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Inside the biggest lottery scam ever

Hot LottoHot Lotto: Inside the biggest lottery scam ever
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Former MUSL employee denies rigging Hot Lotto drawing

It was two days before Christmas in 2010 and Eddie Tipton had a $16.5 million lottery winner in his pocket.

Sporting a hooded jacket, the stocky 47-year-old approached a silver-haired clerk at the counter of an Iowa-based Quik Trip market at around 3:30 p.m., stacking on the counter $3.17 worth of hot dogs, a fountain soda and two tickets.

But Tipton didn't need Lady Luck. The Quik Trip purchase was phase two of a crafty plan to take the 29 million-to-1 odds out of the lottery equation.

The first phase came a month before when Tipton inputted the same winning numbers in the computer system tucked away in Iowa Lottery's secure "Draw Room."

At least, that's the story Iowa prosecutors would have you believe.

To hear Eddie Tipton tell it, he's a lottery patsy.

"I'm having to defend myself against hundreds, if not thousands, of hours of investigative time," he said in an exclusive phone interview at his home, where he was awaiting trial after posting $10,000 bail. "They're running against time because the statute of limitations was almost up and they gotta find somebody. So they throw it all on me," he said.

On January 15, 2015, more than four years after the Hot Lotto ticket was bought at the mini-mart, Tipton was arrested for attempted fraud by the Iowa State Police. "I was like 'What for?' — It came as a complete shock," he said.

Tipton faces five years in what amounts to an alleged lotto shakedown. Now 52 years old, unemployed, and living off his savings, his trial begins on July 13.

Tipton believes he'll be exonerated, although the authorities have already released a video of the Hot Lotto ticket purchase. According to a criminal complaint, voice experts and a Tipton pal all say it's Tipton on the screen. Authorities also accuse Tipton of using his security clearance to juke the lottery's computer, and teamed with a close friend to recruit a crew to collect the winnings.

Eddie Tipton's case may piece together the most ornate and brazen run on the lottery of all time. It's certainly the largest jackpot claimed and then withdrawn in lottery history. And Tipton — if he did pull off the attempted heist — may not be the only one in on the job.

***

After 12 loyal years and a six-figure salary as director of security under the employ of the Multi-State Lottery Association (MUSL) a nonprofit agency overseeing several lottery games throughout the U.S., Eddie Tipton took his job seriously. "I was more of a consultant and helped them with following the rules and showed them how to comply with them," he said.

Tipton says he had no reason to toss it all way. "I was not hurting for money," Tipton said. "Not hurting enough that I need to take a chance and ruin my whole life. No way."

But now that he's been accused of trying to rig the lottery, Tipton stands to lose everything.

On November 20, 2010, Tipton allegedly went into the lottery's fortified "Draw Room," where only he and four colleagues had access. He said he was there to update the lottery computer system to the passing of Daylight Savings Time. Instead, the authorities say, he tinkered with the room's video recorder and closed circuit cameras.

According to multiple criminal court documents, the footage from November 20 didn't properly capture what went on in the room. Instead, Tipton either on or before that day allegedly set the machine to record "roughly one second per minute," according to a reply to Iowa prosecutors' motion by Tipton's lawyers filed on April 9, 2015. The other 59 seconds were invisible.

With the cameras disabled, prosecutors allege, Tipton could have enough time to insert a memory stick that loaded a so-called "root-kit" program. That would've given him the ability to do anything we wanted on the computer — like fixing the lottery numbers and "self-destruct without a trace" — which means the program would be undetectable.

Authorities paint Tipton as a cybersecurity obsessive who preached about root-kits; "he even made a presentation about them at a lottery conference," according to document filed by Tipton's lawyers. The same papers say "[Tipton] tampered with the camera equipment to have an opportunity to insert a thumbdrive into the [computer] tower without detection.

But Tipton insists that he's taking the blame because of his access. "The only reason I'm in trouble is because I'm an employee," he said, unwilling to get into the backroom rigging details.

