CONFESSIONS OF A LOTTERY SCAMMER
How a gaming geek with a checkered past pulled off the biggest numbers con in U.S. history
Eddie Tipton jotted down the numbers as he sat at his desk in Urbandale, Iowa, more than a decade ago. Around him were sticky notes filled with number sets he carefully wrote down as they spun up on his computer screen. The numbers were generated by a cryptic two-line software code Tipton had planted in his employer’s computer system at the Multi-State Lottery Association.
The office building was virtually empty as Tipton ran test after test, zeroing in on the possible winning numbers for an upcoming $4.8 million jackpot drawing in Colorado.
Tipton’s code would let him narrow the drawing’s winning odds from 5 million to 1 to 200 to 1.
And, over time, it would allow him to hijack at least five winning drawings totaling more than $24 million in prizes in Colorado, Wisconsin, Iowa, Kansas and Oklahoma — the biggest lottery scam in U.S. history.
The largest jackpot, a $16.5 million Hot Lotto prize in Iowa in 2010, was never paid. And ultimately, it would be the one that would do Tipton in.
Genesis of a fraud
Tipton, who loved playing the fantasy game Dungeons and Dragons, told himself he wasn’t trying to crack the code for the money. But in 2005,
the 41-year-old Texas native began a fraud that even he had no idea eventually would shake the lottery industry to its core.
“It was never my intent to start a fullout ticket scam,” Eddie told investigators in his post-conviction confession sessions June 29 in Des Moines.
Tipton never expected he’d land an interview with the Multi-State Lottery Association, let alone be hired.
The association is owned and operated by 36 member lotteries, most of them state organizations such as the Iowa Lottery. It’s responsible for many of the nation’s most popular and richest lotteries, including Powerball and Hot Lotto.
Tipton had pleaded guilty in 1982 for his part in a warehouse burglary. The then-19-year-old faced up to 20 years in prison for the felony conviction but instead was given two years of probation and ordered to pay $1,719 in restitution, court records show. And before his burglary conviction, Tipton had been convicted of stealing computer software from a department store.
In 2003, as he sat for an interview, Tipton told Ed Stefan, his prospective boss at the Multi-State Lottery Association, about both convictions. So he was surprised when the association paid to fly him from Texas to Des Moines for a job interview.
Why lottery association executives overlooked Tipton’s criminal convictions isn’t entirely clear. They knew about the burglary when Tipton was hired, according to court documents.
State law prohibits felons working for the Iowa Lottery. But that law does not apply to Multi-State Lottery Association employees. Bret Tyone, CEO of the lottery association, said he couldn’t comment or provide a copy of the association’s employee code of conduct, citing ongoing litigation. Stefan did not return calls for comment.
But former deputy Iowa attorney general Thomas H. Miller made it clear in an interview this year that he believes Tipton should never have been given a job where he would design the software that randomly picked the winning numbers for the Multi-State Lottery Association.
“A thief is a thief,” Miller told 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 scam is born
Tipton’s initial late-night stickynote session resulted in his scam’s first win — a drawing on Nov. 23, 2005, in Colorado.
The stars aligned for that game: It was a major jackpot — $4.8 million — and it landed on one of the three dates of the year that he was able to manipulate with his secret code.
“My brother was going on a trip, and I suggested that I had some numbers that he could play,” Eddie told investigators. “And that was pretty much it.”
But the story, according to his brother Tommy, who by 2005 was a magistrate in Fayette County, Texas, was far more nuanced.
His brother was skeptical whether it was legal for him to play the hundreds of sets of numbers given to him by his brother. Tommy Tipton told investigators that he contacted a friend, Texas defense attorney Luis Vallejo, about the matter and that Vallejo could find no reason it would be illegal for him to play.
After the winning numbers were drawn, three people came forward to claim the prize: a Colorado resident not linked to the conspiracy; Alexander Hicks, a friend of Tommy Tipton’s whom he had recruited to cash the ticket; and Texas lawyer Thad Whisenant, who had created a Nevada limited liability corporation called Cuestion de Suerte (Question of Luck). The Colorado resident’s claim came from an “easy pick” ticket, meaning the numbers were selected by a machine. Investigators ruled that purchase legitimate.
But the others drew their suspicion. Whisenant and Vallejo were publicly named by investigators.
They were never arrested.
Missed warnings
As head of the Multi-State Lottery Association’s IT security, Eddie Tipton said a lack of oversight allowed him to write, install and use his secret code without discovery. He said he even warned lottery officials about the system’s security risks.
Soon after his first successful lottery scam, Tipton said he offered a fix that would have thwarted his ability to predict winning numbers — appointing a second person to oversee some of the most crucial processes of the randomgenerator software.
His secret code was replicated on as many as 17 state lottery systems as the multi-state association integrated the random-number software Tipton designed. For nearly a decade, it allowed Tipton to rig the drawings for games played on three dates each year: May 27, Nov. 23 and Dec. 29.
Tipton’s software version is no longer used.
Tipton, who turned 54 this month, was sentenced in August to up to 25 years in prison. It’s uncertain how long he will serve. He could be paroled within three or four years, his attorneys say.
Lottery officials insist they have shored up security to protect the integrity of their games.
Tipton’s lawyer, Nick Sarcone, isn’t so sure. “Of all the people in the world, ( Tipton) was for years the most qualified to know the potential security risks involved in lottery games.
“I think he is absolutely right that national and state lottery systems remain … vulnerable to fraud.”