A Watertown man and two sons, among the luckiest players of the history of the Massachusetts Lottery, having collected $20.9 million from 13,000 winning tickets, now face federal income tax evasion and money laundering charges, officials said Tuesday.
The indictments of Ali M. Jaafar, his 30-year-old son, Mohamed Jaafar, and a second son, 28-year-old Yousef Jaafar, were cast by the Massachusetts Lottery as the end result of a stealthy, four-year effort to cripple the thriving cottage industry of “ten percenters” in the state, who claim lottery winnings for a cut of the prize.
“These are very significant criminal charges and indictments at the federal court that we believe will impact the individuals named, but also the activity in general,” said Michael R. Sweeney, lottery executive director. “The simple reality is that the level of cash prizes won, the amount, the sheer volume is a statistical impossibility.”
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The lottery has been working with federal prosecutors and Internal Revenue Service criminal investigators since 2017, when research by the Boston Globe and the agency itself showed some 50 people were collecting hundreds of thousands and even millions of dollars in lottery winnings that could not be explained away as simple luck or the result of playing the lottery heavily.
So-called “ten percenters” are people who agree to claim lottery winnings in return for 10 percent or 20 percent of the face value of the cash prize, according to federal prosecutors. Lottery rules require a winner to swear under the penalties of perjury that they are collecting the money only for themselves, not for someone else.
The scam remains active in 2021 despite efforts by authorities to quash it, Sweeney acknowledged. Under state law, a winner must swear under oath that the money is due them only. The lottery, in turn, checks to see if the person claiming the prize has outstanding child support payments or other fees and fines due the state, Sweeney noted.
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“The simple answer is too many” are still participating in the scam, Sweeney said. “There’s ongoing investigations on that front and the public should be expecting more news very shortly.”
The Jaafars were at the head of that list, the Globe reported in 2017, and Sweeney said the agency spent the past four years using civil means to slow them down, but with only limited results. During the same time and on a parallel track, the lottery turned to federal prosecutors and criminal investigators at the IRS to investigate the Jaafars and the industry, Sweeney said.
According to federal prosecutors, Ali Jaafar, 62, started collecting lottery payments in 2011 and has, along with his sons, relied on a network of clerks and owners of convenience stores to supply them with winning tickets from people who do not want the lottery — or the courts — to know they have an influx of cash.
Two unindicted coconspirators are listed in the federal indictment as “an individual residing in Cranston, Rhode Island” and “an individual residing in Watertown.” In 2017, the Globe reported that four Jaafar family members had collected $11 million from the Lottery. Ali Jaafar obtained tickets from 1,200 stores in 160 communities ranging from Springfield to Nantucket, the Globe reported.
“Do not want to talk about it,” Ali Jaafar told the Globe in 2017.
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By 2019, Ali Jaafar received $15.1 million — and claimed in federal tax forms that his winnings were offset by gambling losses so that he also collected $886,261 in tax refunds, federal prosecutors allege.
In 2019, prosecutors alleged in court papers, Jaafar “improperly claimed a tax refund by reporting as gambling winnings money he had received by cashing lottery tickets of other individuals, while offsetting that income by also reporting purported gambling losses.”
Sons Mohamed and Yousef allegedly followed the same practice as their father.
Between 2012 and 2019, Mohamed Jaafar cashed 2,400 tickets and received $3.349 million in payments, prosecutors allege. He allegedly used the same approach to taxes as his father and received $106,032 in federal tax refunds, prosecutor said in court papers.
The third family member, Yousef Jaafar, is accused of cashing 1,360 tickets between 2013 and 2019, receiving $2.48 million, and later collecting a tax refund of $185,951 by falsely claiming gambling losses offset his income.
Ali and Mohamed Jaafar made their initial appearances in US District Court in Boston on Monday, where they were released on personal recognizance and ordered to hand over their passports to the court and not to play the Massachusetts Lottery or go to any casinos while the case was pending, records show.
Yousef Jaafar’s status is not clear. He is among those indicted, but court records do not indicate if he was arrested along with his father and brother.
Attorneys for Ali and Mohamed Jaafar could not be reached for comment Tuesday.
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Sweeney said the lottery could move to sanction stores whose owners or employees have now been connected with the Jaafars.
“This type of activity has a lot of negative ramifications on multiple fronts, and we take that responsibility seriously,” Sweeney said. “It has our absolute attention. It goes to the integrity of the lottery.”
Another so-called ten percenter, Clarance W. Jones, was 81 years old when he was sentenced to federal prison in 2019 for two months after pleading guilty to tax crimes. Two store owners also pleaded guilty to federal charges for buying winning lottery tickets at a discount and then having Jones cash them.
John R. Ellement can be reached at john.ellement@globe.com. Follow him @JREbosglobe.