Hot Lotto rigger sentenced to 10 years

In a sentence intended to send a message, a former Iowa lottery official was ordered to serve 10 years in prison on a conviction for rigging a Hot Lotto drawing to win millions of dollars.

Eddie Tipton, 52, sat silently Wednesday as District Court Judge Jeffrey Farrell handed down the sentence, calling Tipton's behavior "as large a breach of trust as I can imagine."

In July, a jury convicted Tipton of two counts of fraud in what was believed to be America's first trial of a defendant accused of tampering with a lottery computer to manipulate the outcome of a draw.

Assistant Iowa Attorney General Rob Sand and Iowa Lottery CEO Terry Rich said the sentence will send a message to lottery officials and would-be criminals nationwide.

"It's financial crimes where you can deter other people from committing similar crimes," Sand said during the morning hearing. "This isn't someone who got drunk in a bar and decided to assault someone. This isn't someone who committed a single act that they later thought better of … . It is calculating decisions made one after another, according to plan, in order to attempt to defraud the Iowa Lottery."

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But Tipton will likely serve just a fraction of his sentence — if he spends any time behind bars at all.

Tipton has posted a $10,000 bond that leaves him free from custody while his lawyers appeal the verdict. His lawyers have predicted a successful appeal, claiming the prosecution's theory of the lottery rigging resembles a fictional movie script, with no evidence to back it up.

"My client's been a hardworking guy his whole life," defense lawyer Dean Stowers said. "He's honest, and he's — as far as we know it — completely innocent of the charges that were filed against him and prosecuted against him in this case. We intend to continue to represent him, and we plan to win his appeal."

Even if Tipton loses, the two fraud convictions against him carry no mandatory minimum sentence, making him eligible for parole shortly after entering prison, Sand acknowledged.

Stowers told reporters he'd expect Tipton to serve 12 to 18 months before being released.

Tipton had hoped to be placed on a supervised probation that would allow him to keep working an IT job at a Texas company that he started after the trial, Stowers said.

During his sentencing hearing, the former lottery security chief replied simply "No, your honor" when asked by Judge Farrell whether he wanted to speak.

Sand said Tipton deserved prison because he carefully plotted and carried out his crime and has shown no remorse since his arrest. Putting him in prison would help stop other workers from taking advantage of trusted positions to defraud their employers, he said.

The case has enthralled Iowans and gained national attention since late December 2011, when a New York attorney tried to claim —  just hours before it would expire — a Hot Lotto ticket worth $14.3 million on behalf of a trust incorporated in Belize. The identity of the original ticket purchaser was a mystery.

Authorities with the Iowa Division of Criminal Investigation began looking into Tipton after several people identified him as the hooded man in a video showing the ticket being purchased at a Des Moines QuikTrip. At the time, Tipton was the information security director for the Urbandale-based Multi-State Lottery Association that provides games such as Hot Lotto to lotteries nationwide.

Sand told jurors at trial that Tipton installed a self-deleting software program, called a rootkit, onto lottery drawing computers to manipulate the outcome of a Dec. 29, 2010, draw. Tipton then filtered the winning ticket he bought through a friend, Robert Clark Rhodes II, from Texas in an attempt to claim the money, Sand said.

Rhodes has also been charged with two counts of fraud, and has remained in Texas while he appeals an extradition order.

Stowers argued at trial that the theory of the crime wasn't backed by evidence. For instance, investigators were never able to confirm whether a rootkit had been installed on drawing computers, because their hard drives had been wiped since that draw.

Stowers argued to Farrell that a probation sentence was appropriate for Tipton because the Iowa Lottery became suspicious and never paid out any of the ticket winnings — though he was careful not to imply that his client was guilty.

But the judge said a 10-year prison sentence was warranted because the crime represented a massive breach of trust. Farrell told Tipton that he could have burned or otherwise destroyed the winning ticket after he purchased it.

"You had opportunities, and you didn't take any of those," he said.

"The biggest issue I have in this case is that you were in a position of trust with the Multi-State Lottery and a vendor of the Iowa Lottery," he said. "In fact, your job was to make sure that the lottery wasn't breached. To make sure that somebody didn't cheat the game."

Lottery chief Rich sat through the hearing, telling reporters afterward that the case showed the lottery's security procedures worked. The case and trial "fell in his lap" at the same time he became president of the North American Association of State and Provincial Lotteries, and he's watched it unfold along with his national colleagues, he said.

Rich said lotteries need to remain on the lookout.

"With any kind of cyber crime, we find that people always try and beat the system, right," he said. "It's our job to stay one step ahead. And I think this case, particularly, nationally, for all lotteries in America has given us the opportunity to re-evaluate and add added layers of security, which makes it even more difficult."