A prominent lottery official who was stripped of power after a subordinate allegedly carried out a prolonged jackpot-rigging scheme received a $284,000 severance payment, a recent tax filing shows.
The Multi-State Lottery Association (MUSL) made the payment to its longtime executive director Chuck Strutt as part of a "voluntary termination agreement" signed March 31, according to its 2016 tax return. The filing, released by the group in response to a request by The AP, also reveals that its legal and security expenses have skyrocketed as a result of the case.
The group's board, which includes directors from the 37 state and territorial lotteries that are members, placed Strutt on leave Oct. 15, 2015, after the disclosure that the jackpot-fixing allegations against former employee Eddie Tipton had expanded to involve prizes claimed in other states.
Investigators allege that Tipton, the association's former information security director, installed software code on random number generators used by lotteries that allowed him to predict winning combinations on three days of the year. Investigators say Tipton and his associates used that knowledge to buy winning tickets worth millions of dollars in Colorado, Oklahoma, Wisconsin, Kansas and Iowa between 2005 and 2011.
Tipton's friend, Texas businessman Robert Rhodes, pleaded guilty Monday to his role in unsuccessfully trying to claim a $14.5 million Hot Lotto ticket that Tipton bought in Iowa. He is also expected to plead guilty to charges in Wisconsin, where he told investigators that he had split a $783,000 Megabucks jackpot with Tipton in 2008.
Tipton and his brother, a former Texas justice of the peace, are awaiting trial in Iowa. No other lottery association employees, including Strutt, have been accused of any wrongdoing. Strutt has cooperated with the investigation and prosecution.
Strutt, who was the Iowa-based association's first employee in 1987 and helped run the popular Powerball game since its inception, said he was shocked to learn of the allegations against Tipton, saying the organization was "defrauded by a trusted person." In his first interview since the scandal broke, Strutt told the AP on Monday that he's not aware of anyone internally who had suspicions about Tipton.
"The association had accepted practices in place to prevent fraud and Eddie Tipton found a way around them," Strutt said. "Every lottery out there follows industry practices and is constantly on the watch for improving their security. But bad actors do sometimes get through. Eddie is not the first and he won't be the last."
Strutt, 64, said he had supporters and critics on the board. After meeting with them, he said he ultimately agreed to step aside so the organization could take a fresh look at what happened and plot its best path forward. He called his severance payment — which amounted to about one year of salary — part of a standard settlement for the industry.
"It is an American tradition that when a scandal rocks an organization, the head person often moves on," Strutt said. "I understand that."
In a statement, the association's board praised Strutt's long career but said that "new leadership will benefit the rebuilding of the association."
Reeling from the scandal, the association's spending increased by 17 percent, to $6.1 million in the tax year that ended June 30. That includes a surge in legal expenses to $560,830, or nearly eight times as much as it spent two years earlier. It also reported paying $147,650 to SeNet International Corporation, which has helped advise the group on how to improve its security.
The association is fighting two lawsuits that seek millions of dollars on behalf of players who claim they were defrauded or shortchanged. One filed last week seeks class-action status and alleges that the association was negligent in failing to prevent Tipton's alleged fraud.
Timeline of the biggest crime in US lottery history
The following is a compilation of Lottery Post news coverage chronicling the Hot Lotto mystery and subsequently discovered crime.
We start the timeline with a news story indicating that only 3 months remained for the $16 million Hot Lotto jackpot to be claimed.
2011
- Deadline for claiming $16.5M Hot Lotto jackpot nears, Sep. 21, 2011
- Unclaimed Iowa lottery jackpot to expire Dec. 29, Dec. 1, 2011
- Iowa $16.5M Hot Lotto winner claims prize with two hours to spare, Dec. 29, 2011
2012
- Iowa Lottery security chief bent on determining identity of jackpot winner, Jan. 10, 2012
- NY lawyer in lottery mystery travels to Iowa this week, Jan. 17, 2012
- Iowa Lottery security chief to grill NY lawyer over Hot Lotto ticket, Jan. 17, 2012
- Representative of Hot Lotto winner named in lawsuit, Jan. 20, 2012
- Hot Lotto trust representative won't name winner, Jan. 20, 2012
- Iowa Lottery threatens to deny jackpot payout if winner stays anonymous, Jan. 23, 2012
- Lawyer gives up $14 million Iowa lottery ticket claim, Jan. 26, 2012
- $14.3 million Hot Lotto prize claim withdrawn, Jan. 27, 2012
- Iowa Legislators satisfied with Lottery's handling of mystery jackpot winner, Feb. 1, 2012
- Iowa Lottery to give away millions from jackpot mystery, Feb. 26, 2012
- Iowa Lottery director: 50-50 that Hot Lotto mystery will be solved, Aug. 9, 2012
