Deep Dive
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If you were alive in Pittsburgh during the 1970s, chances are you're familiar with a man named Nick Perry. Perry had become a well-known local celebrity from appearing on Pittsburgh television throughout the decade in many different roles. He was a newscaster for a while. He was a sports broadcaster.
And he performed the hosting duties for a wide variety of TV shows, including Meet Your Neighbor, Polka Party, Dialing for Dollars, and at least three different bowling game shows. Here's Perry reminiscing on his career in television, and one of his favorite moments from one of the bowling shows he hosted, called Bowling for Dollars. This lady came on the show. She told me what her favorite hobby was, and, uh...
what the highlight of her life was, to go back to where her husband served in the service, out in the Pacific, one of the islands. Now, this lady was about 92 pounds, about 5'8", had no teeth. We went on in the air, she came out, I introduced her, and we started asking questions back and forth, and I said, what's your hobby? And she told me,
I said, "Great." Now, she couldn't throw one ball down the lane to stay on the lane. It would go in the gutter. Every ball she threw in practice landed in the gutter. So somebody said, "What do you bet on this lady breaking the jackpot?" A million to one. She'll never break it. Well, she broke the jackpot. It was $3,000-some dollars. And everybody was amazed. And I said, "Now that you won this money, $3,000-some dollars, what are you gonna do with it?"
Visit that island with your husband? She says, no, I'm going to buy false teeth for myself, he says. Speaking of jackpots, Nick Perry also hosted the daily lottery drawing for the Pennsylvania State Lottery. And in 1980, Perry vaulted from local fame to national infamy when he was convicted of rigging the daily numbers game that he hosted in a scandal that became known as the Triple Six Fix.
Perry, the mastermind of the scheme, recruited six co-conspirators, including a lottery official, and devised a plan to rig the game. The plan was to gain access to the lottery machines and use hypodermic needles to inject latex paint into a certain number of the lottery balls. The idea was that the paint would weigh the balls down and prevent them from being vacuumed to the top of the machine where the balls were selected. While the balls not injected with the paint would most certainly rise to the top, increasing their odds of being chosen.
The group injected every ball with the paint, except number four and number six. And knowing that the winning numbers would most likely consist of some combination of those two numbers, members of Perry's gang crisscrossed Pennsylvania, purchasing as many tickets containing the winning numbers as possible, and even placing bets with the local bookies.
On April 24th, 1980, the night of the drawing, their scheme paid off. The winning numbers for that night were 6, 6, and 6, and a record payout of $3.5 million followed, with approximately $1.8 million being awarded to Perry and his crew. But their celebration didn't last long.
Like many white-collar crimes, big pockets and big mouths led to their downfall. The sheer number of winning tickets garnered the attention of the authorities, and certain members of the group were too greedy and had shared information with their friends and family who purchased a suspicious amount of tickets of their own. Simply put, too many people were in on the fix. Otherwise, they might have gotten away with it.
There were also witness reports of two men having a conversation in a foreign language on a payphone at a bar where they had just purchased a large quantity of tickets containing the numbers 4 and 6. The foreign language that the men were using turned out to be Greek, which led authorities to Nick Perry, whose real name was Nicholas Katsophanes, who could speak the Greek language fluently. Based on anonymous tips, phone records, and video analysis, the investigation concluded and charges were filed against all seven men.
Almost the entirety of the $1.8 million in winnings was recovered, and Perry's crew quickly flipped on their leader to avoid jail time by testifying against him. He was convicted of several charges, including criminal conspiracy, theft by deception, and perjury, and was sentenced to seven years in prison. But like many white-collar criminals, Perry spent only a fraction of his sentence behind bars.
He was released from prison after serving two years of a seven-year sentence and remained on parole until 1989. After his release, Perry was never able to resurrect his broadcasting career, and the local celebrity faded into obscurity, all the while maintaining his innocence in the lotto scandal until the day he died in 2003. Nick Perry was able to inject liquid into the ping pong balls because he had access to the equipment.
