Eddie Tipton jotted down the numbers on a yellow sticky note as he sat at his desk in Urbandale more than a decade ago.
Around him were more sticky notes filled with number sets that 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 lottery jackpot drawing in Colorado.
The program would let him narrow the drawing’s winning odds from 5 million to 1 to 200 to 1.
And, eventually, it would allow him to hijack numerous winning drawings totaling in the Tens of Millions in Colorado, Wisconsin, Iowa, Kansas and Oklahoma — the biggest lottery scam in U.S. history. Possibly other states as these are the only one’s investigators are certain of.
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.
Investigators were suspicious in 2006 when they heard that a rural Texas judge was trying to exchange $450,000 in consecutively marked bills.
But Tommy Tipton, a Fayette County magistrate, told the FBI that his actions were innocent, if odd: He won the Colorado lottery but couldn’t tell his wife because gambling was against their Christian faith. The FBI accepted the story and dropped its inquiry of Tipton, who soon bought a new truck and more property around the town of Flatonia, 110 miles west of Houston.
A decade later, the inquiry stands out as a missed chance to stop a jackpot rigging scandal that would corrupt the $70 billion lottery industry for years while enriching a tiny group of insiders. The FBI didn’t uncover one fact that its informant knew but didn’t see as significant: that Tipton’s brother, Eddie Tipton, was a lottery industry employee. In fact, he’d built the machine that picked the winning combination for the Colorado Lotto game.
The seed that started it all
Tipton, who loved playing the fantasy game “Dungeons and Dragons,” told himself he wasn’t trying to crack the code for the money.
Instead, the Texas native described by his brother as “a very large” and “kind of lonesome” man, was inspired by the challenge.
An offhand conversation with a co-worker, Gene Schaller, in 2005 set the challenge in motion, Tipton told investigators.
“Hey, did you put your secret numbers in there?” Schaller asked him.
“What do you mean?” Tipton replied.
“Well, you know, you can set numbers on any given day, since you wrote the software.”
Schaller, who remains an accountant for the Multi-State Lottery Association, wouldn’t comment for this article.
But Tipton, while on his way to prison last year, reflected with investigators on the importance of that conversation.
The idea was “just like a little seed that was planted,” he said. “And then during one slow period, I just had a, I had a thought that it’s possible.”
That night in 2005, the 41-year-old bachelor began a fraud that even he had no idea would eventually shake the lottery industry to its core.
A criminal past and a job offer
To be truthful, Tipton never expected he’d land an interview with the Multi-State Lottery Association, let alone be hired and eventually become one of the most entrusted lottery security officials in the nation.
The association is owned and operated by 36 member lotteries, mostly 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 was 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. Tipton told federal investigators more than 20 years later that the software theft was a “Jerry Springer-style” incident that was “more of an argument with a Sears employee.”
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 an in-person job interview.
“And I’m like, ‘Are you sure, because I know these are there,’” Tipton told investigators. “He came in, did my fingerprints, did a background check. They went to the state, the (Iowa) Gaming Commission, and they cleared me.”
Why lottery association executives overlooked Tipton’s criminal convictions isn’t entirely clear. MUSL 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 MUSL employees.
Bret Tyone, CEO of the Multi-State 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 the opportunity to land 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.”
“I didn’t add two and two together,” said the informant, Tom Bargas, owner of Mr. B Fireworks in Schulenburg, Texas. “I don’t think I mentioned it to the FBI. Had I, they probably would have been smart enough to know then. It was a missed opportunity. It should have been stopped immediately.”
Bargas recalled a conversation months earlier in his warehouse in which someone joked to Eddie Tipton that he could use his job at the Multi-State Lottery Association in Urbandale, Iowa, to “rig up the lottery.”
“He just laughed about it,” Bargas told The Associated Press. “We didn’t realize that he was actually thinking about doing it or had done it already.”
