The allegations read like a movie plot, but authorities say the crime was very real. A lottery industry insider is accused of installing an undetectable software program in the computers that pick winning numbers so he can know them in advance.
According to police, Eddie Tipton enlisted accomplices to play those numbers and collect the jackpots. And they enriched themselves for years… until a misstep unraveled their high-tech scheme.
Tipton, former security director of the Multi-State Lottery Association, has been accused of tampering with drawings in four states over a six-year period, and investigators are now expanding the inquiry nationwide to determine if the number could be larger.
State lotteries in Colorado, Wisconsin, and Oklahoma have confirmed they paid jackpots worth $8 million to Tipton associates, including his old college roommate, Robert Rhodes. Investigators are looking at payouts in the other 37 states and U.S. territories that used random-number generators from the Iowa-based association, which administers games and distributes prizes for the lottery consortium.
The inquiry is sending a chill through state governments that receive $20 billion annually in lottery revenue, and that depend on public confidence in the contests. Tipton installed software or had access to machines for national games such as Hot Lotto and some state-based games. The most lucrative ones, Powerball and scratch tickets, weren’t part of the scheme, according to lottery officials.
“It would be pretty naive to believe they are the only four” jackpots involved, said now-retired Iowa deputy attorney general Thomas H. Miller, who oversaw the investigation for 2 ½ years. “If you find one cockroach, you have to assume there are 100 more you haven’t found.”
Tipton, 52, was convicted in July of fraud in the attempt to claim a $16.5 million jackpot in Iowa. He was sentenced to 10 years but is free pending appeal. He is also charged with ongoing criminal conduct and money laundering involving the other three state lotteries. Rhodes, a businessman from Sugar Land, Texas, is charged with fraud in connection with the Iowa jackpot, and is under investigation in Wisconsin.
Tommy Tipton, Eddie’s brother, who bought a winning Colorado Lotto ticket in 2005, resigned his position last month as a justice of the peace in Flatonia, Texas, 100 miles west of Houston, but hasn’t been charged. Colorado authorities are investigating.
Eddie Tipton’s attorney, Dean Stowers, says his client is innocent.
“There’s just absolutely no evidence whatsoever that he did anything to alter the proper operations of the computers that were used to pick those numbers, absolutely no evidence. It’s just all speculation,” Stowers said.
Rhodes’ attorney did not respond to messages and Tommy Tipton did not return calls.
The scheme allegedly continued for years. Prosecutors say Eddie Tipton installed software known as a root kit that enabled him to manipulate numbers without a trace. Tipton was tripped up, investigators say, by the audacious move of buying the winning ticket himself at a service station near where he worked in Des Moines.
“This is kind of an eye opener,” said Oklahoma Lottery director Rollo Redburn. “It reaffirms the fact that we’ve got to be constantly vigilant against people trying to defraud the system.”
Iowa launched the investigation in 2012 after a lawyer representing a trust tried to claim the $16.5 million Hot Lotto jackpot, turning in the ticket hours before a one-year deadline. The trust — which said it benefited a corporation in Belize — eventually withdrew the claim rather than identify who purchased the ticket. Investigators initially suspected it was merely someone trying to hide winnings from a creditor.
The case took a dramatic twist when authorities released surveillance footage from the service station showing a stocky, hooded man buying the winning ticket and hot dogs in December 2010. Stunned lottery colleagues stepped forward to say the man looked and sounded like Tipton — a man with access to their computers.
Eddie Tipton had worked at the association since 2003, after a career in information technology, including at a Rhodes-owned firm in Houston called Systems Evolution. He was promoted to lottery security director in 2013.
Investigators allege that he passed the winning ticket to Rhodes, his University of Houston classmate, who then worked with associates to try to collect.
At Eddie’s trial in July, brother Tommy insisted the man on the video wasn’t his sibling, who he said was larger than the person shown.
In the Wisconsin case, authorities said, Rhodes hired a law firm to claim a $2 million Megabucks jackpot for him in 2008, and took legal action so the $783,000 cash payout could go to his limited liability corporation instead of him. Wisconsin Lottery spokeswoman Stephanie Marquis said nothing seemed suspicious and that other winners have done the same.
In Oklahoma, investigators have alleged a $1.2 million Hot Lotto jackpot claimed in 2011 is linked to Tipton but haven’t spelled out details.
