(CBS Local) — After winning a Wisconsin Lottery jackpot that was rigged by his friend, a Texas businessman used the payout for an investment scam that generated additional undeserved government money, according to court records.
An accomplice in a scandal that has rattled state lotteries, rigged lottery winner Robert Rhodes recently said under oath that he used a Wisconsin Lottery payout of $783,000 to obtain another $180,000 in fraudulent tax refunds, the Associated Press reported.
Rhodes obtained the undeserved tax refunds by purchasing a phony insurance policy for Delta S Holdings, a personal limited liability corporation that he created specifically to collect the lottery prize. He then claimed the insurance policy as a tax-deductible “business expense,” according to court records.
The Texas businessman received about $150,000 from the U.S. government and $36,200 from Wisconsin in tax refunds on the rigged lottery payout. Ironically, Rhodes’ insurer in St. Lucia — Bancroft Life & Casualty ICC Limited, to whom Rhodes sent his payout — later was accused of swindling investors and vanishing with part of Rhodes’ lottery prize.
Rhodes and accomplice Eddie Tipton, a former security director for the Multi-State Lottery Association, pleaded guilty to rigging the Dec. 29, 2007, Wisconsin Lottery Megabucks drawing, which was advertised at $2 million. The pair agreed to refund Wisconsin the $783,000 lottery payout, along with $18,100 per accomplice to refund the state tax refund.
Tipton installed computer code that helped him predict Megabucks winning numbers for three days of the year, investigators said. He worked with his brother, Tommy, and other associates to purchase winning tickets and claim prizes worth millions of dollars in several states.
Tipton and his brother pleaded guilty last week in Iowa, where the Multi-State Lottery Association that he used to work for is located.
Rhodes, 49, pleaded guilty and cooperated with investigators in exchange for probation. In a deposition under questioning from Tipton’s lawyer, Rhodes came clean about the offshore tax scheme.
The accomplices first became friends when Rhodes previously employed Tipton at a Houston-based technology company in the 1990s. When Tipton gave Rhodes note cards with winning combinations to rig the 2007 Wisconsin drawing, Rhodes bought the combinations, which included the winning numbers.
He then formed Delta S Holdings to collect the prize, fearing with Tipton that their relationship would be exposed if Rhodes was listed on record as the winner. He had previously visited the lottery association’s website as well.
Rhodes’ LLC filed a lawsuit to obtain the rigged lottery payout after the Wisconsin Lottery declined to pay a corporation without a court order.
Under oath Rhodes said he sought advice from experts for tax planning, and bought a plan that “allowed me to get a tax refund.”
But Tipton was not aware of the offshore tax scheme until after Rhodes’ fraudulent activity occurred, and Rhodes said Tipton never received any money from the federal and state tax refunds.
“I started getting insurance account records that say all of the money that Delta S Holdings had put there through paying the premium was gone,” he said. “Some expletives followed on my part, you know, what … happened to whatever money was there to pay insurance claims? Well, there is none.”
[H/T: The Associated Press]