A father and son from Massachusetts have been sentenced to prison for running a complex lottery scam that resulted in more than $20 million in winnings being illegally claimed and over $6 million in federal taxes being evaded. The 63-year-old father, Ali Jaafar, and his 29-year-old son, Yousef Jaafar, were convicted in December on charges of conspiracy to defraud the Internal Revenue Service, conspiracy to commit money laundering, and filing false tax returns. On Monday, they were sentenced to five years and 50 months in prison, respectively, and ordered to pay over $6 million in restitution and forfeit their profits from the scheme.
According to prosecutors, the father and son worked together over the course of a decade to defraud the Massachusetts State Lottery Commission and the IRS, recruiting a network of co-conspirators to spread their scheme across Massachusetts. The scam involved buying winning lottery tickets from people across the state who wanted to sell their ticket for a cash discount instead of claiming their prize. The Jaafars and their co-conspirators would then claim the prize money as their own, avoiding detection by the state's lottery commission, which is required to withhold taxes and back payments before paying the prize.
In addition to the low-price ticket buying scheme, the defendants further profited by reporting the winnings on their income tax returns and claiming fake gambling losses as an offset, thereby avoiding federal income taxes and receiving fraudulent tax refunds. The trio altogether cashed over 14,000 lottery tickets in the "elaborate 'ten-percenting' scheme".
The Jaafars' scheme involved dozens of lottery retailers, and the Massachusetts State Lottery Commission has decided to revoke the licenses of the lottery agents who participated in the scheme.
The defendants' lawyer says they intend to appeal to the First Circuit Court of Appeals. Meanwhile, another of Ali Jaafar’s sons who was also involved in the plot, Mohamed Jaafar, has pleaded guilty to conspiracy to defraud the IRS and will be sentenced in July. The case serves as an example of the extensive efforts the Lottery will take to partner with law enforcement to assist in the prevention of illegal activities, according to Deborah B. Goldberg, State Treasurer and Receiver General and Chair of the Lottery Commission. U.S. Acting Attorney Joshua S. Levy called the case, "an elaborate tax fraud" and warned that the defendants' scheme not only stole millions of dollars from taxpayers but also jeopardized the integrity of the lottery system.