Eddie Tipton, 54, admitted in a plea agreement with multiple states this month that he long profited off his position at the association, which helps run dozens of lotteries. Investigators say he designed and installed code that allowed him to predict winning numbers drawn every May 27, Nov. 23, and Dec. 29 of non-leap years. He conspired with his younger brother, friend Robert Rhodes and others to buy and claim winning tickets in five states between 2005 and 2011.
The brothers have agreed to tell investigators the full extent of their involvement in jackpot-fixing under the deal, which requires they pay back $3 million. Prosecutors will seek 25 years in an Iowa prison for Eddie and 75 days in a Texas jail for Tommy, who worked as a sheriff’s deputy before being elected Justice of the Peace in 2002, presiding over traffic enforcement, misdemeanors and some civil disputes.
Tommy Tipton’s lawyers argued that the FBI’s old inquiry should bar his current prosecution because the statute of limitations had expired. But Iowa prosecutor Rob Sand responded that the FBI had no reason to think the lottery might have been rigged.
The FBI’s Houston office, which oversaw the inquiry, declined to comment.
The scandal has roiled state lotteries, which have vowed to tighten their security and face lawsuits from players claiming they were cheated.
A Bigfoot hunt, a lottery win and a duped FBI
The $4.5 million Colorado jackpot in late 2005 is the first prize suspected of being fixed.
Tipton’s initial late-night sticky note session resulted in his scam’s first win — a Nov. 23, 2005, drawing 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 during the year that he was able to manipulate with his secret code.
The opportunity was especially convenient because of his brother’s hunt for Bigfoot.
Tommy Tipton’s fascination with folklore surrounding the ape-like creature began as a child, when his grandmother retold stories about a critter that would spook their farm animals in Arkansas.
Tommy’s curiosity about Bigfoot intensified as an adult after he became a sheriff’s deputy and member of a SWAT team, gaining access to night-vision technology. Tommy told federal investigators he had watched the animals for a couple of hours in Louisiana.
And it just so happened that Tommy’s pursuit of Bigfoot was taking him to Colorado in November 2005.
Eddie, who said few people possessed the “geekiness” necessary to understand his work, seized the opportunity to try out his rigged coding.
“My brother was going on a trip, and I suggested that I had some numbers that he could play,” he told investigators. “And that was pretty much it.”
But the story, according to his brother, was far more nuanced.
Tommy, who by 2005 was a magistrate in Fayette County, Texas, was skeptical whether it was legal for him to play the hundreds of sets of numbers given him by his brother, an employee of the lottery association.
Tommy told investigators he contacted a friend, Texas defense attorney Luis Vallejo, to consult about the matter. Vallejo could find no reason that it would be illegal for him to play, even though Eddie worked for the lottery association, Tommy said.
After the winning numbers were drawn Nov. 23, 2005, three people came forward to claim the $4.8 million prize: a Colorado resident not linked to the conspiracy; Alexander Hicks, a friend of Tommy’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 who in August 2016 asked the public for assistance in the case.
They were never arrested.
Whom can you trust?
Tommy told investigators during his June 29, 2017, deposition that he believed Vallejo somehow stole the numbers he had been given by his brother, although Tommy said he never directly confronted him about it.
Tommy said the theft might have happened when they met as friends for a casual talk over coffee.
Hicks — who was never charged with a crime — gave 90 percent of the nearly $570,000 cash-option prize payout from the jackpot to Tommy. Cuestion de Suerte collected the same amount.
Neither Vallejo nor Whisenant returned calls for this article. Whisenant was never asked to return the money he collected.
Investigators now suspect Whisenant is linked to the scheme. They note he and Tommy Tipton both have financial ties to Fayette County attorney Luis Vallejo, who tried to deposit $250,000 cash into anonymous corporate bank accounts in 2006. Whisenant and Vallejo haven’t been charged. They didn’t reply to phone messages seeking comment.
Tommy remains bitter about the outcome.
