Landmark Lawsuit against Multi-State Lottery Association

Firm News   02-03-2016

DES MOINES, Iowa (Feb. 3, 2016) — Attorneys for a former lottery winner today filed a lawsuit against the Iowa Lottery Authority and the Multi-State Lottery Association (MUSL) for their roles and responsibilities in allowing the Hot Lotto game to be rigged by a former security executive in late 2010. As a result of their negligence and breach of contract, the organizations ultimately denied and deprived the next legitimate Hot Lotto winner on May 7, 2011, of what should have been an additional $10-million jackpot cash value.

The five-count lawsuit asks the court for declaratory judgment to restore the $10 million cash value jackpot from the rigged December 29, 2010, Hot Lotto game to its legitimate winner, Larry Dawson. When Dawson won the jackpot on  May 7, 2011, the jackpot should have been $16 million (cash value) rather than $6 million (cash value) paid to him at the time.

The rigging of the Hot Lotto game offered by the Iowa Lottery and operated by MUSL has been well publicized and documented over the past few years culminating in the criminal conviction of Eddie Tipton, former director of information security at MUSL. The criminal trial and related legal filings illuminated facts about the rigged Hot Lotto game including inadequate security and surveillance measures necessary to protect the integrity of the drawings.

“What happened with the drawing on December 29, 2010, destroys the entire legitimacy of the Hot Lotto game and calls into question the integrity, operational oversight and management capabilities of the Iowa Lottery and the Multi-State Lottery Association, which serves 33 lotteries around the country,” said Jerry Crawford, attorney in the case along with Nick Mauro.

 “While our client did win the Hot Lotto game, the jackpot was less than half of what it should have been if the Iowa Lottery and MUSL had not been asleep at the switch with respect to the security and protection of the games,” he declared.

Crawford underscored that the restitution requested in this lawsuit is not money that was ever earmarked for the state or for any public works programs. Rather, this was jackpot funds that were always intended to go to a legitimate Hot Lotto winner.

While this is the first lawsuit of this nature being filed against the Iowa Lottery and MUSL, it is not the first allegation of games being rigged by Tipton. The petition outlines at least four other lottery games dating back to 2005 in which Tipton has been charged or is being investigated for rigging.

 “Tipton remained employed and in charge of information security with MUSL until November 2014, and it makes one cringe to think what else we don’t know,” said Mauro, co-attorney for Dawson.  “We do know that neither the Iowa Lottery, nor MUSL would have discovered the security breach had it not been for the surveillance tape provided by Quik Trip that showed Tipton purchasing the ticket.”

Lottery employees are not allowed to purchase tickets. When the Iowa Department of Criminal Investigation showed the Quik Trip tape in October 2014, Tipton was recognized. The lack of security and surveillance at MUSL’s headquarters, however, played a key role in how the games were rigged without detection.

“This should be unthinkable because the security is so tight the offender would most-assuredly get caught. But it wasn’t unthinkable, it was doable and done,” Crawford added.

Tipton unsuccessfully attempted to redeem the ticket from the rigged game and eventually the redemption time expired.  At that point, he Iowa Lottery deemed the $10 million pool of money to be an “unclaimed prize” and distributed the money to the participating state lotteries.

“This amounts to unjust enrichment to the lotteries because the December 29, 2010, drawing was not legitimate and did not result in a winner according to the Lottery’s own rules,” Crawford said. “When people buy a lottery ticket, they understand that their odds are 1 in 29 million or worse, but they don’t think for a moment that their chances 0 in 29 million because the game was rigged.”

Hot Lotto is a multi-state lottery game administered by MUSL on behalf of 15 state lotteries including Iowa.  

Associated Document
Related Practice Area
Civil Litigation