DES MOINES — Two brothers admitted Thursday to using inside information from manipulated computer software to pull off multi-state lottery swindles that illegally netted millions of dollars until exposed by suspicious Iowa officials.
Eddie Tipton, 54, a former information security director for the Multi-State Lottery Association who was the mastermind behind the scheme, pleaded guilty to one Class B felony count of ongoing criminal conduct and could face up to 25 years in prison for his role in illegally obtaining $2.2 million after fixing lotteries in five states.
Tipton’s brother, Tommy, 53, of Flatonia, Texas, also entered guilty pleas to two criminal counts as part of a multi-state plea agreement and was placed on probation and sentenced to serve 75 days in a Texas jail beginning Saturday.
The brothers were ordered to pay about $3 million in restitution, and Tommy Tipton also was told to pay Iowa more than $5,300 in fines.
During Thursday’s appearance before Polk County District Judge Bradley McCall, Eddie Tipton admitted he tampered with what were supposed to be random number generators to enable his co-conspirators to claim jackpots in Colorado, Oklahoma, Wisconsin and Kansas. The crimes unraveled when Iowa lottery officials became suspicious over a mysterious attempt to claim a $14.3 million Hot Lotto prize in 2010 that was never paid out but led authorities to Tipton, a lottery official who was not supposed to play.
While working for an Urbandale nonprofit association that distributes lottery games nationwide, Tipton said he wrote a software code about 10 years ago that would predict winning numbers. He shared those numbers with others who used them to win jackpots and they shared their winnings with him.
“It was more of a trying to see if I could do it scenario and then … it just continued to exist,” Tipton told the judge. “The opportunity was there and I just took advantage of it later. But when I first wrote it, I did not know if I would ever use it.”
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Tipton said he was under the belief that the software fell under a “loophole” in the system and “I didn’t think anybody was breaking the law at all” when lotteries agreed to use the software he had developed.
Tommy Tipton told the judge his brother provided him with lottery numbers to play in Colorado and Oklahoma and he did not ask him “how he got the numbers” that he played four times. “I know without the numbers Eddie gave me, it would be unlikely that I would win the lottery,” said Tommy Tipton, who noted he shared the winnings.
“I apologize for my actions,” he told McCall. “They were stupid and unwise.”
He said he planned to sell some of his farm and land in Texas to cover restitution he pledged to repay in full.
Dean Stowers, Eddie Tipton’s defense attorney, successfully argued before the Iowa Supreme Court that charges brought against his client for which he previously was convicted were not brought in a timely manner, but he noted Tipton did not have a similar defense in other states, which led to him agreeing to accept a plea arrangement.
“To give up on that argument is a major concession after litigating it for two and a half years,” Stowers said after the hearing. “But at the same time, Eddie Tipton wants to resolve the case and he done with it and moved on with his life to the extent that he can.”
Stowers added that Tipton’s brother “was a major factor in his decision making” to reach the plea deal whereby Tommy Tipton received a deferred sentence on a felony charge and a 75-day jail term on a misdemeanor guilty plea.
Rob Sand of the Iowa Attorney General’s Office said it felt “good” to resolve a prosecution spanning nearly three years. Sand credited the Iowa Lottery’s refusal to pay out the jackpot and raise questions that led to an investigation unraveling the plot.
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“Were it not for the Iowa Lottery’s vigilance in that, we may not be here today,” Sand told reporters.
He said the state would seek the maximum penalty when Eddie Tipton is sentenced at a future date.
After Tipton’s 2015 conviction in Iowa, which was overturned this month by the Iowa Supreme Court, investigators linked him, his brother, Tommy, and a longtime friend, Robert Rhodes, to suspicious jackpots in Colorado, Oklahoma, Wisconsin and Kansas.
Sand said information provided by Rhodes, a Texas businessman who pleaded guilty to a fraud charge in Iowa and a computer crime charge in Wisconsin earlier this year, provided valuable information for prosecutors against the Tiptons.
Earlier this month, Eddie Tipton pleaded guilty in Wisconsin to theft by fraud and a computer crime charge for defrauding the Wisconsin Lottery in 2007. Tipton and an accomplice collected more than $783,000 for a Wisconsin Megabucks jackpot.
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