ALAN VINEGRAD, United States Attorney for the Eastern District of New York, and PAUL L. MACHALEK, Special Agent-in-Charge, Internal Revenue Service - Criminal Investigation, New York, announced today that 16 New York Racing Association ("NYRA") pari-mutual tellers and dealers have pleaded guilty to tax fraud before the United States Magistrate Judge William D. Wall, at the United States Courthouse in Central Islip, New York. Three defendants, GARY KLIS, DONALD PATTERSON, and CHARLES BONANNO, entered guilty pleas today. Thirteen additional guilty pleas were unsealed today, entered last year by CARL BRAGG, JOSEPH DIMAIO, DANIEL DLUGOSZ, CHARLES DONNELLY, THOMAS GANGI, PHILIP GORDON, ELLEN GRIECO, DAVID LEE, ROBERT LODATI, ROBERT MECCA, DIANE MEHRTENS, CHARLES O'CONNELL, and RICHARD SIMONSON.

According to the pleadings filed today, the defendants were employed by NYRA as pari-mutual tellers and/or dealers at New York State's three thoroughbred racetracks -- the Aqueduct Raceway, Belmont Park, and the Saratoga Racecourse -- all operated by NYRA . The defendant tellers were responsible for collecting cash received in exchange for betting tickets, and paying cash to winning ticket holders. The dealers functioned as cashiers for the tellers, and were responsible for maintaining cash received from the tellers and providing cash to the tellers to pay cash winnings to bettors. In the three informations filed today, the government charged that the defendants KLIS, PATTERSON, and BONANNO created and filed fraudulent tax returns in the following manner: they routinely took cash received from NYRA betters for their own personal use, and then reported to NYRA that their cash drawers or cash bags were "short" by the amount of money that they had taken for themselves. Pursuant to a policy established by NYRA, these defendants returned the money to NYRA in cash or by paycheck deductions, and thereby prevented any net loss to NYRA. They then claimed the amount of cash payments and paycheck deductions as unreimbursed employee expenses on their federal tax returns. By this means, these defendants reduced their taxable income -- but not their actual income -- by the amount of cash that they processed in this way, and reduced their federal taxes due and owing.

According to the informations filed today, at the end of each year, NYRA issued to its employees Short Certifications, certifying the dollar amount received from its employees as reimbursements for account shortages. Several of the defendants provided the certifications to the IRS in support of the fraudulent deductions they took on their tax returns for unreimbursed employee expenses.

Each of the 16 NYRA employee-defendants was charged with filing false tax returns in violation of Title 26, United States Code, Section 7206(1). In pleading guilty today, KLIS, PATTERSON, and BONANNO admitted that for many years they took cash received from NYRA wagerers for their personal use, reimbursed NYRA for the cash they took, and then falsely reported on their tax returns that they incurred employee expenses for account shortages equal to the amount of the cash they took. Each of the 13 defendants whose pleas were unsealed today previously pleaded guilty to falsely deducting substantially more in unreimbursed employee expenses incurred as a pari-mutual teller or dealer than he or she had actually incurred.

In announcing the guilty pleas, United States Attorney ALAN VINEGRAD stated: "These NYRA pari-mutual tellers and dealers abused their positions of trust and took advantage of their access to cash received from the betting public for their own personal monetary gain. They used that cash to replace significant portions of their paychecks, thereby hiding their true taxable income. This case demonstrates the government's commitment to exposing tax fraud schemes, no matter how elaborately and systematically concealed, and ensuring that all individuals, especially those entrusted with cash paid by the public, are held responsible for obeying the tax laws and paying their fair share of taxes." Mr. VINEGRAD thanked the New York State Racing and Wagering Board and the Nassau County Police Department for their assistance in the investigation.

Special Agent-in-Charge PAUL L. MACHALEK stated: At the racetrack, these 16 tellers and dealers pocketed cash and reported to NYRA that their cash drawers were 'short.' They then set out to 'short' the government by making false deductions on their income tax returns. The filing of false tax returns is a significant concern for IRS-Criminal Investigation because it threatens the integrity of the entire tax system. Taxpayers are required to file accurate income tax returns to support the government of our country and if they don't they can be prosecuted for intentionally filing false income tax returns. Persons who have information about income tax fraud can contact the IRS fraud hotline at 1-800-829-0433."

When sentenced by United States District Judge Arthur D. Spatt, each defendant faces a maximum sentence of 3 years in prison, a $250,000 fine, and payment of back taxes, interest and penalties. PATTERSON is scheduled to be sentenced on October 4, 2002; KLIS and BONANNO are scheduled to be sentenced on October 11, 2002. Sentencing dates have not yet been set for the other defendants. The government's investigation is continuing.

The government's case is being prosecuted by Assistant United States Attorneys Suzanne Jaffe Bloom and Burton T. Ryan.