Would the church still have to pay taxs on it ?
Cops are cops. The pastor will be accused of playing the lottery himself with church funds and falsifying this story unless he agrees to pay taxes on the winnings as if the church had been a player, taxable, instead of a donee, nontaxable.
Standard shakedown MO. More frequently observed in fire insurance claims due to the revolving door between the State Fire Marshal arson squad and insurance company investigators.
"Play ball or defend yourself in court. You have a chance to help yourself. We don't know if you did it or not, we can only present the evidence to the jury, it will be up to them."