Welcome Guest
Log In | Register )
You last visited September 22, 2020, 9:55 pm
All times shown are
Eastern Time (GMT-5:00)

Lottery rigging accomplice used Wisconsin payout for offshore tax scam

Jul 6, 2017, 6:53 pm

Share this news story on Facebook
Tweet this news story on Twitter
Insider BuzzInsider Buzz: Lottery rigging accomplice used Wisconsin payout for offshore tax scamRating:

IOWA CITY, Iowa — After Robert Rhodes collected a Wisconsin Lottery jackpot that had been rigged by his friend Eddie Tipton, he used the windfall for an investment scheme that produced another wave of undeserved government money, court records show.

Rhodes, an accomplice in a scandal that has shaken state lotteries, recently explained under oath how he used the $783,000 payout to receive an additional $180,000 in bogus tax refunds. The Texas businessman sent his lottery winnings offshore to buy a phony insurance policy for a personal corporation that never did any business — except receive the lottery prize. He then claimed the policy as a tax-deductible "business expense."

The upshot: Rhodes received roughly $150,000 from the U.S. government and $36,200 from Wisconsin in tax refunds on the lottery payout. But in an ironic twist, the St. Lucia-based insurer where Rhodes sent his cash would later be accused of duping investors and, in Rhodes' words, "abscond" with a chunk of the loot.

Rhodes and Eddie Tipton, former security director for the Multi-State Lottery Association, recently pleaded guilty to rigging the Dec. 29, 2007, Megabucks drawing advertised at $2 million. They agreed to refund Wisconsin the $783,000 payout and an additional $18,100 apiece to cover the state tax refund.

Investigators say Tipton installed computer code that allowed him to predict winning numbers on three days of the year, and that he worked with Rhodes, his brother Tommy and other associates to buy winning tickets and claim prizes worth millions in multiple states. Tipton and his brother pleaded guilty last week in Iowa, where the lottery association is based.

Rhodes, a 49-year-old father, pleaded guilty and cooperated with investigators in exchange for probation. He disclosed the offshore scheme in a deposition under questioning from Tipton's lawyer, Dean Stowers, who called it money laundering and tax fraud.

Rhodes, who did not return a message seeking comment on his testimony, employed Tipton at a Houston tech company in the 1990s and they became friends. Tipton supplied him with notecards listing dozens of potential winning combinations before the Wisconsin drawing, and Rhodes bought them, including the winning ticket.

With Tipton's encouragement, Rhodes formed a limited liability corporation, called Delta S Holdings, to claim the prize. Rhodes had previously visited the lottery association's office and both worried their ties would be discovered if Rhodes was listed as the winner. The LLC filed a lawsuit to obtain the prize after Wisconsin lottery officials said they couldn't pay the corporation without a court order.

Rhodes said he then turned to experts for tax planning advice on his windfall, buying a plan that "allowed me to get a tax refund."

Under the arrangement, Rhodes sent $450,000 to Bancroft Life & Casualty ICC Limited in St. Lucia to buy an "insurance policy" for Delta S Holdings. His tax returns claimed the purchase as a business expense, producing refunds when the governments determined they withheld too much of the prize.

Bancroft recruited tax-weary, wealthy individuals to invest in its insurance. Customers would buy expensive policies that their businesses didn't need but could write off. Bancroft would loan back up to 70 percent of their premium payments.

Rhodes received a $250,000 loan from Bancroft after buying his policy. He also received an insurance claim for $75,000 for "regulatory changes" that he said harmed Delta S Holdings, even though it never did any other business. Asked what regulations had changed, Rhodes testified, "I don't remember." He said its prospects in "real estate" and "consulting" never materialized.

Rhodes said Tipton wasn't told about the offshore deal until later and received none of the refunds. He said the deal went sour in 2012, when Bancroft became insolvent and the company "absconded" with $150,000 his LLC had left.

"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."

Timeline of the biggest crime in US lottery history

The following is a compilation of Lottery Post news coverage chronicling the Hot Lotto mystery and subsequently discovered crime.

We start the timeline with a news story indicating that only 3 months remained for the $16 million Hot Lotto jackpot to be claimed.

2011

2012

2013

2014

2015

2016

2017

AP, Lottery Post Staff

We'd love to see your comments here!  Register for a FREE membership — it takes just a few moments — and you'll be able to post comments here and on any of our forums. If you're already a member, you can Log In to post a comment.

4 comments. Last comment 3 years ago by OneTrickpony.
Page 1 of 1
Avatar
Simpsonville
United States
Member #163184
January 22, 2015
2258 Posts
Offline

Maybe I missed it, but the IRS will definitely take this up.

    eddessaknight's avatar - nw paladin.jpg
    LAS VEGAS
    United States
    Member #47728
    November 22, 2006
    7166 Posts
    Offline

    Maybe I missed it, but the IRS will definitely take this up.

    Big cheese $$$ big bait, big money opportunity = big schemes & scams that will inevitably follow and has world wide

    When asked why the great Brooklyn bank robber, Willie Sutton,  kept on robbing banks, he answered point blank without hesitation:

    "Well warden that's where the money is" 

      music*'s avatar - DiscoBallGlowing
      USN United States Navy
      Fresno, California
      United States
      Member #157851
      August 2, 2014
      3959 Posts
      Offline

      Big cheese $$$ big bait, big money opportunity = big schemes & scams that will inevitably follow and has world wide

      When asked why the great Brooklyn bank robber, Willie Sutton,  kept on robbing banks, he answered point blank without hesitation:

      "Well warden that's where the money is" 

      eddessaknight,  "Well warden that's where the money is" is no longer true. Electronic finances have replaced cash money. Most get their cash from the ATMs. Branches have very little cash on hand. 

       "Crime does not pay." 

       When I win the Lottery I will be a proud taxpayer. I am enjoying the life of an American citizen.  I can drive anywhere in the lower 48 without a passport. I am protected by police and the Justice system. My votes count. 

       People are running toward America and not away from our beloved Country.

      US Flag

       "We are all in this together!" 

        OneTrickpony's avatar - rocking horse.jpg

        United States
        Member #167652
        July 25, 2015
        118 Posts
        Offline

        Maybe I missed it, but the IRS will definitely take this up.

        I agree.  He may have gotten a slap on the wrist in this case, but the IRS plays hardball.