'm going to say terrible things. Yeah, I think like most people, I've become bored with President Trump and his tweets.

Now, David Martin on on assignment for 60 Minutes. For decades, the U.S. has relied on spy satellites to look deep inside the territory of its adversaries. These giant, billion-dollar satellites take high-resolution photographs which can see objects as small as a fist inside Russia, North Korea, or wherever the target is. Tonight, we will take you inside the intelligence agency where those photos are analyzed. And we will also take you inside a revolution that is rocking the top-secret world of spy

satellites. A private company named Planet Labs has put about 300 small satellites into space, enough to take a picture of the entire landmass of the Earth every day. Those small satellites have created a big data problem for the government, which can't possibly hire enough analysts to look at all those pictures. Welcome to the revolution. Five, four, three, two, one. This is how the revolution began.

28 small satellites sent out into orbit by astronauts from the biggest of all satellites, the International Space Station. We took a satellite that would be the size of a pickup truck and we shrunk it. We wanted to make it about the size of a loaf of bread. Robbie Shingler began building satellites 20 years ago, working for NASA. The way that I grew up at NASA is we would spend about 5 to 10 years even to build one satellite. Now he's one of the founders of Planet Labs. This is our satellite manufacturing building.

A company that turns out satellites in months, not years. You can pick these up. They're about 12 pounds or 5 kilograms. Packed with some of the same electronics used in smartphones, they're built by hand in a nondescript building in downtown San Francisco. It looks like a warehouse, and our engineers here build and operate the largest fleet of satellites in human history. It's a pretty big statement, the largest fleet of satellites in human history. I know, isn't that cool? And frankly, we're just getting started. How many have you built over the years? Oh, over the years, we've built about 300 satellites

over the years. And last year we launched about 146 satellites into space. The satellites are called doves. Here on the production floor, they are kept in nests, waiting to be launched in flocks. This is a visualization that shows every satellite that we have up in space today. This is mission control? This is mission control, yeah. It's a little bit of a letdown. But it's a little bit non-traditional.

A normal mission control, you will have dozens and dozens of engineers for one satellite. We flip that around. So we have dozens of satellites for a single engineer. The satellites orbit the globe every 90 minutes while the Earth rotates beneath them. Their cameras documenting the planet as it's changing. I'm always astonished that almost every picture we get down, we compare it to the picture from yesterday, and something's changed. Will Marshall is another of the company's founders. As we see rivers move, we see trees go down, we see vehicles move, we see road surfaces change, and it gives you a perspective of the planet

as a dynamic and evolving thing that we need to take care of. Is that what people are supposed to conclude from seeing all this change? Well, you can't fix what you can't see. That kind of save-the-world ambition carries a big risk, especially for a small firm that's just getting started. And we have liftoff. The planet has many records. We've launched the most satellites in the world ever,

but we've also lost the most satellites ever. Four years ago, Marshall gathered his staff in what Planet calls the mothership to watch a rocket carrying 26 doves blast off. It was a big deal, and we had a customer in the audience at the time that we had brought to see a launch. It was very embarrassing.

Oh, God! Oh, God! Oh, God! Oh, God! I'll never forget it. We see the smoke coming and everyone's cheering. And then it goes and then kaboom! Chester Gilmore runs Planet Satellite Assembly Line. You lost how many satellites? 26. 26. I think he lost, yeah, 26.

Those are your babies. They were. It was a tough, yeah, they were. How long did it take you to get back to normal? We didn't even skip a beat when that happened. Didn't lose a day. On the day we visited Planet, its satellites were beaming down 1.2 million pictures every 24 hours. Planet sells images to over 200 customers, many of them agricultural companies monitoring the health of crops.