Tipton believes he's the one "holding the bag" because of the Iowa Lottery's lapses. He claims he never bought that winning ticket — some still-undisclosed stranger did, instead. "If I knew who the mystery person was that bought the ticket I would serve them up on a platter just to clear my name," he said.

Tipton, clean shaven and heavyset, couldn't have been the man in Quik Trip footage, his lawyer, Dean Stowers, insists. The lotto ticket buyer was "wearing a fake beard" and could have been a "skinny man in a fat suit" to mimic Tipton's stout figure," Stowers said. "Those photos certainly show that my client didn't have a beard on that day, unlike the person seen in the video."

***

Whoever bought the tickets, authorities believe, he didn't act alone.

Also arrested in the caper was Tipton's close friend, 46-year-old Robert Rhodes. The Sugar Land, Texas-based man is also being charged with defrauding the Iowa Lottery.

It's Rhodes who allegedly is the conduit to a crew of five stretching from South America to Canada — all of whom are named in the criminal complaint as colluding with the pair to try to grab the lotto loot.

There's the Canadian lawyer named Philip Johnston, who splits his time between St. Pacome, Quebec, and sunny Turks and Caicos. He allegedly was the first one to take a swing at the lotto piñata.

Johnston tried to get at the lottery windfall by claiming he was in possession of the Hot Lotto ticket in a phone call on November 9, 2011. He submitted the "unique" 15-digit security number printed on the winning ticket but said he was too sick, according to a reply Iowa prosecutors' motion by Tipton's lawyers filed on April 9, 2015, to make the trip to the lottery HQ in Des Moines. He asked if they could take pity on him and instead mail a check.

Then he failed to answer a couple of softball security questions. He said he was wearing a tweed suit on the day he bought the winning ticket. (The guy caught on tape wore a hooded coat) He said he was in his 60s. (The real winner appeared to be in his 30s or 40s). So, the lottery officials declined Johnston's bid.

He tried again, two weeks later on December 6, 2011. This time, Johnston had a new story: He wasn't the guy who had the ticket after all. The winning ticket actually belonged to a wealthy mystery man and together they had set up a Belize-based trust called Hexham Investments, according to multiple documents, including the criminal complaint.

Somehow, Johnston and company erroneously assumed they could cash in the ticket through a trust to keep the buyer anonymous. But this was another oversight: Iowa is one of several states that mandates winners be identified to the public.

The jig was up. Johnston later told investigators he was approached on Oct. 17, 2011, by Tipton's friend Robert Rhodes and by Robert Sonfield, both of Houston, Texas. They asked for Johnston's "assistance with claiming the lottery ticket," according to the criminal complaint. Sonfield told Johnston that he was representing a lotto winner who "wanted to remain anonymous."

Somehow — it's not clear how, exactly — Sonfield got hold of the Hot Lotto ticket. He sent it via FedEx to his longtime friend Crawford Shaw, a New York City lawyer.

Just before the ticket was about to expire, Shaw came forward acting as a trustee for Hexham Investments (for which Johnston was a principal). Shaw initially retained a respected Des Moines-based law firm to present the signed ticket.

On Dec. 29, 2011, 1 hour and 50 minutes before the ticket was to expire, two lawyers from Davis Brown law firm brought the ticket Shaw sent them to the state lottery offices in Des Moines, and tried to claim the prize with the trust name alongside Shaw's signature. The trouble is, Shaw misspelled the trust's name as "Hexam" and skipped the second "h." The lawyers were sent away without a dime.

Then Shaw hopped on a flight to meet with Iowa Lottery officials in Des Moines on January 17, 2012. Unwilling to reveal the name of his mystery client, Shaw couldn't persuade lottery officials to cut him a check.

Nine days later Shaw signed an affidavit and officially withdrew his claim to the ticket.

(When reached by phone last week Shaw identified himself, but repeated, "I am not going to comment," before hanging up.)

