Tuesday, March 24, 2009

Notes from the Undercover

Galley Friend Bob Hamer on Jockeys and a case he worked on race-fixing. Fascinating stuff, including this little perfect study in irony:

Nicknames were commonplace. Among the many I dealt with were Fingers, the Mouth, the Greek, the Broom, and the Printer. It’s a long story and I detail it in my book “The Last Undercover,” but the short version is I managed to the worm my way into the group. One gambler questioned if I was a cop. Thus my name around the track became “Bob the Cop.”

And this brilliant scam:

The investigation did uncover a pretty sophisticated tax scheme. Under federal tax law, any winning wager where the odds are 300-1 or greater require the winner to fill out tax forms prior to cashing the ticket. In track parlance it’s known as a “sign-up.” The track automatically takes out 28% of the winnings before paying off the bet. Thus a winning bet of $10,000 pays only $7,200. Now winnings can be off-set by losses, but that entails keeping losing ticket stubs and preparing tax returns at the end of the year. Most gamblers don’t want the hassle, and many don’t want their spouses to know they spent the afternoon at the track. Thus the “signer” comes into play. For a fee he’ll sign for your ticket, filling out the IRS forms in his name.

Without the help of Turbo Tax, the Mouth took this to a whole level, and I grudgingly admired his ingenuity. Mouth would sign that $10,000 ticket and give you back the $7,200, if not more. He would then gather up losing tickets, often for bets he never placed or losing tickets he shared with other gamblers. Since these losing tickets equaled the dollar amount of the winning tickets, he had off-set all of his so-called winnings. By the next tax season he was collecting hundreds of thousands of dollars in tax refunds…all because those winning sign-ups he claimed to be his were off-set by the losing tickets he claimed to be his. It was a perfect scheme. The track didn’t really care because he was providing a service to those patrons who were winning. The patrons weren’t going to complain because they too were violating the law. The violation was rather difficult and time-consuming to prove so the IRS wasn’t interested in investing the manpower to guarantee a successful prosecution. I got lucky and caught the Mouth. He did my sign-ups. He went to trial, was convicted, and served time in federal prison.

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