But this is Planet's most important customer. So this is our operations center, heartbeat of the agency. Robert Cardillo is director of the National Geospatial Intelligence Agency, NGA for short, the organization which analyzes satellite photos. So this really is ground zero for all the intelligence coming in from space. That's correct. It's where we bring in all of our sources, whether they come from space or any source, but correct, it's ground zero bring in all of our sources, whether they come from space or any source. But correct, it's ground zero. Because 60 Minutes was allowed into this secure operations center,

top-secret high-resolution pictures taken by spy satellites are nowhere in sight. Across the center... Cardillo says lower-resolution images like this one, taken by commercial satellite companies... You see one of the outposts that the Chinese have developed in the South China Sea. Are changing his world by giving him more and more looks at the Earth. Especially places U.S. spy satellites are not zeroed in on. I'm quite excited about capabilities such as what Planet's putting up in space. Planet is a small company with just over 400 employees, many of them in San Francisco.

NGA is a government bureaucracy with a workforce of 14,500 and a 2.7 million square foot headquarters south of Washington, D.C. But Robert Cardillo knew a revolution when he saw one. This is not the scale model. This is the real size. When Planet's Will Marshall unveiled his small satellite at a 2014 TED Talk,

Cardillo showed the video to his workforce. It's going to provide a completely radical new data set about our changing planet. And a radical new culture. Thank you. Planet openly markets its images. NGA spy photos rarely see the light of day. The intelligence analyst who leaked these photos of a Russian shipyard in 1984 went to prison. What NGA can see from space is top secret.

How many of these high-resolution satellites do you operate? I'll not comment. But much of what Cardillo won't talk about is common knowledge to Ted Moksan, who is a household name in the obscure world of amateur satellite tracking. How many photo satellites does the U.S. have in orbit? Currently there are three. Liftoff of NRL 71 for the National Reconnaissance Office. Since we interviewed Moksan, what looks like a fourth photo satellite has been launched. He tracks them from his balcony in downtown Toronto, with nothing more sophisticated than $300 binoculars.

You just wait for a flyby from the satellite? Yeah, I'm laying in wait. For something that's 150 miles away going five miles a second? Yes, and it will cross my field of view in a few seconds, so I've got to be on the ball. Here's what a top-secret satellite looks like from Earth, captured on video by one of about 20 amateur trackers around the world. Its code name is Crystal. This thing is about the size of a city bus. And this is what it looks like from Earth. That's right. It just looks like a moving star. The satellite trackers watch as it streaks across the sky,

measuring its position against well-known stars. That's enough to tell the orbit of the satellite? Yes. We're doing this with our eyes, often with cameras, but the end result of it is numbers. And if we pool enough of that data together, we can actually calculate the orbit to great precision. If you've been able to calculate this, presumably the North Koreans have been able to calculate this.

Absolutely, yes. So there's no mystery to the North Koreans, the Russians, the Iranians, the Chinese, when these satellites are overhead taking pictures. That's right. It's space age hide and seek. Adversaries know when and where American spy satellites are looking, but can never be sure what they're finding. This is what NGA developed in the pursuit of Osama bin Laden.

Before President Obama and his national security team, including Cardillo there on the left, gathered in the White House Situation Room on the night of the raid, NGA had gone back in time through seven years of satellite imagery to construct this scale model of bin Laden's hideout. We had historic imagery of this compound that enabled us to reverse time. NGA could see not just the outside, but inside as well. It enabled us to go back to the point of construction and essentially through our imagery archive to rebuild the house. So we could see how the first floor was designed and how the rooms would lay out.

Where are the stairs from the first to the second floor and the second how the first floor was designed and how the rooms would lay out. Where are the stairs from the first to the second floor and the second to the third floor? So old pictures showed that building before the roof went on. We had pictures before the compound existed. We saw it when it was first constructed and as it was built over time, correct. And that's how you could find out the dimensions of each room. Indeed. The satellites that made that possible are the equivalent of a Hubble Space Telescope. But instead of taking pictures of the heavens, they are zeroed in on Earth,

able to make out objects just four inches across. Keel camera on monitor two for me. For decades, they have been indispensable to knowing what America's adversaries are up to. But like Hubble, they cost billions of dollars each, which is one reason there are so few in orbit. Are they putting more up? They've never had more than four up at a time. Which is why Cardillo is so interested in planet

and its small satellites that deliver a tsunami of data like NGA has never seen. How many analysts would it take to keep up with those number of satellites? We did some calculations, and we came up with 6 million humans would need to be hired to exploit all the imagery that we have access to. You can see that it's not exactly a viable proposition. If you were trying to find this in Syria, it's sort of like a needle in a haystack, right? Planet Shauna Wolverton showed us how a computer can be programmed to help track the impact of Syria's civil war on the people who live there.