As the host, he knew the processes. He was familiar with security protocols and personnel, and his employer, as well as the public, trusted him to perform ethically, all of which he used to his advantage to pull off his scheme. Obviously, security procedures and internal controls have improved drastically since 1980, but accessibility and trust will forever remain important points of concern for lottery organizations, and upholding the integrity of the lottery games is the highest priority of these organizations.
especially as the games evolve alongside technological innovation. New technology opens the door to new threats, which brings us to our main story of this episode, which is the recent hot lotto case that finally concluded in the summer of 2017, where an unclaimed jackpot winning ticket in Iowa led to a cross-continent search for the winner and the uncovering of the largest lottery fraud ever on this episode of Swindled.
They bribed government officials, cleared violations of federal and state law, clearly on assets and paid a plague of taxpayer dollars that were wasted, paid tens of millions of dollars, or a billion dollars, by falsifying its books and records, and in the control of some kind of swindle. Support for Swindled comes from SimpliSafe.
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In December 2010, a few days after Christmas, during the final drawing of the year for a multi-state lottery game called Hot Lotto,
Someone in Iowa beat the 1 in 29 million odds by correctly selecting all six numbers to win the $16.5 million jackpot. It's a well-known fact that about 70% of lottery winners go broke within seven years of collecting their money. Most lottery organizations, including Iowa, allow up to one year to claim a prize. So, in order to avoid becoming another statistic, jackpot winners should get their affairs in order and take their time before claiming their winnings.
And that's exactly what the winner of the December 2010 hot lotto drawing did. Most lottery winners claim their prize within a few days of winning, but not this one.
Here's Iowa Lottery CEO Terry Rich. Well it's been almost a month since we had announced that we had a hot lotto, 16.5 million dollar hot lotto winner. The Iowa Lottery has been looking and asking for everyone to please check their tickets and as a CEO I wanted to announce that I believe that the person who has purchased or owns this ticket
The person who won the jackpot probably doesn't even realize it yet. That's why they haven't claimed their prize. The ticket was purchased at a very busy convenience store called Quick Trip on Interstate 80, which runs east and west all the way from Chicago to San Francisco. It was assumed that the winner was probably a holiday traveler passing through who wasn't even aware that they were sitting on a gold mine.
In fact, lottery officials obtained surveillance video of the purchase from the store and everything seemed very ordinary. In the video, you see a heavy-set white guy with a beard, wearing a hooded sweatshirt and a baseball cap, purchasing two lottery tickets, a fountain drink, and two hot dogs. Nothing about it seems weird. Lottery officials assumed that he'd eventually discover his luck and claim his prize. But months go by, and there's no sign of this guy. Hundreds of people called in claiming to be the winner, but none of them were credible.
They failed to produce the ticket or couldn't confirm key details about the purchase of the ticket that lottery officials knew to be true. As more time passed, the Iowa Lottery announced that if the ticket was not redeemed before the one-year deadline, the jackpot would be forfeited and the $16.5 million prize would become the largest unacclaimed prize in Iowa lottery history. And then finally, on December 29th, 2011, exactly one year after the winning numbers were announced,
This happened. "Ladies and gentlemen, we have the winning ticket." This is Iowa Lottery CEO Terry Rich again. "But we don't have the person nor all of the background information about this winning ticket." At 2:10 p.m., one hour and 50 minutes before the prize expired, two attorneys from the Davis Brown Law Firm in Des Moines delivered the winning ticket to lottery officials. But the owner of the ticket remained a mystery. The ticket was sent by Federal Express to the Des Moines lawyers by a trust named the Hexham Investment Trust.
with a lawyer from Bedford, New York named Crawford Shaw signing the ticket as the trustee. It isn't out of the ordinary for a trust to claim a lottery prize. But before any money is paid out, the Iowa Lottery performs standard security procedures to confirm the legality of the purchase. Crawford Shaw agreed to comply with the security procedures and planned a trip to Iowa to explain everything. So a few weeks after the ticket was redeemed,
Shaw flew to Iowa, met with lottery officials for about 90 minutes, but refused to disclose who owned the ticket or how he obtained it. Iowa lottery officials were forced to reiterate their security measures. They demanded the birth dates, addresses, phone numbers, and email addresses of everyone involved and requested a timeline of every time the ticket had changed hands. Again, this is standard protocol. The Iowa lottery asks this of everyone who wins a jackpot.
