
A national lottery group rocked by an insider's jackpot-rigging conspiracy has settled a lawsuit brought by an Iowa grandfather who said a $9 million prize he won in 2011 should have been far larger.
The Multi-State Lottery Association and Larry Dawson informed a judge of the settlement this month, canceling a trial that had been scheduled to begin next week in Des Moines.
Dawson's lawyer, Nicholas Mauro, said that the terms of the deal are confidential but that his client is relieved that the long-running litigation is over.
A spokeswoman for the association, which is based in Iowa and is owned by dozens of state lotteries, hasn't returned messages seeking comment.
Dawson, a financial adviser who lives in Webster City, won a $9 million Hot Lotto jackpot in 2011 and took the $6 million pre-tax cash payout. He happily claimed the prize, surrounded by his wife, children and grandchildren.
But years later, he learned that the game's previous $16.5 million jackpot had been rigged by Eddie Tipton, the lottery association's information security director, as part of a massive fraud scheme.
Dawson, 66, filed a lawsuit in 2016 alleging that the $16.5 million should have carried over to the prize he won under Hot Lotto's rules. His lawsuit sought $10 million — which would have been the size of the lump sum cash option — plus interest.
In May, a judge ordered a jury trial, in which Dawson could seek a larger prize.
The settlement is the second in recent months to resolve legal claims alleging that the association's lax security allowed Tipton's fraud to occur and cheated players. The association agreed to pay $4.3 million to settle a class-action lawsuit that will give refunds to players who purchased tickets for tainted drawings between 2005 and 2013.
In resolving his case, Dawson will dismiss his claims against the Iowa Lottery. Iowa Lottery CEO Matt Strawn said no state or Iowa lottery money will be used to fund the settlement.
"The settlement between the Multi-State Lottery Association and Mr. Dawson closes a chapter in lottery history that tested" the integrity of lottery games, he said. Iowa officials "passed this test" by investigating, uncovering and prosecuting Tipton's fraud, Strawn said.
Tipton secretly installed code in software used by lotteries that allowed him to predict winning number combinations on certain days of the year. For years, he worked with his brother and other associates to purchase winning tickets and claim prizes around the country. A judge sentenced him in 2017 to up to 25 years in prison.
Tipton's downfall began after he purchased a winning ticket for the $16.5 million Hot Lotto jackpot at a gas station near the association's office in December 2010. He was identified by stunned colleagues as the buyer after investigators released surveillance footage of the purchase years later. Tipton passed the ticket to associates but the Iowa Lottery refused to pay after lawyers for a trust declined to reveal who purchased the winning ticket. (See Timeline of the biggest crime in US lottery history below.)
The money ultimately went back to the 16 states that operated the Hot Lotto as an "unclaimed prize." Dawson's lawsuit alleged that the jackpot should have carried forward, arguing states shouldn't have gotten a windfall for failing to operate a fair and secure game.
Iowa Lottery's previous CEO, Terry Rich, accused Dawson of trying to "rewrite history," saying it was impossible to know what would have happened if the prize had carried over.
Dawson — nicknamed "Lucky Larry" for his golf game — said he bought $19 in tickets for every bi-weekly drawing so he could cover all 19 "Hot Ball" options, after reading a book claiming to have the secrets to winning lotteries.
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
- Former MUSL official received severance amid lottery jackpot scandal, Jan. 10, 2017
- Texas man pleads guilty to fraud in lottery scandal case, Jan. 11, 2017
- Iowa Supreme Court hears lottery rigging case, Feb. 14, 2017
- Kansas files lawsuit against accused lottery rigger, Mar. 16, 2017
- Best friend to testify against Tipton at July lottery rigging trial, Mar. 31, 2017
- Mastermind of lottery fraud will explain how he rigged jackpots, Jun. 12, 2017
- FBI missed rigged jackpot in 2006 before lottery scheme grew, Jun. 19, 2017
- The 5 lottery jackpots Tipton and his friends stole, Jun. 20, 2017
- Lottery jackpot rigger's Iowa convictions dismissed, Jun. 23, 2017
- IT'S OFFICIAL: Tipton pleads guilty to rigging computerized lottery drawings, Jun. 29, 2017
- Lottery rigging accomplice used Wisconsin payout for offshore tax scam, Jul. 6, 2017
- Hot Lotto multi-state lottery game to end in October, Aug. 9, 2017
- Lottery rigging mastermind sentenced to 25 years in prison, Aug. 22, 2017
- Winner sues Colorado Lottery 12 years after rigged drawing, Oct. 5, 2017
2018
- Lottery scammer rigged more drawings than first thought, records show, Feb. 19, 2018
- How a gaming geek with a checkered past pulled off the biggest lottery scam in U.S. history, Mar. 16, 2018
- Infamous lottery scammer says US computerized lottery drawings remain fatally flawed, Mar. 19, 2018
- Iowa Lottery wins International Gaming-Compliance award for work in lottery rigging investigation, Apr. 19, 2018
- The man who cracked the lottery, May 3, 2018
- Memo: Iowa Lottery kept selling games after security warning, Aug. 1, 2018
- Investigation finds lottery scamming Tipton brothers have repaid virtually nothing, Dec. 27, 2018
2019
- Lawyers seek to depose lottery fraud mastermind in prison, Jan. 21, 2019
- Iowa lottery lawsuit granted class action, affecting 7.2 million tickets in 19 states, Jan. 28, 2019
- Colorado man who unwittingly split a $4.8M jackpot with scammer is fighting the Colorado Lottery, Apr. 15, 2019
- Lottery-scamming brothers avoid asset seizures by transferring property to their mother, Apr. 29, 2019
- Lottery winner can seek bigger prize at trial, judge rules, May 17, 2019
- Court rejects Colorado man's claim to full $4.8M lottery jackpot he unwittingly split with scammers, Jun. 21, 2019
- Lottery losers could get paid after lottery scam lawsuit settles for $4.3 million, Jul. 22, 2019
- Journalist faces subpoena in lawsuit over lottery scandal, Aug. 28, 2019
- Lawyers drop request for author's lottery scandal book notes, Aug. 28, 2019
- Website now accepting claims in $4.3 million lottery scam settlement, Sep. 9, 2019
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Thanks to the many members who tipped this story.
