2002 Breeders' Cup betting scandal
Encyclopedia
The 2002 Breeders' Cup betting scandal was an incident that arose when computer programmer Chris Harn conspired with two friends, Derrick Davis and Glen DaSilva, to manipulate bets in the 2002 Breeders' Cup
, held at Arlington Park
in Arlington Heights, Illinois
. This enabled him to arrange a $3 million USD
payout to the trio. The scam was exposed when a 43-to-1 longshot won the Breeders' Cup Classic
, resulting in them being the only ones to win the jackpot. Eventually, Harn, Davis and DaSilva pleaded guilty.
The incident was the biggest betting scandal to take place in the United States in a century. It also exposed serious security flaws in the system used to collect bets for horse races.
, which handles the wagers for 65 percent of horse races in North America. In the fall of 2001, Harn discovered several hundreds of thousands of dollars worth of unclaimed tickets. Using this data, he created "test tickets" (tickets used to test Autotote's software) and pasted the barcodes onto them. However, cashing them was another matter. As an Autotote employee, he was restricted from making wagers himself. In any event, he was too well known at the tracks to cash them.
To solve this problem, he talked DaSilva and Davis into cashing the tickets at various tracks. The three men had been friends and fraternity brothers at Tau Kappa Epsilon
during their days at Drexel University
. DaSilva now lived in New York City
while Davis lived in Baltimore. Davis and DaSilva traveled to several tracks in New Jersey
, New York State
and Pennsylvania
to cash the vouchers. The three men then split the winnings.
However, Harn soon realized that if they kept it up too long, they'd eventually be tracked down. He looked for a way to get one big payoff that could allow him to easily cover his tracks. He found it in the Breeders' Cup, the richest day in American horse racing. Harn decided to go for the Ultra Pick 6, in hopes of scoring a win by picking the winners of the six major races of the competition—the Classic, Turf
, Sprint
, Distaff, Juvenile
and Mile
.
parlors around the country that were still live after the second race of a Pick 4 and the fourth race of a Pick 6 were forwarded to Autotote headquarters in Newark, Delaware
and to the track where the race was held. Harn discovered that there was a half-hour delay between the end of the second or fourth race and when the live wagers were forwarded—enough time to alter the results. Harn was uniquely positioned to take advantage of this weak link. He was a "super user"--the highest level of access at Autotote. In fact, he was responsible for maintaining the entire network.
He had DaSilva set up an account at the Catskill Off-Track Betting Corporation in Pomona, New York
. Harn liked Catskill because its security was fairly lax. Unlike other OTB parlors, it didn't require the bettor to be physically present to open an account, and also didn't have a transaction history file. It was also a fairly low-traffic facility, making it easier to alter bets. He'd set up the system himself, so he knew how it could be exploited.
, just a few miles from Arlington Park. After the first two races, Harn logged in and altered the original bets on the first two races, then picked every horse in the last two races. As a result, DaSilva netted $80,000 in winnings. Two days later, Harn and DaSilva repeated the pattern in a Pick 6 at Belmont Park
. This time, DaSilva scored $100,000. For the Breeders' Cup, Harn had Davis open an account at Catskill in case the authorities got suspicious of DaSilva. Davis then called Catskill from his home in Baltimore to buy a $12 Pick 6 ticket, picking one winner in the first four races.
On Breeders' Cup Day, Harn slipped into his office at Autotote. To make sure he was covered, he remotely ejected the backup tape at Catskill before the first race. He then took several calls from Davis while the races were underway. After the fourth race, and half an hour before the Turf, Harn hacked onto the system and tracked down Davis' bet. He then changed Davis' original bet to reflect the actual four winners. After having the Catskill techs reinsert the tape, he bet on every horse running in the Turf and Classic, assuring that he would win. The plan worked, and they were able to turn their original $1,152 bet into almost $3.1 million in winnings--$2.57 million for winning the Pick 6, plus $498,000 in consolation prizes for picking five out of six winners.
, a 43-to-1 longshot. Had a horse won with shorter odds, there would have been more winners—and a smaller payout—and Davis' bet would have looked normal. The bet would have also looked normal had more people bet on Volponi. As it turned out, Davis was the only winner.
The nature of the bet raised suspicions as well. While most bettors pick more than one horse to increase their chances of winning, as mentioned above Davis selected only one horse for the first four races and effectively played the same ticket six times. It also seemed unusual that all the bets were placed through Catskill, a fairly small operation. The New York Racing Association
asked the New York State Racing and Wagering Board
to launch an investigation. As a first step, the board asked Arlington Park and Catskill not to pay out Davis' winnings. The New York State Police
, FBI and the U.S. Attorney for the Southern District of New York
later joined in the investigation.