Nearly two years went by. Finally, on Nov. 7, 2014, an Iowa Division of Criminal Investigation agent quizzed Tipton, according to the criminal complaint. Tipton told the investigator he knew the rule that he wasn't permitted to play the lottery. What's more, the authorities should scratch his name off the list of suspects because he "wasn't even in town in that time period" when the ticket was purchased.

Tipton told the agent he was in Houston, Texas, visiting "all family." Yet the complaint points to cellphone records that put Tipton in Des Moines at the time the Hot Lotto ticket was issued. What's more, Tipton was having "frequent lengthy phone calls" with Robert Rhodes, according to the complaint. When asked twice about his Houston contacts Tipton "did not mention Robert Rhodes," the complaint reads.

But Tipton told me he was forthcoming with the investigator. "He asked me, 'Do you have a friend named Robert Rhodes?' and I said 'Yes.' I asked them, 'Did I do something wrong?' and they said, 'No.' Then months later they make this stuff up and I'm fighting for my own freedom," he said.

***

Tipton said that Rhodes remains a dear friend of over 20 years. He worked with him at the Houston-based oil and gas programming company Systems Evolution for seven years.

Despite his ties to Rhodes, there was never any real communication with any of the other alleged participants in the lotto scheme. "I don't know Robert Sonfield," Tipton said.

But Rhodes is tight with Sonfield. And the pair have been earned a questionable rep in Houston. One source — who is both involved in litigation with the pair and asked to remain anonymous — said that the two have worked in "pump-and-dump" penny stock schemes, driving up the price and selling it off quickly.

Rhodes and Sonfield are in multiple business arrangements with Philip Johnston, the Canadian lawyer who called in sick to claim the lottery ticket, according to the Division of Criminal Investigation records. For example, Sonfield has 20,000 shares and Shaw 2,000 shares in a company called Platinum Energy. Its president: Johnston.

Johnston and Sonfield are prominently named in stock portfolio documents associated with a company known as Arrayit. Rhodes was briefly CEO of the company's pharmaceutical subsidiary, but was quickly voted out by shareholders.

Documents from a bankruptcy case involving a Houston-based telecommunications company called Digerati portrayed the pair as taking actions that hiked legal fees. They're also accused of jamming up the case with legal trickery, including making unsupported motions to scattering litigation in different venues.

Sonfield himself admitted to an array of "technical irregularities" and "defects in the issuances of the shares." According to bankruptcy filings in the Digerati bankruptcy case filings from September 18, 2013, Robert Rhodes was just a figurehead CEO and "was not properly appointed or elected." Philip Johnston — who was believed to be a fictional person — was issued 1,000 shares of stock that should be "cancelled or deemed invalid."

Tipton insists he doesn't know Johnston, Shaw, or Sonfield from Adam. "There's no communication between me and them," Tipton said, adding that there's no way to connect him with these people — other than circumstantially. "My name is nowhere," Tipton said.

Ask Tipton about the evidence and he comes back with his own version of conspiracy and innuendo. He never bought the ticket. Some mystery man did.

"I have to prove that it wasn't me because whoever did it — we don't know who it is," he said.

"I know how the game works," Tipton added. "So either I'm an incredible genius that did something stupid or I'm just plain incredibly stupid. But how can I be an incredible genius and do something stupid at the same time?"

Thanks to bobby623 for the tip.

Daily Beast, Lottery Post Staff

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17 comments. Last comment 1 year ago by psykomo.
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EZMONEE's avatar - Lottery-057.jpg
Pick3 Analyst
All States
United States
Member #106260
February 15, 2011
17234 Posts
Offline
Posted: July 7, 2015, 1:09 pm - IP Logged

I always knew the lottery games were rigged, whether we want to believe it or not!! There shouldn't be so many repeats in the pick3, specifically.

Type EZ$

    music*'s avatar - nw bookeep.jpg
    Happy California
    United States
    Member #157856
    August 2, 2014
    1513 Posts
    Offline
    Posted: July 7, 2015, 1:32 pm - IP Logged

     Tipton is fighting for his name and freedom.  I wonder how much each would have received if the ticket was successfully cashed in. Is it $16.5 million divided among four or five bad actors. Then pay taxes. Not worth it.

