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Former MUSL official received severance amid lottery jackpot scandal

Insider BuzzInsider Buzz: Former MUSL official received severance amid lottery jackpot scandal
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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

2012

2013

2014

2015

2016

2017

AP, Lottery Post Staff

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8 comments. Last comment 13 hours ago by dallascowboyfan.
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South Africa
Member #129822
June 28, 2012
392 Posts
Offline
Posted: January 11, 2017, 12:17 am - IP Logged

Come now America leave the corruption for the African lotteries....people look up to you and you keep making headline news..Greed !!!

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    Maryland
    United States
    Member #162434
    January 2, 2015
    939 Posts
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    Posted: January 11, 2017, 5:32 am - IP Logged

    If it was already in his employment contract then its a normal payout of his compensation.  If its NOT then it could be questionable Skeptical

      JADELottery's avatar - YingYangYong 01.PNG
      The Quantum Master
      West Concord, MN
      United States
      Member #21
      December 7, 2001
      3680 Posts
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      Posted: January 11, 2017, 8:20 am - IP Logged

      $284,000 severance payment?

      In other words, he Hit the Jackpot.!

      Presented 'AS IS' and for Entertainment Purposes Only.
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      Jehocifer

        lejardin's avatar - Lottery-014.jpg

        United States
        Member #118609
        November 4, 2011
        1056 Posts
        Online
        Posted: January 11, 2017, 12:20 pm - IP Logged

        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.

          Avatar
          New Member
          Bellingham, WA
          United States
          Member #86469
          February 4, 2010
          11 Posts
          Offline
          Posted: January 11, 2017, 2:20 pm - IP Logged

          US FlagSo we see it once again! RNG at it's best....And if u want to stop it, BRING BACK THE NUMBERED BALLS!!!

            rcbbuckeye's avatar - Lottery-043.jpg
            Texas
            United States
            Member #55889
            October 23, 2007
            5754 Posts
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            Posted: January 11, 2017, 11:25 pm - IP Logged

            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.

            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.

            CAN'T WIN IF YOU'RE NOT IN

            A DOLLAR AND A DREAM (OR $2)

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              Happyland
              United States
              Member #146344
              September 1, 2013
              1131 Posts
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              Posted: Yesterday, 9:37 pm - IP Logged

              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

              2012

              2013

              2014

              2015

              2016

              2017

              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.

              If the chances of winning the jackpot are so slim, why play when the jackpot is so small? Your chances never change, but the potential payoff does.
              If a crystal ball showed you the future of the rest of your life, and in that future you will never win a jackpot, would you still play?

              2017: 0% (0 tickets)
              P&L % = Total Win($)/Total Wager($) - 1

                dallascowboyfan's avatar - tiana the-princess-and-the-frog.jpg
                Oklahoma
                United States
                Member #82391
                November 12, 2009
                6305 Posts
                Offline
                Posted: Today, 3:50 am - IP Logged

                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.

                I Love Pink & Green 1908