Lawsuit settled over jackpot rigged by lottery insider

IOWA CITY, Iowa — 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 nearly three times 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 the terms of the deal are confidential but that his client is relieved that the litigation is over. A statement issued by the association said the group and its insurance carrier “decided to settle the case to avoid additional litigation expenses.”

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 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...