- Iowa officials trying to solve lotto mystery, may release surveillance video, Aug. 19, 2012
2013
- 1 year later, Iowa Lottery still hunting for suspicious no-show winner, Jan. 30, 2013
- Inquiry in Iowa Lottery mystery touches Canada, Jul. 26, 2013
- Lottery jackpot probe heats up after immunity deal, Oct. 8, 2013
2014
- Iowa Lottery still hunting mystery Hot Lotto winner [video], Oct. 10, 2014
2015
- MUSL employee arrested in Hot Lotto jackpot mystery, Jan. 15, 2015
- BOMBSHELL: MUSL employee might have rigged Hot Lotto computerized drawing, Apr. 13, 2015
- Texas man charged in Iowa lottery case contests extradition, Apr. 20, 2015
- Extradition trial begins this week in $16.5M Hot Lotto fraud case, Jun. 7, 2015
- Inside the biggest lottery scam ever, Jul. 7, 2015
- Trial underway in world's biggest lottery fraud case, Jul. 14, 2015
- Lottery security chief: Rigging computerized game "sadly" possible, Jul. 15, 2015
- Prosecution rests in Hot Lotto trial, Jul. 16, 2015
- Defense quickly wraps up in Hot Lotto trial, Jul. 16, 2015
- Hot Lotto case moves to jury for deliberations, Jul. 17, 2015
- Former lottery security employee guilty of rigging $14.3M drawing, Jul. 20, 2015
- MUSL security worker who rigged drawing gets 10 years, Sep. 9, 2015
- HOT LOTTO DRAWING CHEAT CHARGED WITH RIGGING MORE JACKPOTS, Oct. 9, 2015
- Texas authorities had previously investigated brother of lottery cheat, Oct. 14, 2015
- Another $1.2M Hot Lotto jackpot rigged by Tipton, officials say, Nov. 21, 2015
- Jackpot-fixing investigation expands to more state lotteries, Dec. 18, 2015
- Prosecutors say Tipton rigged two jackpots he purchased tickets for in Kansas, Dec. 21, 2015
- Maine gives names of Hot Lotto winners to Iowa team looking into rigging scheme, Dec. 23, 2015
- S.C. Lottery assures public no computerized drawings used in state, Dec. 23, 2015
- Kansas lottery players questioning game's integrity, Dec. 23, 2015
- MUSL CHIEF OUSTED OVER JACKPOT-RIGGING SCANDAL, Dec. 23, 2015
- Lottery scandal unlikely to affect New Mexico, official says, Dec. 26, 2015
- Tipton granted delay in next trial until July, Dec. 29, 2015
2016
- Iowa Lottery CEO Terry Rich to answer lottery player questions live Monday evening, Jan. 11, 2016
- First lawsuit in state lottery-fixing scandal seeks millions, Feb. 4, 2016
- MUSL seeks to dismiss lawsuit over rigged jackpot, Apr. 1, 2016
- Lottery scammer's brother facing criminal charges, Apr. 6, 2016
- Investigators find Tipton's software code to rig computerized lottery drawings, Apr. 7, 2016
- Lottery rigging scandal prompts security audit in South Dakota, Apr. 13, 2016
- Preliminary hearing rescheduled for Tommy Tipton in lottery rigging case, Apr. 22, 2016
- Third suspect surrenders in national lottery rigging scandal, Apr. 28, 2016
- Lottery scam investigation comes to Tennessee, May 11, 2016
- Investigators find another friend of Tipton who cashed rigged lottery prize, May 11, 2016
- Convicted computerized drawing fraudster argues Iowa court appeal, Jun. 16, 2016
- US Senate panel demands info in lottery scandal, Jun. 22, 2016
- Lottery rigging trial to be moved out of Des Moines, Jun. 27, 2016
- Eddie Tipton's new trial delayed until 2017, Jul. 1, 2016
- Iowa court reverses part of Tipton's lottery fraud conviction, Jul. 28, 2016
- Internal investigation concludes Tipton acted alone to rig lottery drawings, Aug. 10, 2016
- Prosecutors say 2 more men may be linked to lottery riggings, Aug. 24, 2016
- Judge: winner's lawsuit in lottery-fixing case can continue, Oct. 13, 2016
- Alleged lottery scandal conspirator to enter new plea, Nov. 14, 2016
- Accused lottery rigger Eddie Tipton facing new Wisconsin charges, Dec. 22, 2016
2017
- Man files lawsuit over rigged lottery jackpots, Jan. 4, 2017
- Trials for Tipton brothers charged in lottery scandal delayed, Jan. 8, 2017
Come now America leave the corruption for the African lotteries....people look up to you and you keep making headline news..Greed !!!
If it was already in his employment contract then its a normal payout of his compensation. If its NOT then it could be questionable
$284,000 severance payment?
In other words, he Hit the Jackpot.!
This is what is wrong with this country. No consequences for ones actions.
He was a prominent lottery official who was stripped of power, indicates wrongdoing, he wasnt stripped of power for doing a good job. His contract should reflect this.
Just great, payoff for doing a bad job. I guess in his favor is the fact he was unaware of Tiptons actions.
So we see it once again! RNG at it's best....And if u want to stop it, BRING BACK THE NUMBERED BALLS!!!
He was the chief, so he became the fall guy. He had no idea what Tipton was doing. But, somebody's head had to roll, and Chuck's was it.
Reeling from the scandal, the association's spending increased by 17 percent, to $6.1 million in the tax year that ended June 30. That includes a surge in legal expenses to $560,830, or nearly eight times as much as it spent two years earlier.
It's no surprise that MUSL changed Powerball rules last year to emphasize release from liability (what they called "clarifying language"). Eating all these expenses has made them re-evaluate what they once believed was immunity.
I wonder what the sales are for Hot Lotto? I know I'm hesitant on buying tickets because of this scandal plus it's computerized.