Miller praised the Iowa lottery’s skepticism about the suspicious jackpot but wonders whether other lotteries would have been as careful.
Prosecutor Rob Sand, who is now leading the case, said investigators want to talk to anyone who has been asked to claim a prize on behalf of someone else. They are focusing on jackpots that involve tickets in which the numbers were specifically requested by winners rather than chosen randomly.
The Associated Press contributed to this article
A famous odds maker in Vegas once said that that the odds in Powerball were so bad that it was, in essence, a “voluntary tax on the mathematically impaired.” With this wrinkle, I wonder if the Mob in Vegas isn’t involved!
Every state in the union is involved that’s why I do not buy lottery tickets it’s all rigged
I hope they hang him out to dry. Now, everyone who wins will automatically be under investigation. There are scammers involved at all levels these days.
A lottery is rigged-what a surprise! Random number generators should always be viewed with suspicion. Anyone involved with the programming of the computer can easily rig the system. The ping pong ball lottery picks are probably the hardest to tamper with.
Any time there are large amounts of money to be collected there is going to be a chance that someone is going to try to get their hands on it.
Disgusting – is nothing sacred? Why one resorts to theft in any form is beyond me! Get back to basics – reading, writing and arithmetic and teach parenting in the schools. That may be a start!!
“What profit a man go gain the whole world and lose his very soul.”
Why do those words not resonate with us mere mortals who know we are going to die and be judged?
I used to work at a Casino at South Shore, Lake Tahoe. It was a nice Casino named Harvey’s top of the wheel. I enjoyed my job there, they were excellent people to work for. It is an honest Casino also. No Mickey Mouse games, etc,etc. If ever you are at South Shore Tahoe, try their fabulous food, while enjoying the beautiful scenery of the High Sierras.
I remember you Johnny. You dealt Black Jack. Hey, didn’t you get caught dealing off the bottom of the deck? I lost all my money to you.
Just realizing that iv said I believed it was years ago if u look where an who wins ? some times the need y people wins just to keep us buying u think. ?
I can ‘t believe it’s all rigged. What a disappointment. I never cared for the fact that they turned the picking of the numbers over to a computer. It used to be the ping pong ball pick method. It’s clear now why it was turned over to the computer, it’s called GREED. Hope all envolved do time. I remember when they used to air the picking of the numbers on TV, that went away, now it’s all done in secrecy. What a bunch greedy creeps. I’ll never buy another lottery ticket and I will forward this email on to many, and I hope they do the same. People who are corrupt, will for certain, be exposed sooner or later. I wonder if it was all worth it?
Well if the lottery is rigged then why does the lottery turn over money to the IRS on the prize of the lottery player and not the lottery itself? The lottery has no authority to require federal withholding tax because the lottery is not a employer to the employee. Federal withholding by law occurs in the federal employment workplace according to 26 U.S.C. subtitle C, chapter 24, sections 3401, 3402, 3403 and 3404. Don’t take my word here, verify it for yourself in the tax code.
All Union state lotteries tell lottery players that win prizes of $5,000 or greater, they must require federal withholding tax on the prize. What the lotteries fail to note is this, that the section 3402(q), the section that provides for an extension to withhold on gambling winning’s, is in subtitle C which provides for federal employers only to withhold federal tax only on federal employees if the employee elects to have tax withheld voluntarily. In essence, the lotteries are what Obama is, an impostor, but the lotteries are acting as a federal employer impostor and withholding tax from a federal employee. Since the lotteries do not give a prize winner the choice of whether he/she or the lottery pays over any tax to the IRS, the lotteries commit two felonies, namely extortion and conversion of funds. Too bad 99.999999999% of lottery players who win these million dollar prizes, will gleefully allow the lottery to hand over money to the IRS which did nothing to receive it, but nevertheless the IRS has no authority to require the tax per 4 U.S.C. 72 which declares that all United States Government public offices are limited to the jurisdiction of the District of Columbia. Ask your state lottery to cite the law that gives the lottery to take tax from players’ prize. Be sure the proof the lottery comes up with is not some IRS instructions, because you know that instructions as compared to the law would mean that instructions would have no standing in court as a result of prize winner suing lottery with the law in hand..