Watertown Father And 2 Sons Indicted On Tax Fraud, Money Laundering In Alleged Lottery Scheme
A Watertown family was charged this week with defrauding the government after they cashed in more than 13,000 winning lottery tickets worth nearly $21 million over the past decade.
Prosecutors said Tuesday that Ali Jaafar, 62, and his sons — Yousef Jaafar, 28, and Mohamed Jaafar, 30 — participated in a scheme to cash in winning lottery tickets, mostly scratch-off tickets, to help others avoid paying taxes on the winnings.
The trio were each indicted in U.S. District Court in Boston on one count of conspiracy to defraud the Internal Revenue Service, one count of conspiracy to commit money laundering and multiple counts of filing false tax returns.
According to court documents unsealed this week, the Jaafars and potentially others allegedly worked with lottery agents and convenience store staff at unspecified locations to "purchase winning lottery tickets from the ticket holders for cash at a discounted price." The Jaafars then redeemed the winning tickets, signing lottery forms claiming they were solely entitled to the winnings.
The indictment claimed unnamed lottery agents involved were given a cut of the prize monies once the checks were cashed by the Jaafars. The Jaafars mostly avoid paying income taxes on the prizes by claiming their winnings were offset by massive gambling losses, the court filing stated.
The alleged scheme is commonly referred to as "ten-percenting," in which someone cashes in the winning tickets for someone else in exchange for a commission, such as 10%. Lottery officials have long suspected such schemes have been used to by winners to avoid paying back taxes or child support.
The Jaafars have attracted media attention for years because of their frequent wins, which statisticians and lottery officials say would be nearly impossible just by chance.
In 2019, Ali Jaafar was the top lottery ticket casher in the state, while that same year, Mohamed and Yousef Jaafar were respectively the third- and fourth-highest ticket individual cashers. Between 2011 and 2019, Ali Jaafar paid less than $24,500 in federal taxes on his claimed winnings.
At least two unnamed co-conspirators — a person from Cranston, R.I., and another from Watertown — were referenced in the indictment, suggesting the possibility that others could still be charged.
Lawyers representing Ali Jaafar and Mohamed Jaafar did not immediately return requests for comment Tuesday. It is unclear if Yousef Jaafar has an attorney.
In 2019, another frequent ticket casher, Clarance Jones of Lynn, pleaded guilty to conspiring to commit tax fraud and filing false tax returns in connection with a similar scheme.
Auditors have others have raised concerns about potential ticket cashing schemes in Massachusetts for decades, but the state lottery and prosecutors only started addressing the issue a few years ago after reports that the problem was greater in Massachusetts than any other state.
In late July 2018, the Massachusetts State Lottery Commission created a new policy to let the lottery stop accepting tickets from people flagged for cashing in so many tickets that it is "factually or statistically improbable."
The policy lets lottery officials investigate any individual who wins 20 or more prizes valued at $1,000 or more within a calendar year.
The Jaafars lost a civil suit against the lottery challenging the policy. Despite the court ruling and ongoing pandemic, the Jaafars continued to cash in hundreds of winning lottery tickets in 2020. The lottery has also investigated at least two other frequent ticket cashers who have yet to be charged with any criminal wrongdoing.
Michael Sweeney, executive director of the state lottery, said the indictments were the culmination of several years of work with the Internal Revenue Service and the Department of Justice.
"I'm thrilled," Sweeney said. "It's been a long effort."
Sweeney said the lottery expects additional announcements to be made in the next 30 to 60 days.
"We are working with a variety of law enforcement agencies," he said. "I expect more action to be taken soon."
Sweeney said the lottery would also scrutinize any agents that it suspects might be working with ticket cashers. But he said the lottery so far has focused on the largest players.
"We have we have been able to get criminal indictments and charges against three individuals who are the very top of the list," he said.
WBUR's Todd Wallack contributed to this report