Crawford Shaw was given until the following Friday to produce the requested information, or the prize would be withdrawn. It was around this time that lottery officials became a little concerned and started considering whether to launch a criminal investigation, because they had been looking into this Crawford Shaw guy, and they didn't really like what they found. For one, they learned that he had been associated with criminal proceedings and bankruptcy filings in New York, Delaware, and Texas.
They found out he was a CEO at a bankrupt public company involved in a $100 million securities fraud scandal. They found out that he had blackmailed a former business partner into paying him over $2 million in company shares. And they found out that the investment trust that Shaw was representing, the Hexham Family Trust, which Shaw had actually misspelled on the lottery ticket, was formed in Belize, a small Central American company that doubles as a well-known tax haven. This guy was dirty.
and lottery officials were well aware. With the deadline approaching before he had to reveal who he was representing to lottery officials, and one month after the initial claim, Crawford Shaw contacted the Iowa Lottery and simply gave up the prize. Ladies and gentlemen, the hot lotto jackpot claim has been withdrawn.
We received an official withdrawal note from the lawyers here in Des Moines that represent the Hexham Investment Trust. The question is, what the hell? From the beginning, we knew this was a unique case and we set up, as we do with every lottery play, certain security protocols that were surprising. From the beginning, we had not received the information that we had requested.
At first, Crawford Shaw proposed donating the entire prize to charity rather than revealing the winner's name. But lottery officials declined based on legal concerns. And eventually, a 76-year-old lawyer threw his hands in the air and said, quote, I am not going to argue with the lottery. Did someone really just walk away from $16.5 million because they didn't want to reveal their identity? Seems pretty weird. When reporters reached out for further comment, Crawford Shaw said, quote,
I don't think there's anything more to tell. As far as I'm concerned, this thing is completed. And then he hung up. And then he changed his cell phone number. Crawford Shaw was gone, but the mystery remained. And investigators were determined to solve it. Support for Swindled comes from Rocket Money.
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What happened to the guy from the surveillance video? Was he okay? Was the winning ticket stolen from him? Was it linked to illegal activity of some kind? The lottery had been used by Organized Crime in the past to launder money, so really, anything could be possible. The investigation continued for another two years without any new information, until finally, in October 2013, investigators were led to a lawyer named Philip Johnston in Quebec City, Canada.
Authorities were able to locate Johnston because he was listed as the president on the grantor trust agreement of the investment trust that initially claimed the ticket. And in exchange for immunity, Johnston agreed to talk. Johnston explained that in October 2011, he was contacted by a man from Houston, Texas named Robert Rhodes, asking for his help in claiming a winning lottery ticket.
Johnston attempted to claim the prize himself over the phone, but failed due to the Iowa Lottery's security protocol of asking basic questions such as, what were you wearing when you purchased the ticket? And he claimed to be too sick to make the trip to Iowa to collect in person. So Robert Rhodes from Texas excused Johnston and found another lawyer that would make the trip to Iowa, Crawford Shaw in New York. The pieces seemed to be coming together, but investigators still didn't know how Robert Rhodes obtained the ticket.
Attempts to contact the man from Texas went nowhere. Was he the man in the surveillance video? In an attempt to find out, on October 9th, 2014, almost four years since the ticket was purchased,
Investigators released a surveillance video asking for the public's assistance in identifying the man. And it worked.
A few days later, authorities received a tip from an out-of-state lottery employee who claimed to recognize the man in the video. And a few months later, on January 15th, 2015, an arrest was made. But it wasn't Robert Rhodes.
Here's the news report from KCCI 8 News in Des Moines. It's a story that really has been dragging on for years. Tonight, breaking news in the hot lotto mystery. This investigation started back in 2010 when a lottery ticket was bought at a quick trip store in Des Moines. And tonight, a Norwalk man is facing charges. 51-year-old Eddie Raymond Tipton facing two counts of fraud. Seems like a story that could be headed for Hollywood someday. It's almost unbelievable the
man accused of trying to scam the lottery turned out to be the director of security for the multi-state lottery association edward raymond tipton was never eligible to win because he worked for the multi-state lottery association for over 12 years as the director of information security where he collected a six-figure salary now he's faced with fraud charges and up to five years in prison why would a lottery employee buy a ticket knowing that they were ineligible to play
Well, as the news report stated, according to Tipton, he didn't buy that ticket. He claims that he was in Texas at the time the ticket was purchased and that it was impossible that he could have been the one to purchase that ticket from the quick stop in Iowa. But his cell phone records proved that he was lying. He was in Iowa at the time of the purchase. And the cell phone records also prove that he knew Robert Rhodes, the man from Texas responsible for forwarding the ticket to Philip Johnston in Canada.
