CON­FES­SIONS OF A LOT­TERY SCAM­MER

How a gam­ing geek with a check­ered past pulled off the big­gest num­bers con in U.S. his­tory

USA TODAY US Edition - - FRONT PAGE - Ja­son Clay­worth Des Moines Reg­is­ter | USA TO­DAY NET­WORK

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.”

MICHAEL ZAMORA/USA TO­DAY NET­WORK; IL­LUS­TRA­TION BY USA TO­DAY

ROD­NEY WHITE/USA TO­DAY NET­WORK

“It was never my in­tent to start a full-out ticket scam,” Ed­die Tip­ton said. He pleaded guilty and was sen­tenced to up to 25 years in prison.

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