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Expert Team

5 Infamous Lottery Scams and Scandals

People Expressing Different Emotions Over the Lottery
State lotteries around the country, as well as the Multi-State Lottery Association (MUSL), go to great extents to ensure that their lotteries are fair and on the up-and-up.

But no matter how much you plan, there’s always an unknown quantity that can throw everything into disarray.

I remember as a kid growing up in Massachusetts, the lottery consisted of a game aptly called The Game. It featured 3 sets of numbers printed on a special ticket. The numbers had 3 digits in the first box, which I believe was white, 2 in the 2nd box which was blue and a single digit in the 3rd box which was yellow.

If you matched all 3 sets of numbers to what was drawn, you won $50,000 (which in today’s money is about $310,000).

But that wasn’t all. If you matched the single digit box, you could mail in your ticket for a chance to win $50,000 on the Massachusetts Lottery game show Big Money.

The game and show remained popular through the early 1980s when the pre-printed tickets were no longer a sound investment for the Massachusetts Lottery and they changed over to computer terminals to print tickets as they were purchased.

Today, instead of a weekly lottery we have 3 bi-weekly lotteries in most states. Sometimes there are 2 bi-weekly lotteries on the same day in the same state.

With that many games to keep track of and billions of dollars at stake, you can see why it would make an attractive target for scammers.

1 – Jerry and Marge Selbee

Jerry and Marge Selbee

Not all scams are illegal or immoral. Take the case of Jerry and Marge Selbee for example.

As retired couple has been the talk of the lottery world since a 60 Minutes story that aired in early 2019 told of how they used math to beat not 1 but 2 lotteries.

The octogenarians ran a local convenience store in Evart, Michigan until roughly 15 years ago when they sold it and retired.

One day in 2003 Jerry went to the old store that he used to own and saw that a new game from the Michigan Lottery was coming out called Winfall.

Now, Jerry wasn’t just the retired proprietor of a small town convenience store. He had a degree in mathematics.

Jerry read the rules for the new game and within minutes realized that mathematically it was flawed and favored the players. He saw an opportunity.

The game worked like this: the winnings rolled down every time the jackpot reached the cap of $5 million. Unlike lottery games like Powerball, where the jackpot keeps growing until someone matches every single number, with Winfall, when the jackpot reached $5 million with no winning ticket, all 6 winning numbers, people with tickets that had 5, 4, and 3 winning numbers could cash in.

Where the average person wouldn’t necessarily see it Jerry figured out that it was just basic math and he thought others would see it too, but he was wrong.

When Winfall started Jerry played close attention to the jackpots. When he saw the first roll-down was about to happen, he purchased $3,600 in tickets. The result was that he won $6,300.

The next roll-down, Jerry purchased $8,000 in tickets and won nearly $16,000.

Jerry didn’t tell his wife at first, but soon let her in on the secret.

Soon Jerry and Marge were betting with hundreds of thousands of dollars and win significant prizes.

The 2 were seeing such success that they formed a company, GS Investment Strategies, and invited family and then friends to buy into the business.

In 2005, Michigan discontinued Winfall because sales were low.

However, a friend of theirs who had invested in the company happened to live in Massachusetts.

The friend called Jerry and told him of a new game from the Massachusetts Lottery called Cash WinFall.

Jerry went on the Massachusetts Lottery website and read the rules and how the game worked and within 10 minutes he knew that it was essentially the same game.

From 2005 to 2011, Jerry and Marge would monitor the jackpot from Michigan and when the roll-down was about to happen, they made the 14-hour drive from their home to Massachusetts to buy their tickets.

They limited their purchases to 2 conveniences stores and would rent a room at a Red Roof Inn to sort the insane amount of tickets they would buy.

A reporter from the Boston Globe was doing a story on the lottery and discovered that a few locations were selling a massive number of Cash WinFall tickets.

After some investigation, the report found that 2 groups, a group of students from MIT (the school famous for exploiting casinos by forming companies to count cards in blackjack games) and the Selbees.

The state lottery commission and the attorney general launched an investigation to get to the heart of the matter and to determine if any criminal activities took place. After all, this was normally something you would see from an organized crime syndicate.

After an extensive investigation, the state determined that there was no illegal activity.

Unlike Michigan, Massachusetts was actually seeing large profits from the game. But due to the flaw in the game, they decided to end the game.

Over the period of 2003 to 2011, the Selbees grossed over $26 million and made $8 million in pre-tax profit.

When asked what he did with all the tickets that lost, Jerry said he saved them. The millions of losing tickets sit in hundreds of tubs in the back of his barn. He stated he saved them in case tax agents ever tried to audit him.

He acted equally as smart with his winnings. After some renovations in his house, he set up college funds for his 6 children, 14 grandchildren, and 10 great-grandchildren.

And more money will be heading Jerry and Marge’s way soon as they have sold the rights to the story and a movie will be made about their adventure.

