The Problem With Anonymous Lottery Winners

Last night, a multi-state American lottery called Mega Millions held a drawing that captured the attention of millions across the country. The reason was the extraordinary size of the grand prize, a whopping $1.6 billion. If you played, you probably didn’t win. (And if you did, here’s a reminder that Now I Know depends on user support to keep on going, so please consider supporting the Now I Know Patreon campaign or making a one-time donation via PayPal, thanks.) But someone did — someone in South Carolina. And that winner can consider him or herself doubly lucky because South Carolina law doesn’t require that the winner’s identity be made public.

That’s not the typical situation, though. In many states, winners can’t claim the prize anonymously. That may sound like a really bad idea — awarding someone a Scrooge McDuck-amount of coin and then telling the world? Every scam artist, long-lost relative, and sketchy fundraiser is going to appear out of the woodwork looking for a handout.

And yet, we do it anyway. Why? To avoid corruption and cheats. The lottery is run by people, and sometimes, those people do things to benefit themselves at the expense of the rest of us. Forcing the winner to reveal his or her identity can help root out those not playing by the rules, especially if the corruption comes from inside. Public scrutiny, the theory goes, will prevent lottery officials from fixing the results.

But that doesn’t really happen, right? Well, yes, it does — at least if a drawing from late 2010 is any indication.

The Multi-State Lottery Association (abbreviated MUSL) is, as it sounds, an organization which operates lotteries across state lines. A total of 34 states participate in the MUSL and while Powerball is the MUSL’s best-known game, it isn’t its only one. (That said, Mega Millions is operated by another consortium.) For example, from 2002 to 2017, MUSL ran a game called Hot Lotto. The details of the game aren’t important, except that the winning numbers weren’t selected by the ping-pong powered machines that Powerball and Mega Millions use. Rather, a random number generator — a computer program — spit out the winning set of six numbers every Wednesday and Saturday evening. The odds of randomly guessing the correct combination was roughly one in 30 million.

On December 29, 2010, the Hot Lotto jackpot hit $14.3 million. And someone in Iowa, not far from MUSL’s headquarters, won. And for some reason, the winner didn’t claim the prize until the very last moment. That set off alarm bells among regulators — and those alarms were about to get louder. Here’s how the Des Moines Register recapped the final hours of the claiming period, and you’ll see immediately that something was amiss:

Hours before the ticket was to expire in 2011, a group called Hexham Investments Trust — a mysterious company incorporated in Belize — tried to claim the prize through a New York attorney named Crawford Shaw.

Those behind the trust refused to reveal their identities, which is required under Iowa law. Lottery officials refused to release the cash.

In a last-ditch effort, Shaw asked if Hexham Investments could claim the cash and turn it over to the state to give away to charity.

Lottery officials declined the offer, saying it was the duty of the prize winner to accept and distribute the funds. Hexham Investments and Shaw gave up their claim to the cash.

That’s right: instead of revealing themselves, the winners walked away from millions of dollars. That… that doesn’t happen very often, to say the least. And it didn’t help the would-be winner maintain his anonymity. The decision to forfeit the prize didn’t get those lottery officials to back off — if anything, the above was proof positive of the possibility of criminal wrongdoing. A years’ long investigation continued, and what officials found was fraud — and it came from within the walls of the MUSL.

The culprit was a guy named Eddie Tipton, a computer programmer who worked at the MUSL. Years prior, he had added two lines of code which, for three drawings a year, would cause Hot Lotto to generator some not-so-random numbers. Anyone playing Tipton’s set of numbers would have a one-in-200 chance of getting the grand prize on those days. And on December 29, 2010, Tipton played his numbers himself — and then asked a friend to cash in the winning ticket. But that friend waited until the last minute and tried to hide his identity, causing the scam to come tumbling down.

Incredibly, this wasn’t the first time Tipton profited (or would have profited) from his malignant code — per the Chicago Tribune, he and some accomplices “cheat[ed] four states out of $2.2 million in several lottery games over six years.” They likely would have gotten away with it, too, but for their attempt to claim that final prize anonymously and with time running out.

In the summer of 2017, Tipton was sentenced to 25 years for his crime (although he’ll likely be out in three to four years on parole). He and his accomplices were also ordered to pay approximately $3 million in restitution.

Bonus fact: If you win the lottery and really want to claim it anonymously in a state that doesn’t necessarily allow for that, you may be able to — but you may have to sue. In January of 2018, a New Hampshire woman won a Powerball jackpot worth $560 million. She signed the back of her ticket to claim it but later realized that any information provided there was part of the public record. Erasing her name (using, e.g. white-out) would void the winning ticket, so instead, she went to court, asking that the information not be made public. And she won. As New Hampshire Public Radio reported, “Judge Charles Temple says that only the hometown of Ms. Doe can be released, citing her ‘strong privacy interest.'” But as NPR noted, maybe you should call her Jane Dough instead.

From the Archives: You Can’t Win If You Don’t Play: The person who sued to win the lottery, and lost.