Accomplice in U.S. lottery rigging scandal used cash for offshore tax scam

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

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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. government and $36,200 from Wisconsin in tax refunds on the lottery payout. The upshot: Rhodes received roughly $150,000 from the U.S. But in an ironic twist, the St.

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

The Texas businessman sent his lottery winnings offshore to buy a phoney 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.” 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.
Rhodes received a $250,000 loan from Bancroft after buying his policy. Asked what regulations had changed, Rhodes testified, “I don’t remember.” He said its prospects in “real estate” and “consulting” never materialized. 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.
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.

9, 2017, file photo, Texas businessman Robert Rhodes, right, faces a judge with his attorney Joseph Cahill in Polk County District Court in Des Moines, Iowa. (Rodney White/The Des Moines Register via AP, File) In this Jan.

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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.

“It’s setting up a phoney 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. “It’s just another layer of fraud that Robert Rhodes was involved with.”

“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 the hell happened to whatever money was there to pay insurance claims? Well, there is none. What the hell?”

Bancroft recruited tax-weary, wealthy individuals to invest in its insurance. The customers could make insurance claims for broad categories of losses, such as a business downturn. Bancroft would loan back up to 70 per cent of their premium payments. Customers would buy expensive policies that their businesses didn’t need but could write off.

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.

Tipton and his brother pleaded guilty last week in Iowa, where the lottery association is based. 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.
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, a 49-year-old father, pleaded guilty and co-operated with investigators in exchange for probation.
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. Under the arrangement, Rhodes sent $450,000 to Bancroft Life & Casualty ICC Limited in St.

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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.”