Acton Man Sentenced to Seven Years in Prison for Scheme to Defraud the Treasury Department of Over $50 Million in Tax-Free Energy Grants
BOSTON – A father and son were convicted by a federal jury yesterday in connection with a “ten-percenting” scheme in which they cashed winning Massachusetts state lottery tickets on behalf of the ticket holders to avoid taxes and receive tax refunds.
Ali Jaafar, 63, and Yousef Jaafar, 29, both of Watertown, were convicted 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. U.S. District Court Judge Nathaniel M. Gorton scheduled sentencing for April 11, 2023 and April 13, 2023 for Ali Jaafar and Yousef Jaafar, respectively. Mohamed Jaafar, another of Ali Jaafar’s sons, who was also involved in the scheme, previously pleaded guilty to conspiracy to defraud the Internal Revenue Service on Nov. 4, 2022 and is scheduled to be sentenced on March 8, 2023.
“By defrauding the Massachusetts Lottery and the Internal Revenue Service, the Jaafars cheated the system and took millions of hard-earned taxpayers’ dollars. This guilty verdict shows that elaborate money laundering schemes and tax frauds will be rooted out and prosecuted,” said United States Attorney Rachael S. Rollins.
The defendants conspired with others to purchase winning lottery tickets at a cash discount from gamblers all over Massachusetts, often using convenience store owners to facilitate the transactions. This scheme—referred to as “ten-percenting” because the ticket purchasers typically keep between 10-20 percent of each ticket’s value—allows the real gamblers to avoid reporting the winnings on their tax returns. The defendants and co-conspirators then presented the winning tickets to the Massachusetts Lottery Commission as their own and collected the full value of the tickets. 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.
Between 2011 and 2020, the defendants and their co-conspirators cashed more than 14,000 lottery tickets and claimed more than $20,000,000 in Massachusetts lottery winnings. Based upon their submitted lottery claims, in 2019, Ali Jaafar was the top individual lottery ticket casher for Massachusetts. 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.
The charge of conspiracy to defraud the Internal Revenue Service provides for a sentence of up to five years in prison, three years of supervised release, a fine of $250,000 or twice the gross gain or loss, whichever is greater, and restitution. The charge of conspiracy to commit money laundering provides for a sentence of up to 20 years in prison, three years of supervised release, a fine of $500,000 or twice the value of the property involved in the transaction, whichever is greater, restitution and forfeiture. The charge of filing false tax returns provides for a sentence of up to three years in prison, one year of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
U.S. Attorney Rollins and Joleen Simpson, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigations in Boston made the announcement. Assistance was provided by the Massachusetts State Lottery Commission. Assistant U.S. Attorneys Christopher J. Markham and Kristen A. Kearney of Rollins’ Securities, Financial & Cyber Fraud Unit are prosecuting the case.