Jackpot cohort used payout to receive bogus tax refunds
IOWA CITY, Iowa — After Robert Rhodes collected a Wisconsin Lottery jackpot that had been rigged by his friend, 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.
“It’s setting up a phony expense for a business that wasn’t a true business so that somebody could claim a deduction they weren’t entitled to,” Stowers said Wednesday.