How a gaming geek with a checkered past pulled off the biggest lottery scam in U.S. history
Eddie Tipton jotted down the numbers on a yellow sticky notice as he sat at his table in Urbandale greater than a decade in the past.
Around him have been extra sticky notes crammed with quantity units that he in moderation wrote down as they spun up on his display screen. The numbers have been generated via a cryptic two-line device code Tipton had planted in his employer’s laptop device at the Multi-State Lottery Association.
The administrative center construction was once just about empty as Tipton ran take a look at after take a look at, zeroing in on the conceivable successful numbers for an upcoming $four.eight million lottery jackpot drawing in Colorado.
The program would let him slim the drawing’s successful odds from five million to 1 to 200 to 1.
And, in the end, it could permit him to hijack no less than 5 successful drawings totaling greater than $24 million in prizes in Colorado, Wisconsin, Iowa, Kansas and Oklahoma — the biggest lottery scam in U.S. history.
The greatest jackpot, a $16.five million Hot Lotto prize in Iowa in 2010, was once by no means paid. And in the long run, it could be the one that may do Tipton in.
The seed that began all of it
Tipton, who beloved taking part in the delusion sport “Dungeons and Dragons,” advised himself he wasn’t looking to crack the code for the cash.
Instead, the Texas local described via his brother as “a very large” and “kind of lonesome” guy, was once impressed via the problem.
An offhand dialog with a co-worker, Gene Schaller, in 2005 set the problem in movement, Tipton advised investigators.
“Hey, did you put your secret numbers in there?” Schaller requested him.
“What do you mean?” Tipton answered.
“Well, you know, you can set numbers on any given day, since you wrote the software.”
Schaller, who stays an accountant for the Multi-State Lottery Association, would not remark for this text.
But Tipton, whilst on his approach to jail remaining yr, mirrored with investigators on the significance of that dialog.
The thought was once “just like a little seed that was planted,” he stated. “And then during one slow period, I just had a, I had a thought that it’s possible.”
That evening in 2005, the 41-year-old bachelor started a fraud that even he had no thought would in the end shake the lottery business to its core.
“It was never my intent to start a full-out ticket scam,” Eddie advised investigators all through his June 29 post-conviction confession classes in the Hoover State Office Building in Des Moines.
A prison past and a task be offering
To be fair, Tipton by no means anticipated he’d land an interview with the Multi-State Lottery Association, let by myself be employed and in the end turn out to be considered one of the maximum entrusted lottery safety officers in the country.
The affiliation is owned and operated via 36 member lotteries, most commonly state organizations equivalent to the Iowa Lottery. It’s accountable for lots of of the country’s most well liked and richest lotteries, together with Powerball and Hot Lotto.
Tipton had pleaded in charge in 1982 for his section in a warehouse housebreaking. The then 19-year-old confronted as much as 20 years in jail for the legal conviction, however as a substitute was once given two years of probation and was once ordered to pay $1,719 in restitution, court docket data display.
And prior to his housebreaking conviction, Tipton have been convicted of stealing laptop device from a division retailer. Tipton advised federal investigators greater than 20 years later that the device robbery was once a “Jerry Springer-style” incident that was once “more of an argument with a Sears employee.”
In 2003, as he sat for an interview, Tipton advised Ed Stefan, his potential boss at the Multi-State Lottery Association, about each convictions. So he was once stunned when the affiliation paid to fly him from Texas to Des Moines for an in-person task interview.
“And I’m like, ‘Are you sure, because I know these are there,'” Tipton advised investigators. “He came in, did my fingerprints, did a background check. They went to the state, the (Iowa) Gaming Commission, and they cleared me.”
Why lottery affiliation executives overpassed Tipton’s prison convictions is not fully transparent. MUSL knew about the housebreaking when Tipton was once employed, in keeping with court docket paperwork.
State legislation prohibits felons operating for the Iowa Lottery. But that legislation does now not practice to MUSL staff.
Bret Tyone, CEO of the Multi-State Lottery Association, stated he could not remark or supply a replica of the affiliation’s worker code of habits, bringing up ongoing litigation. Stefan didn’t go back requires remark.
But former deputy Iowa Attorney General Thomas H. Miller made it transparent in an interview this yr that he believes Tipton will have to by no means were given the alternative to land a task the place he would design the device that randomly picked the successful numbers for the Multi-State Lottery Association.
“A thief is a thief,” Miller advised Game Show Network.
“If he’ll steal $100, he’d be glad to steal $16 million, and yet Multi-State Lottery officials actually put him in the position of being director of security for the multi-state lottery, inviting the fox into that chicken coop.”
A Bigfoot hunt, a lottery win and a duped FBI
Tipton’s preliminary late-night sticky notice consultation resulted in his scam’s first win — a Nov. 23, 2005, drawing in Colorado.