and then to Crawford Shaw in New York. In fact, Eddie Tipton and Robert Rhodes knew each other quite well. Turns out there was frequent and lengthy calls between the two, including on the day the winning ticket was purchased. Their relationship traced way back to when they were college roommates during their time at the University of Houston. Tipton also served as the chief operating officer for Rhodes' company, Systems Evolution Incorporated, for over seven years.
where he did such a great job, Robert Rhodes left a glowing recommendation on Tipton's LinkedIn profile. Rhodes describes Tipton as someone he would work with again in a second. Part of the review reads, "Eddie brought a no-nonsense aspect to his operational role at Systems Evolution Incorporated. His critical eye caught things that would later be so important for the longevity of our organization. Mr. Tipton also was very focused on the bottom line.
Authorities arrested Rhodes on fraud charges a few months later in March. The prosecution was alleging that Tipton purchased the ticket and knowing that he wasn't legally allowed to play as a lottery employee, passed the ticket to his old pal Robert Rhodes who attempted to collect the prize anonymously through a trust in Belize. That explains how the ticket was obtained. But how did Eddie Tipton pick the winning numbers? Was he just supremely lucky or did he somehow manipulate the game and know in advance which numbers would be picked?
Hot Lotto wasn't a traditional lotto game in the sense that the numbers were picked from a group of physically numbered balls, as was the case in the 666 fix scandal. No, the Hot Lotto numbers were computer generated, and Eddie Tipton was the director of IT security for Hot Lotto. And co-workers say he was obsessed with something called Root Kits. He even presented on the topic at a trade conference. Root Kits are basically a malicious software that gives unauthorized users access to a system.
and they're extremely difficult to detect and sometimes self-destructing. And once installed, it's possible that the rootkit provided Tipton with the ability to play with the numbers. Prosecutors deduced that he manipulated the security cameras to record one second of every minute while he installed the rootkit onto the system using a thumb drive.
And rootkits weren't the only thing Eddie Tipton was obsessed with. Today the prosecutor asked a judge to bar any discussion of Bigfoot hunting at the upcoming trial of Eddie Tipton. Wait, what? Tipton and his friends reportedly hunt for Bigfoot for fun in their spare time. Never mind. But yeah, it's very possible that Eddie Tipton hacked the system. Despite his obsession with Bigfoot,
Eddie Tipton seemed like an intelligent guy and as the director of IT security, he certainly had the access and the knowledge that would be needed to pull off this scheme. In fact, KCCI 8 News in Iowa actually interviewed Eddie in 2014 for a story about password security. It's an afterthought. Security has always been an add-on and when something happens, it's too late, cat's out of the bag.
Here's Assistant Iowa Attorney General Rob Sand. "Under reasonable doubt, not only was he the purchaser of that ticket, not only did he pass that ticket along to be claimed by others, but that he tampered with lottery equipment in order to know what those winning numbers would be." Eddie Tipton disputed the allegations and claimed he was innocent, saying, quote, "I was not hurting for money, not hurting enough that I need to take a chance and ruin my whole life. The only reason I'm in trouble is because I'm an employee."
His defense team based their case on Eddie Tipton not being the guy in the surveillance video because really, that was the only hard evidence to dispute. All of the other evidence was hypothetical or circumstantial. If the software used to rig the lotto was self-destructing as the prosecution theorizes, there would be no evidence of his tampering. Although the prosecution had several witnesses testify that the man in the video was indeed Eddie Tipton, including some of his closest friends,
The defense had witnesses of its own that could potentially raise reasonable doubt in the minds of the jury. Here's his sister Denise on how she knows the man in the video is not her brother. Disregard the fact that Eddie Tipton has a beard in his mugshot, but maybe she's right.