Harn and Davis were very nervous, but finally decided their only course was to claim the bet was legitimate. Davis went to the press, maintaining his innocence. He said the only reason that the payout was so large was that he'd intended to make a $2 bet rather than the $12 bet he'd actually made. However, he claimed he'd done nothing wrong and demanded proof that there was any funny business involved.
Investigators soon discovered that Harn and Davis had been members of Drexel's Tau Kappa Epsilon chapter. Not long after that, they discovered DaSilva had been a member of that fraternity at the same time as Harn and Davis, and also had an account at Catskill. They soon discovered that DaSilva's bets at Balmoral and Belmont were similar in nature to the larger bet Davis made at the Breeders' Cup—raising suspicions that they were dry runs for the Breeders' Cup bet. The New York State Police also seized computers from Autotote and Harn's house, and also subpoenaed Harn's phone records. On November 12, Harn, Davis and DaSilva were each charged with one count of wire fraud
in White Plains, New York
. James Comey, the U.S. Attorney for Southern New York, portrayed the scheme as a 21st century version of The Sting
.
In the face of mounting evidence—including numerous calls from Davis' cell phone to Harn's Autotote phone and witnesses who saw Harn logged into the Catskill site while on the phone— Harn opted to cooperate with investigators. He not only admitted rigging the Breeders' Cup bet and the test runs he'd conducted with DaSilva, but also told investigators about his scheme to cash unpaid tickets—something they didn't know anything about. Federal law requires anyone cooperating with prosecutors to disclose all criminal activity in which they'd engaged.
On November 20—a week after the indictment—Harn pleaded guilty to conspiracy to commit wire and computer fraud and conspiracy to commit money laundering
. He admitted to rigging the Breeders' Cup, Balmoral and Belmont bets. He also admitted to bilking legitimate winners out of $92,500 with his duplicate ticket scheme. On December 11, DaSilva pleaded guilty to similar charges, but claimed he didn't know Davis was in on the scheme and that he took no part in the Breeders' Cup bet. The next day, Davis pleaded guilty to conspiracy to commit wire fraud and gave up all claims to the money.
On March 20, 2003; Harn was sentenced to a year and a day in federal prison. Davis received 37 months while DaSilva received two years. The $3.1 million payoff was split among 78 people who'd gotten five out of six races right; each got $39,000 in addition to their original $4,600 consolation prizes.
took swift action in the face of a growing outcry once the nature of the scam emerged. It required all tote companies to modify their software to allow bets to be forwarded immediately after it closed. It also pressured its member tracks into not doing business with parlors that didn't have the ability to record wagers taken over the phone.
The scheme was profiled on the Canadian
television series Masterminds
.
Breeders' Cup
The Breeders' Cup World Championships is an annual series of Thoroughbred horse races, most but not all Grade I, operated by Breeders' Cup Limited, a company formed in 1982. From its inception in 1984 through 2006, it was a single-day event; starting in 2007, it expanded to two days. The location...
, held at Arlington Park
Arlington Park
Arlington Park is a horse race track in the Chicago suburb of Arlington Heights, Illinois. Horse racing in the Chicago region has been a popular sport since the early days of the city in the 1830s, and at one time Chicago had more horse racing tracks than any other major metropolitan area...
in Arlington Heights, Illinois
Arlington Heights, Illinois
Arlington Heights is a village in Cook and Lake counties in the U.S. state of Illinois. A suburb of Chicago, it lies about 25 miles northwest of the city's downtown. The population was 75,101 at the 2010 census....
. This enabled him to arrange a $3 million USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
payout to the trio. The scam was exposed when a 43-to-1 longshot won the Breeders' Cup Classic
Breeders' Cup Classic
The Breeders' Cup Classic is a Grade I Weight for Age thoroughbred horse race for 3 year olds and older run at a distance of 1¼ miles on dirt. It is held annually at a different racetrack as part of the Breeders' Cup World Championships...
, resulting in them being the only ones to win the jackpot. Eventually, Harn, Davis and DaSilva pleaded guilty.
The incident was the biggest betting scandal to take place in the United States in a century. It also exposed serious security flaws in the system used to collect bets for horse races.
Background
Harn was a senior computer programmer at AutototeAutotote
Autotote, which has been renamed Scientific Games, is a company that supplies pari-mutuel wagering systems worldwide. These are automated, computerized off-track and on-track betting systems for betting on horse races, greyhound racing and jai-alai. It is an integrated system for off-track...