Mums the Word, but Inquiring Minds Want to Know!
Fortunately there are now "safeguards" in place to deter future Tipton-like random-number-generator malfeasance . . at least "until the next time"!
I hope it was a good settlement for him because it seemed he had a sound case had it gone to trial.
The MUSL I'm sure settled for reasons that litigated precedence would have not worked in the Industry's favor.
Caveat Emptor is your only friend.
Good Luck.
Congrats to Larry.
Larry is lucky, l mean when was the first time you had a lottery player double dipping. He initially won $6 mil, complained that it should have been a lot more- and then they settled. The players in general from my POV, got screwed. How so you ask? Well first off, the Musl " settled" the previous lawsuit- same game awhile ago where a couple million dollars was to be spread out to the playing public, well as it turns out ONE player along with the attorneys made off with the lion's share of that settlement, and then we got Larry, making off with a settlement we are told " is none of our business." That would never fly out here. Where is the " transparency " the lotto loves to blow their horn about? Anyways, that's my 3 cents..
When I read the article yesterday, I thought there was more to the story because Larry validated his ticket before Shaw made his infamous appearance at lottery headquarters. There were a few other cases where winners sued over unclaimed jackpot prizes, but those results for some reason are seldom published. By sealing the exact details to the Dawson settlement, it will be difficult for anyone to use that as a precedent.
Why was Tipton's software not analyzed by multiple third parties before being put into use? Why was one guys software put into place, unquestioned and unchecked?
The people who chose Tipton to write the software had responsibility to oversee and vet the product they were getting from Tipton, yet they did not do that. It's like the honor system was used. It's crazy when you think about it. The guy was just given blind trust to create and implement the software.
Also the fact that it wasn't their personal/business money it made no difference financially to the people who represented the MUSL. It kept everything behind closed doors as a trial would be public record.
"it seemed he had a sound case had it gone to trial."
He didn't have bad case, but it wasn't a great case, either. If the prize had rolled over more tickets would have been sold between the rigged drawing and the one that he won, and that means there's a chance (that can be calculated accurately) that somebody would have won in between the drawings, and that could have resulted in his prize being smaller rather than bigger.
We may never know because the settlement terms are confidential, but if the lottery was smart that was probably a factor in the amount they settled for.
"By sealing the exact details to the Dawson settlement, it will be difficult for anyone to use that as a precedent."
Except for other incidents where the circumstances are extremely similar a court ruling wouldn't result in any meaningful precedent anyway. I imagine the lotteries were hoping that there are very few future cases with similar circumstances much more than they were hoping to avoid any kind of precedent.
"Why was Tipton's software not analyzed by multiple third parties before being put into use?"
That's a great question. While we may not have a "real" or official answer I think we can very safely blame it on high level stupidity. I understand providers of commercial software wanting to keep their code secret, but there are a lot of things where that shouldn't be allowed if they want to sell their programs for use by government agencies. It doesn't take bad intent or a lot of intelligence to recognize that software for things like lotteries and elections could very easily be written to favor the interests of the people writing the code. That government agencies would simply pay for the software and run it with no questions is unconscionable. Unfortunately it's not also surprising.
He was the only legitimate winner so the whole jackpot should have been his.
Right. That thinking is often found in the jungle. For instance Lions do not tolerate Hyenas & African painted dogs hunting in " their" territory. They & they alone should be the predators, which is why lions will kill them on sight, after all- they are the only "legitimate" players in that vast field..
Did Larry sleep with your wife and run over your dog?
Any time an individual player extracts a settlement from a lottery entity, or prevails against one in court, it's a win for all players. Does it matter that Larry's claim is a bit of a stretch? MUSL is paying for their sheer stupidity regarding Tipton.
What the frell are you on about Willis? l was talking about the distribution of the so called settlement.