Any decent sister should be able to recognize their brother's shoe size in grainy surveillance video footage. Eddie's brother Steven points out another obvious sign that the man in the surveillance video is not his brother. The guy's doing everything left-handed. Okay, why is that important? My brother's not left-handed, he's right-handed. If you're still not convinced, Eddie's other brother Tommy might just change your mind. The person in the video also is buying hot dogs.
Eddie's not a hot dog guy. He's a, he's a, he's go to Whataburger, Jack in the Box, and get a big meal kind of guy. I've never ever seen him buy a hot dog at a convenience store. Eddie Tipton, beardless, right-handed, hunter of Bigfoot, rootkit enthusiast, but not a hot dog guy. Well, I'm convinced. But unfortunately for Eddie Tipton, the jury was not. He was found guilty and sentenced to 10 years behind bars.
Here are jurors Dennis Buswell and Laura Van Gundy on how the jury came to its conclusion. Everything about the case, even though there wasn't a lot of hard evidence, led back to the defendant. I mean, whether it was phone calls, the people he associated with, the people he worked with. He had the knowledge. We looked at the tape from the quick trip over and over, and we were able to tell that the man did look like him.
We watched him as he went out of the store. It was the same car that was rented. As for Eddie Tipton's reaction to the jury's decision, shock. Shock. And that's it. That's it. But that's not where the story ends. A month after his sentencing, new allegations arose.
Former security director for the Multi-State Lottery Association, Eddie Tipton, is now accused of rigging two more lotteries in Kansas back in 2010, totaling $44,000. That's on top of allegations he also rigged the computer system to win lotteries in Colorado, Oklahoma, and Wisconsin. According to court documents, Tipton's brother and friends claim the multi-million dollar jackpot's
then paid Tipton half the earnings. Now Tipton's facing even more charges, including ongoing criminal conduct and money laundering. Apparently, these Bigfoot hunters have been getting away with rigging lotteries for years. Remember Robert Rhodes, the Texas businessman? He won a $2 million jackpot in Wisconsin in 2007. In exchange for his testimony, Rhodes received a five-year suspended prison sentence, two years probation, and six months of electronic monitoring.
And remember this guy? That was Eddie's brother Tommy, the Justice of the Peace in Texas, and he won half a million dollars in Colorado. Tommy pled guilty and was sentenced to 75 days in jail for a misdemeanor theft charge. Eddie Tipton finally admitted to rigging the games and pled guilty to the new charges of ongoing criminal conduct and was given the maximum sentence of 25 years, which he will serve concurrently with the original 10-year sentence he received earlier in the year.
The prosecution estimates that he will be granted parole in five years. Well, I certainly regret my actions. It's difficult, even saying that, with all the people that I know behind me, that I hurt, and I regret it. I'm sorry. You are single? Yes, Your Honor. Adult children? None. No children. And you have a college education? Yes, sir. And apparently you're taking some additional courses? I was until the scheduling conflicts occurred.
In what area? Ministry. Is that something you want to get into? I have considered the idea for many years. So at this point in time, because of the career change, I think that would be something very viable for myself. You have agreed as part of this plea agreement to repay $2.2 million. Yes, Your Honor. How are you going to do that? Well, initially, I really don't know.
But I would like to think that I have the ability with some of my skill sets to try and earn enough money to pay it back. That would be an earnest goal. But unless given the opportunity, I don't know that I will be able to. Anything else you want to tell me, sir? I regret my actions. I'm sorry for the people I hurt. And I stand by it. Thank you.
Combined, Eddie Tipton, Tommy Tipton, and Robert Rhodes were ordered to pay back about $3 million in prizes they improperly obtained. Since the Hot Lotto scandal, lottery organizations all over the country have taken additional security measures to protect the integrity of the games, especially those games involving computer-generated numbers. The Hot Lotto game that was at the center of the Eddie Tipton scandal held its final drawing on October 28, 2017.
Swindled is written, researched, produced, and hosted by me, a concerned citizen. For more information about the show, check out swindledpodcast.com. You can also find us on Facebook, Twitter, and Instagram at swindledpodcast. If you want to support the show, you can do so at patreon.com slash swindled. For a few bucks a month, you will receive early access to new episodes and exclusive access to bonus episodes. Thanks for listening.
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