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Latest Legal Action in Hot Lotto Fraud Case
Iowa Office of the Attorney General Announces Additional Charges

OKLAHOMA CITY (Nov. 20, 2015) - A criminal investigation that began in Iowa and has been underway for nearly five years has expanded, with charges now involving lottery jackpot prizes in four states, the latest in Oklahoma. A felony criminal conduct charge filed last month that stemmed from jackpots won in Iowa, Colorado and Wisconsin was amended this week to also include a lottery jackpot in Oklahoma.

At the time that all of the jackpots were won, the man charged in the case worked as an information security consultant at a vendor organization within the lottery industry. That man, Eddie Tipton, later became the Director of Information Security at that same vendor organization, the Multi-State Lottery Association (MUSL), which is based in Urbandale, Iowa. MUSL handles day-to-day functions such as prize drawings in some lotto games on behalf of U.S. lotteries. In his work at MUSL, Tipton evaluated security systems at many U.S. lotteries and provided other information-technology duties, including software programming.

Tipton was convicted this summer on two felony counts of fraud in the case that started the long-running investigation: the attempted claim of a lottery jackpot in 2010 in Iowa.

Then in October, a felony charge of ongoing criminal conduct was filed against Tipton that initially encompassed lottery jackpot prizes won in three different states: the attempted claim in 2010 in Iowa; a jackpot claimed in 2005 in Colorado; and another in 2007 in Wisconsin. The criminal conduct charge has been expanded this week to include a jackpot prize claim in 2011 in Oklahoma.

The Oklahoma prize was a $1.2 million Hot Lotto jackpot won on Nov. 23, 2011. The prize was claimed on Dec. 21, 2011, by a Texas man.

Tipton is charged with violating Iowa’s ongoing criminal conduct statute. The criminal complaint against him stipulates that he helped build the random-number generator equipment used in the jackpot drawings for the prizes involved. The complaint also stipulates that according to court testimony earlier this year, he had the technical ability and opportunity to tamper with the drawing equipment that picks the winning lottery numbers in order to make the numbers predictable.

The Iowa and Oklahoma jackpots were both won in the multi-state Hot Lotto game, while the jackpots in Colorado and Wisconsin were won in games offered only in those states.

Background Regarding the Investigation

The long-running investigation dates back to 2010. On Dec. 29, 2010, a ticket purchased at a convenience store in Des Moines, Iowa, won the multi-million-dollar jackpot in that night’s Hot Lotto® drawing. For nearly a year, the prize went unclaimed.

Then, with less than two hours to go before the prize would have expired on Dec. 29, 2011, the winning ticket was presented to the Iowa Lottery by lawyers on behalf of a New York investment trust that had been established to benefit a corporation in the country of Belize. No one associated with Hexham Investments Trust of Bedford, N.Y., would provide the basic details necessary to verify that the ticket had been legally purchased, legally possessed and legally presented. Those involved said they could not identify the jackpot winner or the man who purchased the winning ticket. That standard information is routinely requested from jackpot winners in Iowa as part of the lottery’s security processes to comply with both state law and lottery game rules.

On Jan. 26, 2012, Crawford Shaw, a New York attorney who identified himself as the trustee of Hexham Investments Trust, withdrew the claim to the jackpot. The Iowa Lottery requested that the Iowa Attorney General’s Office and the Iowa Division of Criminal Investigation open a criminal investigation into the matter, which has been ongoing since that time.

The money from the jackpot involved, which totaled nearly $10.8 million in cash, was returned to the lotteries in the Hot Lotto game in proportion to the sales from each jurisdiction.

In January 2015, Eddie Tipton was charged with two counts of lottery fraud in the Iowa prize claim. He was convicted on those charges in July in Iowa’s Polk County District Court and sentenced in September to 10 years in prison, the maximum penalty possible. At the sentencing, the judge called Tipton’s behavior a large breach of trust.

A second man is also charged in the Iowa case. Robert Rhodes II of Sugar Land, Texas, was arrested in March and charged with two counts of lottery fraud. The criminal complaint against him detailed that Tipton previously worked for Rhodes’ Houston-based company. An Iowa trial date for Rhodes has not been set.

Tipton is the only person charged to date in the prize claims in Colorado, Wisconsin and Oklahoma.

Rollo Redburn, Executive Director of the Oklahoma Lottery stated, "It’s appalling to know that the person at the center of this case once worked as a trusted employee at a vendor organization within the lottery industry. This is a breach of trust against lotteries, our players, our games and the worthy causes that lotteries benefit. The case is a stark reminder of the need to be vigilant against fraud. We are so pleased that the staff of the Iowa Lottery was the key factor in preventing prize payment in the initial case and the continued investigation has helped our industry introduce new equipment, additional layers of security and better separation of duties to protect our players. The Oklahoma Lottery is committed to ensuring the security and integrity of our games and to ensure that the games are fair and offer all players an equal chance to win. We will continue to cooperate with the investigators in this case wherever it leads."

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Net proceeds of all Lottery games are used to support improvements and enhancements for Oklahoma education. More than $699 million has been contributed to education since November 2005 with funds appropriated by the State Legislature to pay debt service on a higher education capital bond issue; to pay support salaries for public schools and for equipment, scholarships and other purposes at our career and technology education institutions.


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