So what we've done is created a algorithm that looks for new roads and buildings. An algorithm that rifled through reams of satellite photos and identified the first signs of a new refugee camp. Here's that first image. So the red grid is what? Those are new roads and all of these blue spots that you can see here are buildings. So this is one little corner of Syria. Could you do this for the entire country? We could absolutely do this for the entire country. I can show you over here. We can zoom out. And you can see that we've run this algorithm over the entire country,

and you can see all of the roads and buildings. This is the first photo an American spy satellite ever took from space in 1960, a far-off look at a Russian airfield. Since then, we have gotten much more spectacular looks at Earth, like these taken by the Apollo astronauts. But the U.S. government no longer holds a monopoly on photos from space and has no power to stamp top secret on any of the 800 million images the planet has taken in its brief lifetime.

Making it available to everybody, people are going to come up with uses of that imagery that you haven't imagined. Dreamed of, yeah. And not all of them are going to be good. No. You worry about that? I worry a lot.

And we wouldn't have started Planet if we didn't have a very strong conviction that the vast majority of the use cases are very, very positive. Last year, Americans spent more than $80 billion playing state lotteries. That's around $250 for each citizen, more than what was spent on concerts, sporting events, and movie tickets combined. Over 25 states took in more from their lottery proceeds than from corporate income tax. Because of these stakes, it's essential that in both perception and reality, lotteries are truly games of chance, everyone entering with an equal opportunity to win. Which is why investigators took note when a retired couple from Michigan, Jerry and Marge Selby,

made $26 million winning various state lottery games dozens of times. This is not a story, though, of a con or a scam or an inside job. No, this is a ballad of a couple from small-town America who did something that most people only dream of. They didn't so much as beat the lottery odds as they figured them out. For years, high school sweethearts Jerry and Marge Selby lived a quiet life in Everett, Michigan, population 1,900. A single stoplight factory town

that collapses in the folds of a map. Together, they raised six kids and ran a local convenience store on Main Street. Jerry handled the liquor and cigarettes, and Marge kept the books and made the sandwiches. How long did you have the store? 17 years. 17 years? Mm-hmm.

Every day? Mm-hmm. Every day. Why did you decide to sell it? I was 62, Marge was 63, and I thought it was a nice time to sell and see what we could do after that. You're in your early 60s. You decide to retire. You're going to put your feet up.

What was the plan? Yeah, that was basically it. I don't think we had one per se. That was basically it. We were going to enjoy life a little bit. But one morning in 2003, Jerry happened to walk back into the corner store and spotted a brochure for a brand new lottery game called Windfall. Jerry always possessed what he calls a head for math. He has a bachelor's degree in the subject from nearby Western Michigan University.

And in only a matter of minutes, he realized that this was a unique game. I read it, and by the time I was out here, I knew what the potential might be. It did not take you weeks to suss this out. No, no, not at all. Three minutes. Three minutes, and you've found the loophole in the state lottery. Three minutes. I found a special feature. That feature was called a roll-down, and the lottery announced when it was coming. Unlike the Mega Millions games you've probably heard of,

where the jackpot keeps building until someone hits all six numbers and wins the big prize, in Windfall, if the jackpot reached $5 million and no one matched all six numbers, all the money rolled down to the lower-tier prize winners, dramatically boosting the payouts of those who matched 5, 4, or 3 numbers. Sound complicated? Well, it wasn't to Jerry. See if you can stick with him here. Here's what I said.