, which handles the wagers for 65 percent of horse races in North America. In the fall of 2001, Harn discovered several hundreds of thousands of dollars worth of unclaimed tickets. Using this data, he created "test tickets" (tickets used to test Autotote's software) and pasted the barcodes onto them. However, cashing them was another matter. As an Autotote employee, he was restricted from making wagers himself. In any event, he was too well known at the tracks to cash them.
To solve this problem, he talked DaSilva and Davis into cashing the tickets at various tracks. The three men had been friends and fraternity brothers at Tau Kappa Epsilon
Tau Kappa Epsilon
Tau Kappa Epsilon is a college fraternity founded on January 10, 1899 at Illinois Wesleyan University with chapters in the United States, and Canada, and affiliation with a German fraternity system known as the Corps of the Weinheimer Senioren Convent...
during their days at Drexel University
Drexel University
Drexel University is a private research university with the main campus located in Philadelphia, Pennsylvania, USA. It was founded in 1891 by Anthony J. Drexel, a noted financier and philanthropist. Drexel offers 70 full-time undergraduate programs and accelerated degrees...
. DaSilva now lived in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
while Davis lived in Baltimore. Davis and DaSilva traveled to several tracks in New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
, New York State
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
and Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
to cash the vouchers. The three men then split the winnings.
However, Harn soon realized that if they kept it up too long, they'd eventually be tracked down. He looked for a way to get one big payoff that could allow him to easily cover his tracks. He found it in the Breeders' Cup, the richest day in American horse racing. Harn decided to go for the Ultra Pick 6, in hopes of scoring a win by picking the winners of the six major races of the competition—the Classic, Turf
Breeders' Cup Turf
The Breeders' Cup Turf is a Weight for Age Thoroughbred horse race on turf for three-year-olds and up. It is held annually at a different racetrack in the United States or Canada as part of the Breeders' Cup World Championships. The race's current title sponsor is Emirates Airlines.The forerunner...
, Sprint
Breeders' Cup Sprint
The Breeders' Cup Sprint is an American Weight for Age Grade I Thoroughbred horse race for three year olds & up. Run on dirt over a distance of 6 Furlongs , the race has been held annually since 1984 at a different racetrack in the United States or Canada as part of the Breeders' Cup World...
, Distaff, Juvenile
Breeders' Cup Juvenile
The Breeders' Cup Juvenile is a Thoroughbred horse race for 2-year-old colts and geldings raced on dirt. It is held annually at a different racetrack in the United States or Canada as part of the Breeders' Cup World Championships....
and Mile
Breeders' Cup Mile
The Breeders' Cup Mile is a Grade 1 Weight for Age stakes race for thoroughbred racehorses three years old and up, run on a grass course. It has been conducted annually as part of the Breeders' Cup World Championships since the event's inception in 1984...
.
Finding a weak link
At the time, all wagers placed at the numerous off-track bettingOff-track betting
Off-track betting refers to sanctioned gambling on horse racing outside a race track.-US history:...
parlors around the country that were still live after the second race of a Pick 4 and the fourth race of a Pick 6 were forwarded to Autotote headquarters in Newark, Delaware
Newark, Delaware
Newark is an American city in New Castle County, Delaware, west-southwest of Wilmington. According to the 2010 Census, the population of the city is 31,454. Newark is the home of the University of Delaware.- History :...
and to the track where the race was held. Harn discovered that there was a half-hour delay between the end of the second or fourth race and when the live wagers were forwarded—enough time to alter the results. Harn was uniquely positioned to take advantage of this weak link. He was a "super user"--the highest level of access at Autotote. In fact, he was responsible for maintaining the entire network.
He had DaSilva set up an account at the Catskill Off-Track Betting Corporation in Pomona, New York
Pomona, New York
Pomona is a village partly in the Town of Ramapo and partly in the Town of Haverstraw in Rockland County, New York, United States, located north of New Hempstead, east of Harriman State Park, north of Monsey and west of Mount Ivy. According to the 2010 Census, the population was 3,103, a 13 percent...
. Harn liked Catskill because its security was fairly lax. Unlike other OTB parlors, it didn't require the bettor to be physically present to open an account, and also didn't have a transaction history file. It was also a fairly low-traffic facility, making it easier to alter bets. He'd set up the system himself, so he knew how it could be exploited.
The scheme
Harn had DaSilva conduct two dry runs of their scheme. On October 3, DaSilva bet on the Pick 4 harness races at Balmoral ParkBalmoral Park
Balmoral Park is a horse racing track located just south of Crete, Illinois, United States. The track hosts harness racing for most of the year except for a brief period in January when the track is dark.-History:1925...
