Appeals court tosses one fraud conviction of accused Hot Lotto rigger

Prosecutors were too late in bringing one fraud charge against a former Iowa Lottery security official convicted in a 2010 lottery rigging scheme in an effort to win $14.3 million, judges on the Iowa Court of Appeals have ruled.

The Wednesday ruling reversed one of the two fraud convictions a state prosecutor won last year against Eddie Tipton, a former information security director for the Multi-State Lottery Association whose role in the ongoing scandal prompted a nationwide investigation.

A three-judge panel found one of the fraud charges brought against Tipton in early 2015 came after the three-year statute of limitations for the crime expired. It's a small win for defense attorneys who've long argued the charges were brought too long after the unsuccessful 2011 attempt to claim the prize money sparked an investigation that ultimately led back to Tipton.

However, the ruling upheld the second fraud conviction and did not order a new trial in the case — meaning Tipton still could face serving up to five years of the prison sentence a district court judge handed down after his trial. Judge Anuradha Vaitheswaran wrote for the panel that there was enough circumstantial evidence in the case to back up investigators' claims that Tipton tampered with lottery computers to rig the outcome of the Dec. 29, 2010, drawing.

"The jury reasonably could have found that Tipton tampered with the random number generator computers with the intent to influence the lottery winnings," she wrote.

Investigators claim that it was Tipton, 53, who purchased the winning Hot Lotto ticket at a Des Moines convenience store in December 2010. Assistant Iowa Attorney General Rob Sand argued at Tipton's trial last year that the winning ticket was filtered through a close friend of Tipton's and two lawyers in an attempt to claim the prize money. Jurors convicted him of both fraud counts.

“We’re pleased that his conviction was upheld on the tampering count," Sand said Wednesday. Prosecutors are reviewing their options regarding the other fraud charge, he said.

The case captured public attention in late 2011 when New York attorney Crawford Shaw tried to redeem the ticket hours before it expired on behalf of a faceless Belize company called Hexham Investments Trust. Lottery officials declined to pay out the prize, and the Iowa Division of Criminal Investigation in October 2014 released surveillance video of the ticket being purchased in an attempt to find its owner. A Maine lottery official recognized Tipton as the hooded man purchasing the ticket and offered the tip to Iowa investigators.

The dismissed fraud charge specifically accused Tipton of "passing or attempting to redeem a lottery ticket with the specific intent to defraud." However, the statute of limitations on that charge would have started ticking no later than Dec. 29, 2011, when Shaw initiated the ill-fated attempt to get the prize money, Vaitheswaran wrote.

There was little evidence in charging documents that Tipton was "controlling or directing" the attorney at that time, the judge wrote. The time period in which Tipton could have been charged for that crime ended three years later in late 2014, just weeks before the information security director was charged.

Though it was technically not illegal for Tipton to buy the ticket, his job barred him from playing the lottery. The Urbandale-based lottery association provides games such as Hot Lotto for state lotteries across the nation.

Both prosecutors and Tipton's defense attorneys can ask the court of appeals to re-hear the case or appeal the ruling to the Iowa Supreme Court. Defense attorney Dean Stowers said he could not talk specifically on Wednesday about whether he'll appeal in an effort to have both charges overturned.

“We’re pleased that the court found that the prosecution was not timely brought and that the state should have been investigating this case diligently since no later than January of 2012," he said. “We’re concerned about certain factual and legal errors that the court appears to have made.”

Tipton is currently facing additional charges of ongoing criminal conduct and money laundering after additional investigations uncovered potentially tainted jackpots linked back to him in Colorado, Oklahoma, Wisconsin and Kansas. A trial is currently scheduled for February. His brother and a close friend have also been charged for participating in the alleged tampering schemes.

Tipton has remained free on bond while he appeals his convictions.