I said, if I played $1,100, mathematically, I'd have one 4-number winner. That's $1,000. I divided $1,100 by 6 instead of $57 because I did a mental quick dirty, and I come up with $18. So I knew I'd have either $18 or $19 three-number winners, and that's $50 each. At $18, I got $1,000 for a four-number winner, and I got 18 three-number winners worth $50 each.

That's $900. So I got $1,100 invested, and I've got a $1,900 return. Sounds like good math. Yeah, a little over 80%, isn't it? You're talking about this as if it's the most obvious set of figures in the world. This is not taxing the outer limits of your math skills. No, no, it is. Actually, it's just basic arithmetic.

Are you thinking, I bet there are a million people that have also caught on to this? Exactly is what I thought. When a roll-down was announced, Jerry sprang into action. He bought $3,600 in windfall tickets and won $6,300. Then he bet $8,000 and nearly doubled it. At that point, I told Marge what I was doing. I was going to say, putting thousands of dollars in action on a state lottery game.

At what point do you share this with your wife? Right at that point. Jerry says, I think I've cracked the Michigan state lottery. What do you say to that? You know, it didn't surprise me. You weren't surprised? No, I wasn't surprised because as long as nobody wins and you win money, you could see the numbers. So when you realize there aren't a million people that have discovered this, it's pretty much just you.

What's that feeling like? Amazed. Yeah. Amazed. Pretty happy. I just couldn't fathom it. Soon, Jerry and Marge Selby started playing for hundreds of thousands of dollars. Jerry set up a corporation, GS Investment Strategies.

He showed us stacks of record books that detailed their winnings. Here's one that was pretty successful. We played $515,000, and we got back $853,000. That's about a 60% return. That was a good return. They invited family and friends to share in their, well, windfall, selling shares in the corporation for $500 apiece. You might say this was a different kind of hedge fund.

We met some of the local investors at the Everett hangout spot, Sugar Ray's Cafe. All four of you guys are members of an exclusive club. James White is a local attorney. Dave Huff operated a machine and tool shop. And brothers Lauren and Ray Gerber

are retired farmers. And when you looked at the mathematics of it, it made sense. You guys followed the math the mathematics of it, it made sense. You guys followed the math when he broke it down? Pretty much. Yeah, but he's really good at math. So he explained this. He asked him questions.

Yeah, he's a math whiz. Do you guys remember how much you gave him to invest? I had about $8,000, and then I put another $6,000 in for the grandkids. For the grandkids? Yeah. But overall, you guys came out way ahead on this. Oh, yes. Oh, yeah.

It was a good game. It helped me put three kids through school and one through law school, so it was quite beneficial. You used it for education. Pretty much. There's a lot of people around town that knew what it was about and talk about it, that it had occurred. But a lot of people were really leery. They were thinking, you guys are nuts.

By the spring of 2005, Jerry's Club stood at 25 members. Those willing to press their luck included three state troopers, a factory plant manager, and a bank vice president. They had played windfall 12 times, winning millions, when Michigan suddenly shut down the game, citing, ironically, lack of sales. Michigan game gets closed down. How long before you realized there was a game in Massachusetts that also presented some favorable odds? One of our players emailed me and he said, Massachusetts has a game called Cash Windfall.

Do you think we could play that? I've heard that. And so I got on the computer. I looked at the game. And once I researched it, I got back with him. And I said, we can play that game. We got another winner. How long did it take you this time to figure out that you could get a positive return here?

Ten minutes. That's when Jerry and Marge Selby developed a routine they continued for the next six years, driving 900 miles to Massachusetts every time there was a roll-down and buying hundreds of thousands of tickets at two local convenience stores. Then they hold up, not in some fancy suite at the High Rollers Hotel, but in a room at the Red Roof Inn, sorting the tickets by hand for 10 hours a day, 10 days straight. Not so much playing the lottery as working it. So once there was a roll down, on average, how much were you putting in play? Over $600,000 per play,

seven plays a year. $4.2 million once this roll down was coming. Per year. Did you ever get nervous? Oh yeah. What did you do with all the losing tickets? Saved them.