2 – Dan Tim Poulin

In 2012, an Illinois woman contacted the Maine Lottery after receiving a message on Facebook. The message stated that she had won $40,000 in the Mega Millions game.

In the message, the woman was instructed that she could claim the prize by sending them a processing fee to expedite the transfer of the $40,000 to her account.

The message was signed by Dan Tim Poulin.

In 2019, it’s easy to see that this was a scam of monumentally simplistic proportions and the majority of people wouldn’t even read past the first line. But the world was different in 2012. Social media was relatively new and people were learning how it worked.

The scam, which the fact-checking website Snopes states had its origins as far back as 1920, was a popular email scam at the time, but it was not a common event in social media.

This led to the woman calling the Maine Lottery

She explained the letter and told them that the link in the message took her to a very realistic looking Powerball site that included the real logos and even had a list of past winners on it.

The kicker was the signature. Dan Tim Poulin.

The head of the state lottery at the time was Tim Poulin. His predecessor, who’d passed away 8 months before, was Dan Gwadowski.

After consulting with some employees of the Maine Lottery, the woman was advised it was indeed a scam.

Poulin stated at the time “I was flabbergasted that someone would actually go through all that trouble of using my name, plus that of our former director, Dan Gwadowsky.”

He further went on to talk about the actions of the Maine Lottery with regards to winners and money: “We will never ask for money. We will never ask for any personal information in an initial contact with you. If you get an inquiry from anybody that purports to be a lottery official and they say where they are from, the best thing to do is to pick up the telephone and call the lottery office where they say that they are from. We have had people do it and hopefully, people will continue to do such.”

3 – The Store Clerk

Lottery Tickets

Around the same time that the Dan Tim Poulin happened, the Maine Lottery discovered another scam that was happening in their state.

Over the last few years, this has happened a few times, but 2012 was the first time a lottery commission put out a warning on the subject.

The scam involves store clerks at lottery terminal locations. Usually, the clerk is working alone as it is easiest to pull off when no other workers are present.

A customer brings in a ticket and asks the clerk to run it through the terminal to see if there was a winner. The clerk runs the ticket and then tells the customer that it didn’t win and holds on to the ticket. In actuality, the ticket was a winner.

The Maine Lottery offered tips to prevent this from happening and 7 years later, they are still valid steps that players should take.

The tips to avoid this scam are:

  • Sign the ticket. This is the best safeguard against this type of fraud. If a ticket is signed, only the person who’s signature matches can claim the prize on the ticket.
  • All machines are equipped with a “winner sound”. While some stores may disable this sound, most do not. If you hear the sound, you’ve won and don’t let the clerk tell you otherwise.
  • Ask for a printed receipt of the ticket scan. All transactions have a printed receipt. This is because winners need to be accounted for. The process usually involves stapling a winning ticket to the receipt but losing tickets print receipts also. All lotteries do this.
  • Use a location that has security cameras that work. Most stores nowadays have this, but some mom and pop shops in rural areas and some stores in need of refurbishment may not have functioning cameras or any cameras. Having the transaction on video can assist the lottery commission and the owner from rooting out any shenanigans.
  • Use a “self-service” checker. This is a scanner that you can use yourself. Most states have these scanners
  • Report suspicious behavior to the lottery commission. Their goal is to keep everything above board because it can mean billions for your state. The integrity of the game is the highest priority.

4 – The Hot Lotto Fraud Case

Eddie Tipton

Eddie Tipton was an employee of the Multi-State Lottery Association (MUSL). He was an information security director for the organization and was in charge of developing the algorithms for many random number generators (RNG) that selected the winning lottery numbers across the Midwest.

Eddie knew the ins and outs of the RNGs and could predict the winning lottery numbers fairly accurately.

As an employee of MUSL, Eddie was prohibited by law and by his contract with the organization from playing in any lottery that MUSL worked with.

But he had an idea. He knew he was banned from the lottery, but friends and family weren’t.

In 2005, Tipton enlisted his brother Tommy, a Texas Justice of the Peace, to see if they could get away with winning a prize. Eddie had constructed the RNG for the Colorado lottery and Eddie gave Tommy the winning numbers before they were drawn. Tommy won and enlisted a friend to claim the ticket in his name to avoid implicating Eddie. Tommy offered the friend 10% of the winnings. The prize totaled $568,990.

Seeing how successful he was in Colorado, Eddie struck again in 2007. This time it was in Wisconsin. Eddie made a deal with Texas businessman Robert Rhodes to buy a ticket in the Wisconsin Lottery. Eddie provided the winning number to Rhodes who claimed the $783,257 prize via a limited liability corporation that he established specifically to claim the prize and conceal his identity. When forensic accountants investigated, they found that the corporation funneled the money back to Eddie.

