News

Lottery group settles with $9 million winner who sought bigger prize

Larry Dawson and his wife Kathy, of Webster City, claim a Hot Lotto jackpot in 2011. (Photo from Iowa Lottery)
Larry Dawson and his wife Kathy, of Webster City, claim a Hot Lotto jackpot in 2011. (Photo from Iowa Lottery)
/

A lottery association rocked by an insider’s jackpot-rigging conspiracy said Monday it has settled a lawsuit brought by an Iowa grandfather who claimed a $9 million prize he won in 2011 would have been nearly three times as big if there hadn’t been cheating.

The Multi-State Lottery Association and Larry Dawson informed a judge of the settlement this month, canceling a trial that was scheduled to begin next week in Des Moines. The terms of the deal are confidential.

“He’s relieved that it’s over,” said Dawson’s attorney, Nicholas Mauro.

Dawson, a financial adviser who lives in Webster City, won a $9 million Hot Lotto jackpot in 2011. He claimed the $6 million pretax cash payout, 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, in a massive fraud.

Dawson, 66, sued in 2016 alleging that the $16.5 million should have carried over to be added to the prize he won under Hot Lotto’s rules. His lawsuit sought an additional $10 million — the size of the lump sum cash option plus interest.

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 lawsuit by giving refunds to players who purchased tickets for tainted drawings between 2005 and 2013.

A statement from the association said it and its insurance carrier decided to settle the Dawson suit to “avoid additional litigation expenses.” The group said the deal “contains also a confidentiality clause that prevents either party from discussing the terms or releasing it.”

Settlement agreements involving government bodies are public records under Iowa law. But it’s not clear how that law applies to the association, a nonprofit that is owned by 38 state and territorial lotteries and based in Iowa.

In resolving his case, Dawson dismissed claims against the Iowa Lottery. That agency and the Iowa Attorney General’s Office said they don’t have copies of the settlement.

Iowa Lottery Chief Executive Officer Matt Strawn said no state or Iowa Lottery money will 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 without paying out on the suspect ticket, 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 Urbandale in December 2010.

Stunned colleagues identified him 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 bought the ticket.

ARTICLE CONTINUES BELOW ADVERTISEMENT

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 and that states shouldn’t receive a windfall for failing to operate a fair and secure game.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.