You saved all the losing tickets? And the big totes. Big plastic totes. There must have been millions. Eighteen. Eighteen million dollars worth of losing tickets. And you have this. Just in case we had a physical federal audit.

We had the upstairs of the barn. I stored them in one end and in the other end. And then I thought, oh, no, this floor is going to fall through. So then we stored them down in a pole barn, and we had probably 60, 65 tubs of tickets. Did you guys ever say, well, we're supposed to be retired here. We're making 14-hour drives to Massachusetts. We're having fun. It's fun.

It's fun for you guys. It's fun doing it, yes. You get a high on it. And it gave you a satisfaction of being successful at something that was worthwhile to not only us personally, but to our friends and our family. But in 2011, the Boston Globe got a tip and discovered that in certain Massachusetts locations, cash windfall tickets were being sold at an extraordinary volume. Smart people had figured out, if I buy enough of these tickets, I'll always be a winner. I'll get back more than I spent.

Scott Allen oversees the Globe's investigative reporters, known as the Spotlight Team. The paper's reporting revealed that two groups were dominating cash windfall. The Selby gang from Everett, Michigan, in their competition. A syndicate led by math majors from MIT, the Massachusetts Institute of Technology. These were kids young enough to be the Selby's grandchildren. The guy who started it, he was doing an independent study project as an undergraduate at MIT, and he figured out that he could win this game. So he got a bunch of his friends to pool in their money. So they became, as time went on, professional cash windfall players,

recruiting their friends and raising money from backers until they, too, were spending hundreds of thousands of dollars. Incredibly, the MIT group bet between $17 and $18 million on cash windfall over a seven-year period, earning at least $3.5 million in profits, almost the exact same rate of return as the Selbys. You've got a syndicate from northwest Michigan. You've got a group of MIT students. Did your story meter start beeping? It was a great story.

The Boston Globe article caused a sensation, raising suspicion that the game was rigged. The Massachusetts state treasurer shut down the cash windfall game and called for an investigation. It was led by then State Inspector General Greg Sullivan. When we got involved, the public perception was there must be some kind of organized crime or public corruption to explain how millions of dollars are being bet by syndicates on state lottery tickets. We really looked at this looking for corruption. We used subpoenas. We looked at documents.

We interviewed dozens of people to look at this in detail with a hypothesis that something illegal had happened. You went into this looking for organized crime. As the story unfolded, were you surprised by what you found? I wasn't surprised. I was dumbfoundedly amazed that these math nerd geniuses had found a way, legally, to win a state lottery and make millions from it. And the state's getting rich in the process. And the state got very rich. The state made $120 million.

The investigation found no one's odds of winning was affected by high-volume betting. When the jackpot hit the roll-down threshold, cash windfall became a good bet for everyone, not just the big-time bettors like the Selbys. By then, though, Massachusetts State Lottery had moved on to a different game, without a statistical twist. And with that, Jerry and Marge Selby's excellent adventure drew to an end. In total, their unlikely homegrown company grossed more than $26 million from nine years of playing the lottery. Your corporation, $26 million.

You smile when you recounted that figure. That was satisfactory. Satisfactory. They made nearly $8 million in profit before taxes. Back in Everett, not exactly the land of extravagance, the Selbys put their winnings to practical use, renovating their home and helping their six kids, 14 grandkids and 10 great-grandchildren pay for their education. They still get together with members of their lottery group, but millions of dollars in windfall tickets have been replaced by nickel and dime poker night.

And Marge makes everyone chicken pot pie. I'm struck by how measured you are telling this story. Do you find anything remarkable about this? The only thing I found really remarkable is nobody else really seemed to grasp it. What I'm hearing you say is that this part of the country is really good at keeping a secret. I'm Scott Pelley. Next Sunday, enjoy the Super Bowl right here on CBS.