The stars aligned for that sport: It was once a main jackpot — $four.eight million — and it landed on considered one of the 3 dates all through the yr that he was once in a position to control with his secret code.
The alternative was once particularly handy on account of his brother’s hunt for Bigfoot.
Tommy Tipton’s fascination with folklore surrounding the ape-like creature started as a kid, when his grandmother retold tales about a critter that may spook their cattle in Arkansas.
Tommy’s interest about Bigfoot intensified as an grownup after he turned into a sheriff’s deputy and member of a SWAT workforce, having access to night-vision generation. Tommy advised federal investigators he had watched the animals for a couple of hours in Louisiana.
And it in order that took place that Tommy’s pursuit of Bigfoot was once taking him to Colorado in November 2005.
Eddie, who stated few other people possessed the “geekiness” essential to know his paintings, seized the alternative to check out out his rigged coding.
“My brother was going on a trip, and I suggested that I had some numbers that he could play,” he advised investigators. “And that was pretty much it.”
But the tale, in keeping with his brother, was once way more nuanced.
Tommy, who via 2005 was once a Justice of the Peace in Fayette County, Texas, was once skeptical whether or not it was once felony for him to play the masses of units of numbers given him via his brother, an worker of the lottery affiliation.
Tommy advised investigators he contacted a buddy, Texas protection lawyer Luis Vallejo, to seek the advice of about the subject. Vallejo may in finding no explanation why that it could be unlawful for him to play, despite the fact that Eddie labored for the lottery affiliation, Tommy stated.
After the successful numbers have been drawn Nov. 23, 2005, 3 other people got here ahead to assert the $four.eight million prize: a Colorado resident now not connected to the conspiracy; Alexander Hicks, a buddy of Tommy’s whom he had recruited to coins the price ticket; and Texas attorney Thad Whisenant, who had created a Nevada restricted liability-corporation known as Cuestion de Suerte (Question of Luck).
The Colorado resident’s declare got here from an “easy pick” price ticket, which means the numbers have been decided on via a device. Investigators dominated that acquire legit.
But the others drew their suspicion. Whisenant and Vallejo have been publicly named via investigators who in August 2016 requested the public for help in the case.
They have been by no means arrested.
Whom are you able to agree with?
Tommy advised investigators all through his June 29, 2017, deposition that he believed Vallejo in some way stole the numbers he have been given via his brother, despite the fact that Tommy stated he by no means at once faced him about it.
Tommy stated the robbery would possibly have took place once they met as buddies for a informal communicate over espresso.
Hicks — who was once by no means charged with a crime — gave 90 % of the just about $570,000 cash-option prize payout from the jackpot to Tommy. Cuestion de Suerte accrued the similar quantity.
Neither Vallejo nor Whisenant returned requires this text. Whisenant was once by no means requested to go back the cash he accrued.
Tommy stays sour about the result.
“It was a big shock to me to hear that an attorney whom I went to for advice played the lottery,” he stated of Vallejo. “And I have lots of anger over that issue. I’m not saying what I did was right, but you would think an attorney that you trusted would not tell you anything wrong or negative. Don’t know if he did, but I’m 99 percent sure he got it from me.”
Soon after the 2005 win, Tommy fell from a 31-foot tree stand whilst Bigfoot looking and “almost died,” he advised investigators. He was once in the health facility in 2006 when the FBI puzzled him about why he was once looking to trade $450,000 in consecutively marked expenses.
Tommy honestly advised the brokers the cash got here from the 2005 Colorado lottery win. But he advised them he was once looking to trade the expenses as a result of he could not inform his spouse of the win since playing was once opposite to her Christian religion.
In neither the first nor a next interview did the FBI ask about the paintings his brother was once doing for the Multi-State Lottery Association — and Tommy by no means volunteered the knowledge.
“They just asked me two questions during that interview. Well, they talked about Bigfoot hunting again. Kind of laughed at me,” Tommy stated in his confession. “They visited with the attorneys for like an hour. I sat there, I remember that, because I was in a wheelchair in a lot of pain.”
Eventually, the FBI dropped its inquiry, and the Tiptons resumed their lottery scheme.
Frustrated Eddie warns his bosses
As the head of the Multi-State Lottery Association’s IT safety, Eddie Tipton was once making nearly $100,000 a yr. But he felt underappreciated and overworked at the time he wrote the code to hack into the nationwide lottery device.
He was once operating 50- to 60-hour weeks and regularly was once in the administrative center till 11 p.m. His managers anticipated him to tackle way more roles than have been sensible, he complained.
“I wrote software. I worked on Web pages. I did network security. I did firewalls,” he stated in his confession. “And then I did my regular auditing job on top of all that. They just found no limits to what they wanted to make me do. It even got to the point where the word ‘slave’ was used.”
