Father and Sons Are Charged in $21 Million Lottery Fraud

No statistical model could explain this, and when a Massachusetts man and his two sons redeemed more than 13,000 lottery tickets valued at nearly $ 21 million in eight years, federal prosecutors and lottery officials said it was far from lucky.

“A statistician will say that there are astronomical features,” said Michael R. Sweeney, the executive director of the Massachusetts State Lottery, in an interview. “But the reality is, it’s zero.”

In a 19-page indictment unsealed in the U.S. District Court in Massachusetts Monday, Ali Jaafar and his sons Mohamed Jaafar and Yousef Jaafar were jointly charged with more than a dozen cases of fraud, money laundering and tax evasion, authorities say it was a ticket redemption system. The vast majority of tickets were scratch cards, which are usually sold in convenience stores, prosecutors said.

From 2011 to 2019, according to the indictment, the Jaafars were demanding the prizes on behalf of actual winners who may have avoided their winnings being forfeited for unpaid taxes or child support, a requirement for any prize over $ 600 in Massachusetts.

The Jaafars then falsely reported six- and seven-digit gambling losses on their tax returns, which enabled them to drastically cut the taxes they paid on winnings, prosecutors said.

The family previously suspected lottery officials in Massachusetts, where prosecutors said Ali Jaafar, 63, of Watertown, Massachusetts, was the “best single lottery box office” in 2019. Mohamed Jaafar, 31, of Watertown and Waltham, Mass., Finished third this year, and Yousef Jaafar, 28, of Watertown finished fourth.

The Massachusetts State Lottery Commission temporarily suspended the three men from redeeming lottery tickets, a decision the Jaafars unsuccessfully challenged in Boston Superior Court in 2019.

“I think it really speaks for a measure of hubris,” Sweeney said of her legal challenge. “This is not the result of someone who is lucky or someone who, quote-without-quote, plays a lot.”

Ali Jaafar and Mohamed Jaafar pleaded not guilty to the federal court in Boston on Monday afternoon by video conference. They were both arrested the previous Monday and later released on their own. Her lawyers did not immediately respond to requests for comment.

It was not initially clear whether Yousef Jaafar was in custody. His lawyer did not respond to a request for comment either.

The lawyer who represented the Jaafars in their previous civil lawsuit against the Lottery Commission refused to comment on Monday.

A spokeswoman for the US District Court in Massachusetts initially did not comment on the case.

In Massachusetts, lottery officials will check if that person owes unpaid state and state taxes or child support before anyone can redeem a ticket that is worth more than $ 600.

To avoid having their prize money seized, the lottery officials sometimes sell their winning tickets to someone else to redeem with the lottery commission. The person redeeming the ticket keeps 10 percent or 20 percent of the winnings in a system known as 10 percent.

“You are trying to defeat the system,” said Mr. Sweeney.

In the indictment, federal prosecutors said Ali Jaafar paid less than $ 24,500 in federal taxes on lottery winnings of $ 15 million and received $ 886,261 in tax refunds for fake gambling losses from 2011 to 2019.

Prosecutors said Mohamed Jaafar paid less than $ 21,700 in federal taxes on lottery winnings of $ 3.3 million and received $ 106,032 in tax refunds for fake gambling losses from 2012 to 2019.

Yousef Jaafar paid less than $ 10,700 on $ 2.4 million in lottery winnings and received tax refunds of $ 185,951 for notional gambling losses from 2013 to 2019, according to indictments.

They were each charged with US conspiracy fraud and money laundering conspiracy charges. Ali Jaafar and Mohamed Jaafar were each charged with filing false tax returns on five counts, while Yousef Jaafar was charged with filing false tax returns on three counts.

According to Massachusetts state lottery rules, an individual who claims 20 or more prizes of $ 1,000 or more in a year is subject to review by the lottery director. If the lottery director determines that the individual was statistically “unlikely” to win that many times, the individual may be given a 90-day ban if they can claim prizes in excess of $ 600. A second violation can result in a 180-day ban and a third violation can result in a one-year ban.

Mr Sweeney said the Lottery Commission had initiated administrative proceedings against the Jaafars and referred the matter to law enforcement. He said other similar lottery fraud criminal cases would continue.

“You can assume,” he said, “there are more shoes to take off.”

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