The red flags were fairly easy to spot — people simply don’t win the lottery hundreds of times. Or 13,000, which is the number of winning lottery tickets allegedly cashed by Ali Jaafar and his two sons, Yousef Jaafar and Mohamed Jaafar.
The family from Watertown, Massachusetts, is accused of orchestrating a lottery ticket cashing scheme worth nearly $21 million over eight years to help other winners avoid paying taxes and potentially avoid paying child support.
Details of Massachusetts lottery ticket cashing scheme
The indictment alleges that the scheme worked like this: A person would win a lottery ticket, then the Jaafars would purchase the ticket for less than $600, which is the threshold for paying taxes on lottery winnings in Massachusetts. The Jaafars would then turn around and cash in the ticket for the full amount. Then, to offset the taxes that the Jaafars would then owe, they’d falsely claim millions of dollars in gambling losses on their tax returns.
The trio first grabbed the attention of lottery officials in 2019 when father Ali Jaafar was the state’s top individual lottery ticket casher, with son Mohamed ranking third and son Yousef coming in fourth.
Michael R. Sweeney, the Massachusetts State Lottery executive director, said of the statistical anomaly, “A statistician will say there’s some astronomical odds. But the reality is, it’s zero.”
The Jaafars were suspended from cashing lottery tickets after officials took notice in 2019. The Jaafars appealed the decision in court. The appeal was denied, the investigation continued, and after two years, charges were filed.
Not the first time ‘ten-percenting’ has worked in Massachusetts
The lottery scheme known as ten-percenting isn’t new, even in Massachusetts. In 2019 in Lynn, the same time the Jaafars popped up on the feds’ radar, 80-year-old Clarance W. Jones pled guilty to tax fraud and a host of other charges.
Jones cashed in lottery tickets worth more than $11 million from 2011 to 2017, but because he also claimed massive gambling losses, he paid just $16,000 in taxes.
The Jones scheme involved a pair of store owners, George Kinslieh and Bhavan Patel. First, they would pass the tickets onto Jones. Next, Jones cashed them in at full value with the Massachusetts State Lottery. Jones would then split the proceeds with Kinslieh and Patel.
Along with Jones’s guilty plea, both store owners also pleaded guilty to being co-conspirators.
Sweeney spoke of the enforcement that exposed the fraud of Jones and the alleged fraud of the Jaafars. “Over the last four years, the Massachusetts Lottery has done more to address this issue than in the prior 40 years combined.”
Much of that added enforcement comes from a policy adopted in 2018 that allows lottery officials to investigate anyone who wins 20 or more prizes worth more than $1,000 within the same calendar year. The Jaafars filed a civil suit against the policy, which the court dismissed.
The Jaafars face charges that include money laundering
The charges included 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.
The multiple counts carry sentencing guidelines that can amount to 28 years in prison, fines totaling $1 million, and full restitution of the defrauded funds. Twenty of those possible years behind bars come from the money laundering charge.
Massachusetts Treasurer Deb Goldberg said of the indictments, “This is the latest example of the Lottery’s ongoing efforts to partner with law enforcement to assist in preventing illegal activities, while also maintaining the integrity of the Lottery. I commend the Lottery team, the U.S. Attorney’s Office, the Massachusetts State Police, and the Internal Revenue Service and others for their diligent work on this case.”
The 19-page indictment also mentioned two unnamed co-conspirators. One was another Watertown resident, and the other, a person from Cranston, Rhode Island. This leaves the door open for more charges down the road.