Nobody at the Multi-State Lottery Association oversaw his entire frame of labor, and few other people in reality cared about safety, he stated. That loss of oversight allowed Tipton to jot down, set up and use his secret code with out discovery.
Tipton stated he even warned lottery officers about the device’s safety dangers and alerted them in 2006 about an error in the random-drawing device after the similar numbers have been drawn in the similar order in the similar yr in a Wisconsin sport.
Soon after his first a hit lottery scam, Eddie stated he introduced a repair that may have thwarted his talent to expect successful numbers — appointing a 2nd consumer to supervise a few of the maximum an important processes of the random-generator device.
“I asked for that originally, I did,” he stated all through his confession, “Because I knew that I had already done this. I’m like, ‘I don’t want to do this anymore.'”
His quick boss, Stefan, took the issues severely, he stated, however others in the group didn’t. Most of his issues have been pushed aside or inadequately addressed, Tipton complained.
“I’d do reviews and I’d find stuff — gaping holes in their procedures — and I would tell them, but if it wasn’t in my rules, the MUSL rules, I couldn’t write it down,” he stated. “I couldn’t document that I saw this gaping hole because they didn’t want to hear it or they didn’t want it written down anywhere.”
And so the secret code survived.
Eddie additionally advised investigators there was once “zero chance” that Gaming Laboratories International, a New Jersey-based corporate employed via the Multi-State Lottery Association to check and certify video games as random, would have came upon his two-line code for rigging the drawings.
Gaming Laboratories didn’t go back requests for remark.
That code was once replicated on as many as 17 state lottery methods as MUSL built-in the random-number device Tipton designed. For just about a decade, it allowed Tipton to rig the drawings for video games performed on 3 dates each and every yr: May 27, Nov. 23 and Dec. 29.
Tipton’s device model is now not used.
The giant mistake
It was once on Dec. 23, 2010, that Eddie made a miscalculation that in the long run unraveled his scheme: He purchased a successful price ticket himself.
Before, he had at all times funneled successful numbers to others.
Video captured his price ticket acquire at a Des Moines comfort retailer about 10 miles from the Multi-State Lottery Association workplaces.
Though he knew the Iowa Lottery had retained a video of the acquire, Eddie advised considered one of his easiest buddies, Robert Rhodes, that he may declare the price ticket if he sought after.
But Eddie gave Rhodes one caveat: Don’t wait till the remaining minute to assert the price ticket.
That recommendation was once neglected.
Rhodes participated in an intricate plan to assert the prize anonymously — not up to two hours prior to the four p.m. cut-off date on Dec. 29, 2011.
“When I heard that there was a claim, I was actually surprised,” Tipton stated all through his consultation. “I will be able to say this: I advised Rhodes don’t wait till the remaining, till the finish to assert it. Do now not.
“Because that is when it has the maximum scrutiny.”
Indeed, the 11th-hour scheme to assert the price ticket captivated the public’s consideration. The $16.five million jackpot was once the third-largest prize in Hot Lotto’s history.
For weeks, lottery officers had peppered information media throughout the nation to publicize the unclaimed price ticket. Then, simply as the year-long window was once to run out, two legal professionals representing a agree with confirmed up at Iowa Lottery headquarters to assert the prize.
But Iowa legislation calls for Iottery winners’ names and addresses to be made public, and the thriller over who was once at the back of the declare ruled newscasts for weeks.
Despite the intense scrutiny, it could take investigators kind of 3 years to glue Tipton to the Hot Lotto rigging. On Jan. 15, 2015, he was once charged with two counts of legal fraud.
He later confronted different fees, most commonly associated with cash laundering and fraudulent wins in different states.
His brother Tommy and Rhodes additionally have been charged with felonies associated with the rigged drawings.
Rhodes, of Sugar Land, Texas, pleaded in charge to a legal price of being social gathering to a laptop crime and was once sentenced in March 2017 to 6 months of house confinement in Texas and ordered to pay $409,000 in restitution.
He agreed to testify in opposition to Eddie and Tommy Tipton as a part of his plea deal.
Tommy and Eddie pleaded in charge to legal crimes associated with the rigging scheme in June 2017 and agreed to pay off $2.2 million in restitution.
Tommy admitted claiming prizes in Colorado and Oklahoma the use of numbers Eddie equipped. He was once sentenced to 75 days in prison.
Eddie was once sentenced in August to as much as 25 years in jail.
In his confession classes, Eddie defined 3 key errors that helped deliver down the decade-long scheme:
- Tommy’s try to trade coins for unmarked expenses.
- His personal acquire of a successful price ticket.
- Playing in Iowa, the place he stated safety is tighter than in different states.
“I am announcing at the time I didn’t suppose it was once fraud,” he told federal officials. “I believed that me writing that code and placing an additional set of rules in there and sending it off to Gaming Labs and them giving it a stamp of approval would get to the bottom of me of any issues.”
