Security director convicted in U.S. lottery jackpot scam

The US lottery industry is abuzz following the news that a former security director of the Multi-State Lottery Association, Eddie Tipton (52), has been convicted of fraud for fixing a jackpot in Des Moines, Iowa with prosecutors claiming that his high-tech scheme extended far beyond the state.

The result is an expanding investigation across at least four states, with the enquiry centred on a modus operandi that saw the installation of undetectable malware that gave Tipton advance knowledge of winning numbers, enabling him to enlist accomplices to play the numbers and collect the jackpots.

It is believed that the scam operated in four state lotteries for more than six years, enabling Tipton and his accomplices to enrich themselves. So far, Colorado, Wisconsin, and Oklahoma have joined Iowa in confirming that jackpots valued at a total of $8 million were paid out and allegedly linked to Tipton and associates.

Tipton was caught when he decided to buy one of the winning tickets himself at a service station near the headquarters of the association where he had worked since 2003.

The ticket he bought was subsequently presented in 2012 by a New York lawyer representing a newly created trust on behalf of a Belize-registered corporation, who turned in the ticket hours before a one-year deadline. When routinely questioned, the trust withdrew the claim rather than identify the ticket buyer, arousing the suspicions of the Iowa lottery.

Surveillance video from the point of sale was publicised in an effort to identify the buyer of the winning ticket, and Tipton’s colleagues at the lottery recognised him as the buyer.

Further investigations led to claims that after buying the ticket Tipton passed it on to a university class mate and previous employer in Texas, Robert Rhodes, who passed it to a Canadian offshore banking expert, who delivered it to the New York lawyer who tried to collect.

Tipton was subsequently convicted and sentenced to ten years in jail, but is currently free pending an appeal. His brother Tommy and Rhodes, who deny any wrongdoing, are currently the subject of investigation, with Rhodes contesting an extradition attempt by Iowa enforcement authorities.

Local media reports claim that Colorado authorities alerted by the Iowa case are investigating a $4.5 million jackpot split by three winners in 2005. Authorities say Tipton’s brother Tommy received $537,000 in a cash pay-out after giving a friend 10 percent for claiming the prize on his behalf.

In Oklahoma a further investigation is in progress regarding a $1.2 million Hot Lotto jackpot claimed by a Texas construction company owner in 2011; collaboration with Iowa investigators has led to allegations that Eddie Tipton is linked to that drawing.

And in Wisconsin investigators have been advised by Iowa that Tipton and Rhodes worked together to claim a prize there as well. The state lottery director, Mike Edmonds has triggered a state department of justice enquiry into a $2 million Megabucks winning ticket which Rhodes had a law firm claim on his behalf in 2008, asking that the cash be deposited to his corporation.

Edmonds resigned his position this week after 12 years in-post for reasons that are not yet clear.

Media in all four states have been covering the evolving story, reporting that the criminal activity has sent a chill through the 37 US states that operate lotteries, generating around $20 billion annually.

The states use random-number generators from the Iowa-based Multi-State Lottery Association where Tipton worked.