iowa lottery fraud

$1.5 million settlement ends legal action against Iowa lottery

Eddie Tipton apologizes for his role in an Iowa Lottery scam before being sentenced to 25 years in prison.

A lottery association has agreed to pay $1.5 million to settle an Iowa man’s claim that an insider’s scheme to hijack drawings resulted in him receiving a reduced jackpot, state emails show.

Larry Dawson of Webster City, who won a $9 million jackpot in 2011, alleged in 2016 lawsuit that his jackpot would have been larger had the drawing for the game’s previous jackpot not been rigged by a since-imprisoned executive of the Multi-State Lottery Association.

The Urbandale-based association administers or provides services for lotteries in dozens of states, including Iowa. In 2005, Eddie Tipton, its security chief, hijacked the association’s random generation system for lottery numbers by secretly adding a software code that allowed him to predict the winning numbers.

The code was replicated to games in as many as 17 states, according to transcripts of his confession, which the Des Moines Register obtained last year.

Convicted in 2017, Tipton is serving a sentence of up to 25 years at the Clarinda Correctional Facility.

The association — frequently referenced as MUSL — has refused to disclose the settlement in the Dawson case, contending that it is a private entity and is not subject to public records laws, even though it is owned and operated by its member states’ publicly established lotteries.

Larry Dawson and his wife claim the $9 million prize, worth $6 million in cash, from the Hot Lotto jackpot he won in 2010. Dawson is suing the lottery, alleging a jackpot rigging scheme shortchanged him. (Photo: Special to the Register)

MUSL Director Bret Toyne summarized the $1.5 million settlement in an Oct. 9 email to lottery directors, including Iowa Lottery CEO Matt Strawn. The Iowa Lottery released the email as part of records requested by the Register and The Associated Press.

Iowa Lottery officials said they do not have a copy of the settlement beyond Toyne’s summary. It remains unknown whether there are other stipulations linked with the agreement, which the Register is still seeking. It has filed a complaint against MUSL, noting that under Iowa law, any settlement made on the government’s behalf is subject to public disclosure.

The Iowa Lottery no longer uses MUSL software to conduct Iowa game drawings. MUSL software is, however, still used for Powerball, Mega Millions and Lotto America, national games still offered by the Iowa Lottery.

Tipton’s scam began to unravel after Iowa Lottery officials refused to anonymously pay a $16.5 million jackpot that his associates attempted to collect through a trust account. An investigation ultimately revealed that Tipton had purchased the ticket in 2010 at a Des Moines convenience store.

Some states allow jackpot winners to remain anonymous. Iowa rules, however, require winners to identify themselves, which helped to foil the national scheme, multiple lottery officials and investigators have said.

“The settlement between the Multi-State Lottery Association and Mr. Dawson closes a chapter in lottery history that tested that foundation of trust,” Strawn, the Iowa Lottery CEO, said in a November statement included in the released emails. “The actions of state of Iowa officials over the years to investigate, uncover and successfully prosecute this fraud against the public serve as a reminder that Iowa passed this test.”

Webster City resident Larry Dawson said his $9 million jackpot would have been bigger had it not been for a scam.

How A Former Employee of the Multi-State Lottery Hijacked The Jackpot

This program originally aired on August 6, 2019

$16.5 million. That’s how much was in the jackpot in 2010, when Eddie Tipton won the lottery after buying the ticket in a Des Moines convenience store. As the security chief at the Multi-State Lottery Association at the time, Tipton was unable to claim the money. He hired a law firm to deliver the winning ticket and keep his name anonymous — but by then the Iowa Lottery had already suspected something fishy was going on. Tipton had masterminded the biggest lottery fraud in US history.

On this hour of River to River, host Ben Kieffer talks with Terry Rich and Perry Beeman, authors of the new book “The $80 Billion Dollar Gamble: The Inside Story of How a Suspicious Ticket, Hot Dogs, and Bigfoot Foiled the Biggest Lottery Fraud in US History.” Their book details this twisting and bizarre tale.

Guests include:

  • Perry Beeman, Managing Editor at the Business Record and co-author of “The $80 Billion Dollar Gamble”
  • Terry Rich, former CEO of the Iowa Lottery and co-author of “The $80 Billion Dollar Gamble”
  • Rob Sand, Iowa State Auditor and prosecutor of the Hot Lotto fraud scandal

This program originally aired on August 6, 2019$16.5 million. That's how much was in the jackpot in 2010, when Eddie Tipton won the lottery after buying… ]]>