     Stay tuned in for more when they go to trial.No Pity!

     I've been rich and I've been poor. Believe me, rich is better. 

     Attributed to Joe E. Lewis and others

      RedStang's avatar - tallman zps6gf4inoc.jpg
      NY
      United States
      Member #121961
      January 21, 2012
      3157 Posts
      Offline
      Posted: July 7, 2015, 2:29 pm - IP Logged

       Tipton is fighting for his name and freedom.  I wonder how much each would have received if the ticket was successfully cashed in. Is it $16.5 million divided among four or five bad actors. Then pay taxes. Not worth it.

       Stay tuned in for more when they go to trial.No Pity!

      Yea, he's going to keep denying everything because he's scared to death and knows he will lose everything.

        Avatar
        New Member

        United States
        Member #167350
        July 7, 2015
        2 Posts
        Offline
        Posted: July 7, 2015, 3:37 pm - IP Logged

        Actually the Hot Lotto is a after tax lottery game. So the prize amount show is what you receive.

          haymaker's avatar - Lottery-012.jpg
          Egg Harbor twp.south Jersey shore
          United States
          Member #112968
          June 29, 2011
          3854 Posts
          Offline
          Posted: July 7, 2015, 4:01 pm - IP Logged

          Nother good reason for ball machine drawings, PA. scam not withstanding.

          Extraordinary Popular Delusions & the Madness of Crowds    -- Charles Mackay  LL.D.

            Avatar
            New Member

            United States
            Member #167350
            July 7, 2015
            2 Posts
            Offline
            Posted: July 7, 2015, 4:02 pm - IP Logged

            I have always believed that the Lottery if fixed to a degree. Not that they know who will win but which City or Sate will win the Jackpot. 

            I believe that is where these guys got the idea from, they just had to make a few adjustments in order to make the winning ticket print where and when they wanted it to be printed. I believe that is the way the draws are set up. The Lottery always says a state wins more frequently because more people play in those States. I say Bull, Delaware, N.Y, New Jersey, Virginia, Pennsylvania  and Florida, Atlanta win the Jackpot more than any of the other States. The computer doesn't know which state is playing more draws, it's a conglomeration of picks combined. that's the way the computer sees it.

            It would be nice if the Lottery was run by an Independent Company and overseen by the Government than the Government running it. It would also be nice if they would go back to White and red Balls with clear transparent machines top to bottom. Computers can be rigged by software and dishonest humans. This way it is really random.

            I think if they are going to continue using computers everyone should start picking there own numbers and play at the last 1/2 hour of the cut off. That would bog down the processor and keep it from choosing where the lottery will be won. Just my opinion.

              Raven62's avatar - binary
              New Jersey
              United States
              Member #17843
              June 28, 2005
              49725 Posts
              Offline
              Posted: July 7, 2015, 4:03 pm - IP Logged

              It'll be interesting to see how this plays out.

              A mind once stretched by a new idea never returns to its original dimensions!

                Raven62's avatar - binary
                New Jersey
                United States
                Member #17843
                June 28, 2005
                49725 Posts
                Offline
                Posted: July 7, 2015, 4:06 pm - IP Logged

                I have always believed that the Lottery if fixed to a degree. Not that they know who will win but which City or Sate will win the Jackpot. 

                I believe that is where these guys got the idea from, they just had to make a few adjustments in order to make the winning ticket print where and when they wanted it to be printed. I believe that is the way the draws are set up. The Lottery always says a state wins more frequently because more people play in those States. I say Bull, Delaware, N.Y, New Jersey, Virginia, Pennsylvania  and Florida, Atlanta win the Jackpot more than any of the other States. The computer doesn't know which state is playing more draws, it's a conglomeration of picks combined. that's the way the computer sees it.

                It would be nice if the Lottery was run by an Independent Company and overseen by the Government than the Government running it. It would also be nice if they would go back to White and red Balls with clear transparent machines top to bottom. Computers can be rigged by software and dishonest humans. This way it is really random.