In December 2010, the Hot Lotto game had reached a jackpot of $16.5 million. According to the rules of the Iowa Lottery, winners have 1 year to claim any prize. 11 months after the drawing, a man named Philip Johnson from Quebec City, Canada called the Iowa Lottery to claim the prize. He stated that he was too sick to travel to Iowa to pick up the check and was hoping that it could be done via phone or mail or a combination.

Lottery personnel quizzed him on the authenticity of the ticket. He was able to provide the 15 digit verification code on the ticket, but he wasn’t able to answer other questions that authenticated his ticket ownership.

Johnson called again on December 6th stating that he was not the actual owner, but he was acting on behalf of a person who wished to remain anonymous. The anonymous man was now represented by a Trust based in Belize called Hexham Investments. He was turned away because Iowa doesn’t allow anonymity when claiming a prize.

On December 29th, with only hours to go before the ticket expired, lawyers representing Hexham and a New York City-based lawyer named Crawford Shaw presented the winning ticket at lottery headquarters. The ticket was rejected because the company name was misspelled on the ticket as “Hexam”.

2 weeks later, Shaw returned to try to claim the prize but was turned away again when he would not reveal the owners of trust. Shaw then withdrew claims to the prize and the money went back to the state lotteries.

In 2011, Eddie went for another prize. This time he enlisted another business owner from Texas named Kyle Conn. Conn crossed the border into Oklahoma and bought a ticket with the winning numbers provided by Eddie. The prize this time was $1.2 million.

The scam broke when Johnson was interviewed by Iowa authorities. Johnson, listed as Hexham’s president, spelled out the whole scam. The said that Robert Rhodes and Robert Sonfield of Sugar Land, Texas had asked him to assist in anonymously claiming the prize.

As the investigation progressed, investigators came across video footage of the purchase of the ticket. The person buying the ticket was Eddie Tipton.

Based on this, in January of 2015, Tipton was arrested and charged with 2 counts of fraud for attempting to illegally participate in the lottery, and attempting to use fraudulent means to claim prizes. Rhodes was arrested for 2 counts of fraud 2 months later. It was discovered that Rhodes and Tipton had worked together at a Houston company for years and he was in Des Moines when the ticket was purchased.

In July 2015, Tipton was found guilty on 2 counts of fraud. The following September, he was sentenced to 10 years’ for his actions in the Iowa case.

But that was not all, investigators did more research hand discovered his earlier transgressions.

In June 2017 Eddie confessed to having installed a software program that rigged the RGN in 2005 or 2006. He stated: “I wrote software that included code that allowed me to technically predict winning numbers and I gave those numbers to other individuals who then won the lottery and shared those winnings with me,” He admitted he did this in Colorado, Wisconsin, Kansas, and Oklahoma as well as Iowa. The following August he was sentenced to an additional 25 years in prison and he and his brother will have to pay back $3 million in restitution.

Robert Rhodes pled guilty in Iowa to charges that he helped Eddie and Tommy commit fraud in the 2010 incident. In March 2017 he pled guilty to the 2007 Wisconsin drawing scenario and made a deal to testify against Eddie and Tommy. The deal called for him to be sentenced to 6 months of home confinement and make restitution of $409,000.

5 – Ashwinder Singh

The Maine Lottery scam warning came to life outside of the country in July 2011. The place was across the continent in Winnipeg. Manitoba, Canada. A man in his 60s (who was never publically identified) brought his lottery ticket to a local gas station to see if any numbers on the ticket had won.

The cashier named Ashwinder Singh ran the ticket and told him that the ticket was not a winner.

The ticket was a multi-draw ticket, which means that instead of buying tickets every drawing, he paid for multiple drawings in advance. Later in the week, he went to look for the ticket and couldn’t find it. He thought he had simply lost the ticket, so the man went to a store and bought another ticket with the same numbers.

When the numbers were drawn, the man had discovered that he had won. The drawing had 2 winners splitting the $180,000 jackpot. When the prizes were claimed, lottery officials were suspicious because both tickets came from the same store. The other claimant was Ashwinder Singh.

Officials interviewed Singh who broke down and admitted he had stolen the man’s original ticket. The man was given the total $180,000 and Singh received an 18-month sentence for his actions in September 2013.

Conclusion

These are just a few of the many scams and scandals that besiege lotteries each year. But for each of these scandals, millions of people plop down hard earned cash to have a chance at winning fairly.

And while these exploits may leave the lotteries in question with a temporary black eye, the fact is that they actually discovered the issues and investigated. They brought those who needed to be to justice. Many having to make some sort of restitution.

But they don’t just behave reactively to anomalies that may taint results, the act proactively to prevent events like this from occurring whenever possible. If they didn’t I’m sure thousands more of these stories would be floating around.

And the reality is that they’ve to be proactive. The lottery is a public trust. The citizens must have confidence that it is on the up-and-up. If not, it will result in lower sales which will cost states 10s or even 100s of millions of dollars.