“It was a big shock to me to hear that an attorney whom I went to for advice played the lottery,” he said of Vallejo. “And I have lots of anger over that issue. I’m not saying what I did was right, but you would think an attorney that you trusted would not tell you anything wrong or negative. Don’t know if he did, but I’m 99 percent sure he got it from me.”
Soon after the 2005 win, Tommy fell from a 31-foot tree stand while Bigfoot hunting and “almost died,” he told investigators. He was in the hospital in 2006 when the FBI questioned him about why he was trying to exchange $450,000 in consecutively marked bills.
Tommy truthfully told the agents the money came from the 2005 Colorado lottery win. But he told them he was trying to exchange the bills because he couldn’t tell his wife of the win since gambling was contrary to her Christian faith.
In neither the first nor a subsequent interview did the FBI ask about the work his brother was doing for the Multi-State Lottery Association — and Tommy never volunteered the information.
“They just asked me two questions during that interview. Well, they talked about Bigfoot hunting again. Kind of laughed at me,” Tommy said in his confession. “They visited with the attorneys for like an hour. I sat there, I remember that, because I was in a wheelchair in a lot of pain.”
Eventually, the FBI dropped its inquiry, and the Tiptons resumed their lottery scheme.
Frustrated Eddie warns his bosses
As the head of the Multi-State Lottery Association’s IT security, Eddie Tipton was making almost $100,000 a year. But he felt underappreciated and overworked at the time he wrote the code to hack into the national lottery system.
He was working 50- to 60-hour weeks and often was in the office until 11 p.m. His managers expected him to take on far more roles than were practical, he complained.
“I wrote software. I worked on Web pages. I did network security. I did firewalls,” he said in his confession. “And then I did my regular auditing job on top of all that. They just found no limits to what they wanted to make me do. It even got to the point where the word ‘slave’ was used.”
Nobody at the Multi-State Lottery Association oversaw his complete body of work, and few people truly cared about security, he said. That lack of oversight allowed Tipton to write, install and use his secret code without discovery.
Tipton said he even warned lottery officials about the system’s security risks and alerted them in 2006 about an error in the random-drawing software after the same numbers were drawn in the same order in the same year in a Wisconsin game.
Soon after his first successful lottery scam, Eddie 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 random-generator software.
“I asked for that originally, I did,” he said during his confession, “Because I knew that I had already done this. I’m like, ‘I don’t want to do this anymore.’”
His immediate boss, Stefan, took the concerns seriously, he said, but others in the organization did not. Most of his concerns were dismissed or inadequately addressed, Tipton complained.
“I’d do reviews and I’d find stuff — gaping holes in their procedures — and I would tell them, but if it wasn’t in my rules, the MUSL rules, I couldn’t write it down,” he said. “I couldn’t document that I saw this gaping hole because they didn’t want to hear it or they didn’t want it written down anywhere.”
And so the secret code survived.
Eddie also told investigators there was “zero chance” that Gaming Laboratories International, a New Jersey-based company hired by the Multi-State Lottery Association to test and certify games as random, would have discovered his two-line code for rigging the drawings.
Gaming Laboratories did not return requests for comment.
That code was replicated on as many as 17 state lottery systems as MUSL 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.
The big mistake
It was on Dec. 23, 2010, that Eddie made a miscalculation that ultimately unraveled his scheme: He bought a winning ticket himself.
Before, he had always funneled winning numbers to others.
Video captured his ticket purchase at a Des Moines convenience store about 10 miles from the Multi-State Lottery Association offices.
Though he knew the Iowa Lottery had retained a video of the purchase, Eddie told one of his best friends, Robert Rhodes, that he could claim the ticket if he wanted.
But Eddie gave Rhodes one caveat: Don’t wait until the last minute to claim the ticket.
That advice was ignored.
Rhodes participated in an intricate plan to claim the prize anonymously — less than two hours before the 4 p.m. deadline on Dec. 29, 2011.
