BOSTON — A federal jury on Monday sentenced a father and son from Watertown to five years and 50 months in prison for their part in a lottery scam, in which the pair claimed more than $20 million in Massachusetts lottery winnings over nine years on behalf of the actual winning ticket holders to avoid paying taxes and to collect tax refunds, prosecutors said.
As a direct result of this case, the Massachusetts State Lottery Commission is in the process of revoking or suspending the licenses of more than 40 of its lottery agents.
Ali Jaafar, 63, and Yousef Jaafar, 29, were convicted back in December of one count of conspiracy to defraud the Internal Revenue Service, one count of conspiracy to commit money laundering, and one count each of filing a false tax return, according to the Massachusetts U.S. attorney’s office.
Mohamed Jaafar, another son of Ali Jaafar, previously pleaded guilty to conspiracy to defraud the IRS in November 2022 in connection to the same scheme.
Mohamed is scheduled to be sentenced on July 25, 2023.
“The outcome of this case sends a clear message that anyone complicit in the avoidance of financial obligations through fraudulent Lottery prize claims faces real and severe consequences. We commend the U.S. Attorney’s Office, the Massachusetts State Police and the IRS for their efforts in assisting us in confronting these illegal activities and securing the public’s trust in the Lottery,” said Mark William Bracken, Interim Executive Director, Massachusetts State Lottery.
According to prosecutors, the Jaafars conspired with other individuals to buy winning lottery tickets at a cash discount from gamblers around the state. Convenience store owners often facilitated the transactions.
The scheme is known as “10 percenting” because the ticket buyers usually keep between 10 to 20 percent of each ticket’s value, officials said.
“Instead of using business savvy and skill to build a legitimate multi-generational family business, the Jaafars carried out a complex decade-long tax and lottery scam, building a vast network of coconspirators to further their illegal activities. Tax violations have been erroneously referred to as victimless crimes, but it’s the honest law-abiding citizen who is harmed when someone tries to manipulate our nation’s tax system,” said Joleen Simpson, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigations in Boston.
In practice, the scam allows the actual gamblers to avoid reporting their winnings on tax returns, while conspirators like the Jaafars present the winning tickets to the Massachusetts Lottery Commission as their own and collect the full value, prosecutors said.
“The defendants also reported the ticket winnings as their own on their income tax returns and claimed fake gambling losses to offset the claimed winnings, thereby avoiding federal income taxes and receiving tax refunds,” prosecutors said.
Between 2011 and 2020, the Jaafars and their co-conspirators cashed over 14,000 lottery tickets and claimed more than $20 million in winnings, officials said.
“Based upon their submitted lottery claims, in 2019, Ali Jaafar was the top individual lottery ticket casher for Massachusetts,” prosecutors said. “Mohamed Jaafar was the third-highest individual ticket casher and Yousef Jaafar was the fourth-highest individual ticket casher. In total, the three family members received more than $1,200,000 in tax refunds by claiming other peoples’ lottery tickets as their own and then offsetting those winnings with fake gambling losses on their tax returns.”
This is a developing story. Check back for updates as more information becomes available.
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