After Robert Rhodes collected a Wisconsin Lottery jackpot that had been rigged by a friend, he used the windfall for an investment scheme that produced more undeserved government money, court records show. 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, and Rhodes recently explained under oath how he used the $783,000 payout to receive an additional $180,000 in bogus tax refunds, the AP reports. 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." Rhodes received about $150,000 from the US government and $36,200 from Wisconsin in tax refunds on the payout.
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. But in an ironic twist, Bancroft Life & Casualty ICC Limited, the St. Lucia-based insurer where Rhodes sent his cash, would later be accused of duping investors. 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. Rhodes, a 49-year-old father of two who received probation in exchange for his testimony, and Tipton, who pleaded guilty in Iowa last week, have agreed to refund Wisconsin the $783,000 payout, plus $18,100 apiece to cover the state tax refund. (Read more scam stories.)