“When I heard that there was a claim, I was actually surprised,” Tipton said during his session. “I will say this: I told Rhodes do not wait until the last, until the end to claim it. Do not.
“Because that’s when it has the most scrutiny.”
Indeed, the 11th-hour scheme to claim the ticket captivated the public’s attention. The $16.5 million jackpot was the third-largest prize in Hot Lotto’s history.
For weeks, lottery officials had peppered news media across the country to publicize the unclaimed ticket. Then, just as the year-long window was to expire, two attorneys representing a trust showed up at Iowa Lottery headquarters to claim the prize.
But Iowa law requires Iottery winners’ names and addresses to be made public, and the mystery over who was behind the claim dominated newscasts for weeks.
Despite the intense scrutiny, it would take investigators roughly three years to connect Tipton to the Hot Lotto rigging. On Jan. 15, 2015, he was charged with two counts of felony fraud.
He later faced other charges, mostly related to money laundering and fraudulent wins in other states.
His brother Tommy and Rhodes also were charged with felonies related to the rigged drawings.
Rhodes, of Sugar Land, Texas, pleaded guilty to a felony charge of being party to a computer crime and was sentenced in March 2017 to six months of home confinement in Texas and ordered to pay $409,000 in restitution.
He agreed to testify against Eddie and Tommy Tipton as part of his plea deal.
Tommy and Eddie pleaded guilty to felony crimes related to the rigging scheme in June 2017 and agreed to repay $2.2 million in restitution.
Tommy admitted claiming prizes in Colorado and Oklahoma using numbers Eddie provided. He was sentenced to 75 days in jail.
Eddie was sentenced in August to up to 25 years in prison.
In his confession sessions, Eddie outlined three key mistakes that helped bring down the decade-long scheme:
Tommy’s attempt to exchange cash for unmarked bills.
His own purchase of a winning ticket.
Playing in Iowa, where he said security is tighter than in other states.
“I’m saying at the time I did not think it was fraud,” he told federal officials. “I thought that me writing that code and putting an extra algorithm in there and sending it off to Gaming Labs and them giving it a stamp of approval would resolve me of any problems.”
Eddie, did not respond to a request to speak for this article. He is serving his sentence in Iowa’s Clarinda Correctional Facility.
It’s uncertain how many years Eddie will spend in prison. He could be paroled within three or four years, his attorneys noted at his sentencing last year.
Eddie Tipton said in his confessions that investigators had identified each of his fraudulent lottery wins.
But his brother Tommy said there had been at least two other times that he tried unsuccessfully using his brother’s code.
For his part, Eddie Tipton said during the confessions he has avoided every interview and television request, including those who have offered to pay for his story.
But, if it’s feasible, he said he would use any money generated to pay his restitution.
“Because at this point in time, I don’t know how I’m gonna come up and pay that restitution back,” Tipton said.
The consequences for his former employer are less clear.
At least two lawsuits tied to Eddie Tipton’s lottery-rigging scheme are still pending, including one against the Multi-State Lottery Association that seeks class-action status on behalf of all players cheated by Tipton’s manipulated drawings.
Lottery officials insist they have shored up security to protect the integrity of their games.
Eddie’s lawyer, Nick Sarcone, isn’t so sure. “Of all the people in the world, (Eddie 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.”
After Eddie Tipton was convicted of fraud in 2015 for buying the winning ticket for a $16.5 million Iowa jackpot, a tipster called investigators suggesting they revisit the jackpot his brother won a decade prior. Other rigged jackpots emerged. Tommy Tipton, who testified that his brother was innocent at the 2015 trial, resigned his judgeship and was charged.
Bargas called Tommy Tipton’s plea deal — in which he’ll be allowed to maintain employment as a firearms instructor — too lenient.
More than one source has stated the following but this specific quote seems to include what many others have said.
“Tommy will tell anyone that will listen to him that Vallejo told him what he was doing was all legal. Seriously Tommy is too stupid, he has always been a bully enforcer for others. The people behind this are still in Texas.”