A national lottery group rocked by an insider's jackpot-rigging conspiracy has settled a lawsuit brought by an Iowa grandfather who said a $9 million prize he won in 2011 should have been far larger.
The Multi-State Lottery Association and Larry Dawson informed a judge of the settlement this month, canceling a trial that had been scheduled to begin next week in Des Moines.
Dawson's lawyer, Nicholas Mauro, said that the terms of the deal are confidential but that his client is relieved that the long-running litigation is over.
A spokeswoman for the association, which is based in Iowa and is owned by dozens of state lotteries, hasn't returned messages seeking comment.
Dawson, a financial adviser who lives in Webster City, won a $9 million Hot Lotto jackpot in 2011 and took the $6 million pre-tax cash payout. He happily claimed the prize, 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, as part of a massive fraud scheme.
Dawson, 66, filed a lawsuit in 2016 alleging that the $16.5 million should have carried over to the prize he won under Hot Lotto's rules. His lawsuit sought $10 million — which would have been 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 class-action lawsuit that will give refunds to players who purchased tickets for tainted drawings between 2005 and 2013.
In resolving his case, Dawson will dismiss his claims against the Iowa Lottery. Iowa Lottery CEO Matt Strawn said no state or Iowa lottery money will be used to 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, 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 December 2010. He was identified by stunned colleagues 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 purchased the winning ticket. (See Timeline of the biggest crime in US lottery history below.)
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, arguing states shouldn't have gotten a windfall for failing to operate a fair and secure game.
Iowa Lottery's previous CEO, Terry Rich, accused Dawson of trying to "rewrite history," saying it was impossible to know what would have happened if the prize had carried over.
Dawson — nicknamed "Lucky Larry" for his golf game — said he bought $19 in tickets for every bi-weekly drawing so he could cover all 19 "Hot Ball" options, after reading a book claiming to have the secrets to winning lotteries.
Timeline of the biggest crime in US lottery history
The following is a compilation of Lottery Post news coverage chronicling the Hot Lotto mystery and subsequently discovered crime.
We start the timeline with a news story indicating that only 3 months remained for the $16 million Hot Lotto jackpot to be claimed.