Eddie, who grew to become 54 on Thursday, didn’t reply to a request to talk for this text. He is serving his sentence in Iowa’s Clarinda Correctional Facility.
It’s unsure what number of years Eddie will spend in jail. He might be paroled inside of 3 or 4 years, his legal professionals famous at his sentencing remaining yr.
He has paid $25,000 of his $16.eight million in restitution, in keeping with the most up-to-date court docket data filed in January.
Eddie Tipton stated in his confessions that investigators had recognized each and every of his fraudulent lottery wins.
But his brother Tommy stated there have been no less than two different instances that he attempted unsuccessfully the use of his brother’s code.
Investigators are assured all the rigged drawings were recognized, stated Rob Sand, a former lawyer for the Iowa Attorney General’s administrative center who helped prosecute the Tipton instances.
For his section, Eddie Tipton stated all through the confessions he has have shyed away from each interview and tv request, together with those that have introduced to pay for his tale.
But, if it is possible, he stated he would use any cash generated to pay his restitution.
“Because at this level in time, I do not understand how I am gonna arise and pay that restitution again,” Tipton stated.
The penalties for his former employer are much less transparent.
At least two proceedings tied to Eddie Tipton’s lottery-rigging scheme are nonetheless pending, together with one in opposition to the Multi-State Lottery Association that seeks class-action standing on behalf of all gamers cheated via Tipton’s manipulated drawings.
Lottery officers insist they’ve shored up safety to offer protection to the integrity in their video games.
Eddie’s attorney, Nick Sarcone, is not so positive. “Of all the other people in the international, (Eddie Tipton) was once for years the maximum certified to grasp the attainable safety dangers concerned in lottery video games.
“I think he is absolutely right that national and state lottery systems remain… vulnerable to fraud.”
About this tale
After brothers Eddie and Tommy Tipton have been stuck perpetrating the greatest lottery fraud in U.S. history, they meticulously defined their involvement to federal brokers as a situation in their 2017 convictions and plea agreements. This tale is in line with just about 400 pages of court docket transcripts detailing their confessions, which the Des Moines Register bought 8 months after submitting a public data request.
Reaction to the confessions
The Des Moines Register reached out to a number of mavens and other people related with the lottery for his or her response to Eddie and Tommy Tipton’s detailed confessions. Here’s what they stated:
“There should be a lesson in this. Everybody just trusted a computer, a box. It’s ridiculous to think this was allowed to occur without more rigorous testing.”
— Dean Stowers, considered one of Tipton’s legal professionals
“I used to be happy to listen to Tipton admit… that the Iowa Lottery did issues proper…. Tipton additionally stated that considered one of his biggest errors was once looking to perform in a state like Iowa, the place Lottery safety group of workers are all former legislation enforcement officials.
“I’m pleased with the paintings via Iowa Lottery staff and Iowa legislation enforcement investigators, who remained dedicated to following the information anywhere they led. We have been a part of an operation that collected and reviewed proof from throughout North America to construct a case in opposition to Tipton, which in the long run resulted in his confession and plea.”
— Iowa Lottery CEO Terry Rich
“Of all the other people in the international, (Eddie Tipton) was once for years the maximum certified to grasp the attainable safety dangers concerned in lottery video games. I believe he’s completely proper that nationwide and state lottery methods stay insecure and susceptible to fraud.”
— Nick Sarcone, considered one of Tipton’s legal professionals
“With prison habits, other people regularly really feel strengthened via getting away with riskier and riskier behaviors. Is it a considerate escalation? I doubt it. But, no less than behaviorally, Eddie almost definitely felt strengthened as a result of he first of all were given away with it.”
— Andy Kaiser, chairman of the psychology division at St. Ambrose University in Davenport
“All MUSL staff are, and feature at all times been, prohibited from claiming prizes in video games facilitated via MUSL. In 2015, this prohibition was once prolonged to all lottery video games introduced via United States Lotteries, irrespective of whether or not MUSL has any involvement in the ones video games.”
— Bret Toyne CEO of the Multi-State Lottery Association
“Leaders wish to acknowledge the distinction between an pointless value and a just right funding…. MUSL saved the value of its self-produced (random quantity turbines) smartly underneath marketplace price… via restricting the scope of the third-party verification of the validity of the code. By making that call, MUSL risked its integrity, and it misplaced that guess.”
— Robert Sand, an assistant Iowa Attorney General who helped prosecute Eddie and Tommy Tipton
Timeline of the biggest crime in US lottery history
The following is a compilation of Lottery Post information protection chronicling the Hot Lotto thriller and therefore came upon crime.
We get started the timeline with a information tale indicating that most effective three months remained for the $16 million Hot Lotto jackpot to be claimed.