                I think if they are going to continue using computers everyone should start picking there own numbers and play at the last 1/2 hour of the cut off. That would bog down the processor and keep it from choosing where the lottery will be won. Just my opinion.

                What makes you think a independant company would be any less corrupt than the government?

                A mind once stretched by a new idea never returns to its original dimensions!


                  United States
                  Member #166618
                  May 30, 2015
                  84 Posts
                  Offline
                  Posted: July 7, 2015, 4:16 pm - IP Logged

                  AGEEEED!!!!

                   

                  THE FACT THEY DONT REPEAT IS SO SKETCHY

                   

                  edit: sketchy because they say it is random.

                  if random, why wouldnt they be exact more often?

                    Avatar
                    Maryland
                    United States
                    Member #162434
                    January 2, 2015
                    887 Posts
                    Offline
                    Posted: July 7, 2015, 5:59 pm - IP Logged

                    It'll be interesting to see how this plays out.

                    Yea, the more they dig on this guy the more they are finding out.  This seems to be just another scheme he is running, nothing new to him. 

                      RJOh's avatar - chipmunk
                      mid-Ohio
                      United States
                      Member #9
                      March 24, 2001
                      19825 Posts
                      Offline
                      Posted: July 7, 2015, 6:54 pm - IP Logged

                      I have always believed that the Lottery if fixed to a degree. Not that they know who will win but which City or Sate will win the Jackpot. 

                      I believe that is where these guys got the idea from, they just had to make a few adjustments in order to make the winning ticket print where and when they wanted it to be printed. I believe that is the way the draws are set up. The Lottery always says a state wins more frequently because more people play in those States. I say Bull, Delaware, N.Y, New Jersey, Virginia, Pennsylvania  and Florida, Atlanta win the Jackpot more than any of the other States. The computer doesn't know which state is playing more draws, it's a conglomeration of picks combined. that's the way the computer sees it.

                      It would be nice if the Lottery was run by an Independent Company and overseen by the Government than the Government running it. It would also be nice if they would go back to White and red Balls with clear transparent machines top to bottom. Computers can be rigged by software and dishonest humans. This way it is really random.

                      I think if they are going to continue using computers everyone should start picking there own numbers and play at the last 1/2 hour of the cut off. That would bog down the processor and keep it from choosing where the lottery will be won. Just my opinion.

                      "they just had to make a few adjustments in order to make the winning ticket print where and when they wanted it to be printed."

                      It's the winning combination the schemer needs, he can print out a winning ticket any time at any terminal by making out a play slip.  If he's not greedy and it's a multi-state game he could have a buddy buy one from a different state too.

                       * you don't need to buy more tickets, just buy a winning ticket * 
                         
                                   Evil Looking       

                        Avatar

                        United States
                        Member #122691
                        February 6, 2012
                        330 Posts
                        Offline
                        Posted: July 7, 2015, 8:51 pm - IP Logged

                        I read the first few sentences and that's all I needed to read. So basically they are admitting that they can input the winning numbers? If that's so that highly unethical and should be illegal and probably about 50 other things. 


                          United States
                          Member #156369
                          June 16, 2014
                          570 Posts
                          Offline
                          Posted: July 7, 2015, 9:57 pm - IP Logged

                           Tipton is fighting for his name and freedom.  I wonder how much each would have received if the ticket was successfully cashed in. Is it $16.5 million divided among four or five bad actors. Then pay taxes. Not worth it.

                           Stay tuned in for more when they go to trial.No Pity!

                          Music yep.  ICAM on that...

                          Noche....(Good night)  adios.

                            Avatar
                            New Member
                            Maryland
                            United States
                            Member #155454
                            May 19, 2014
                            13 Posts
                            Offline
                            Posted: July 7, 2015, 11:17 pm - IP Logged

                            Actually the Hot Lotto is a after tax lottery game. So the prize amount show is what you receive.

                            The after tax jackpot did not begin until 2013, after this scam went down.