, just a few miles from Arlington Park. After the first two races, Harn logged in and altered the original bets on the first two races, then picked every horse in the last two races. As a result, DaSilva netted $80,000 in winnings. Two days later, Harn and DaSilva repeated the pattern in a Pick 6 at Belmont Park
Belmont Park
Belmont Park is a major thoroughbred horse-racing facility located in Elmont in the Town of Hempstead in Nassau County, New York, on Long Island adjoining New York City. It first opened on May 4, 1905...
. This time, DaSilva scored $100,000. For the Breeders' Cup, Harn had Davis open an account at Catskill in case the authorities got suspicious of DaSilva. Davis then called Catskill from his home in Baltimore to buy a $12 Pick 6 ticket, picking one winner in the first four races.
On Breeders' Cup Day, Harn slipped into his office at Autotote. To make sure he was covered, he remotely ejected the backup tape at Catskill before the first race. He then took several calls from Davis while the races were underway. After the fourth race, and half an hour before the Turf, Harn hacked onto the system and tracked down Davis' bet. He then changed Davis' original bet to reflect the actual four winners. After having the Catskill techs reinsert the tape, he bet on every horse running in the Turf and Classic, assuring that he would win. The plan worked, and they were able to turn their original $1,152 bet into almost $3.1 million in winnings--$2.57 million for winning the Pick 6, plus $498,000 in consolation prizes for picking five out of six winners.
Suspicions mount
Unfortunately for Harn and his friends, the Classic was won by VolponiVolponi
Volponi is an American Thoroughbred racehorse. Bred by trainer Philip G. Johnson's family operation, Amherst Stable, he was sired by Florida Derby winner Cryptoclearance...
, a 43-to-1 longshot. Had a horse won with shorter odds, there would have been more winners—and a smaller payout—and Davis' bet would have looked normal. The bet would have also looked normal had more people bet on Volponi. As it turned out, Davis was the only winner.
The nature of the bet raised suspicions as well. While most bettors pick more than one horse to increase their chances of winning, as mentioned above Davis selected only one horse for the first four races and effectively played the same ticket six times. It also seemed unusual that all the bets were placed through Catskill, a fairly small operation. The New York Racing Association
New York Racing Association
The New York Racing Association, Inc. is the not-for-profit corporation that operates the three largest thoroughbred horse-racing tracks in the state of New York. It runs Aqueduct Racetrack in South Ozone Park, Queens, Belmont Park in Elmont, Long Island , and Saratoga Race Course in Saratoga...
asked the New York State Racing and Wagering Board
New York State Racing and Wagering Board
The New York State Racing and Wagering Board is the official governing body that oversees horse racing, charitable gaming, and Indian casino gaming in New York State...
to launch an investigation. As a first step, the board asked Arlington Park and Catskill not to pay out Davis' winnings. The New York State Police
New York State Police
The New York State Police is the state police force of over 4,600 sworn Troopers for the state of New York. It was established on April 11, 1917 by the New York Legislature, in response to the 1913 murder of a construction foreman named Sam Howell in Westchester County, which at that time did not...
, FBI and the U.S. Attorney for the Southern District of New York
U.S. Attorney for the Southern District of New York
The U.S. Attorney for the Southern District of New York is the chief federal law enforcement officer in eight New York counties: New York , Bronx, Westchester, Putnam, Rockland, Orange, Dutchess, and Sullivan. Preet Bharara, who was appointed by Barack Obama in 2009 is the U.S. Attorney for the...
later joined in the investigation.
Harn and Davis were very nervous, but finally decided their only course was to claim the bet was legitimate. Davis went to the press, maintaining his innocence. He said the only reason that the payout was so large was that he'd intended to make a $2 bet rather than the $12 bet he'd actually made. However, he claimed he'd done nothing wrong and demanded proof that there was any funny business involved.
Caught
The fact that the nature of the ticket changed so abruptly after the first four races (the same four winners picked for the first four races on every bet and then every possible combination of horses in the last two races) led investigators to wonder early on if someone had hacked into the system and changed the ticket. Naturally, the focus turned to the Autotote system. Autotote immediately suspected an inside job, and questioned all of its employees in Newark. They soon discovered that Harn wasn't scheduled to work on the day of the race, but had still been in the office. Even more seriously, they discovered Harn had tapped into the system and altered Davis' ticket after the first four races. When Harn couldn't explain his activity or what he was doing at work in the first place, Autotote fired him and turned over the results of its own investigation to New York State and federal officials.Investigators soon discovered that Harn and Davis had been members of Drexel's Tau Kappa Epsilon chapter. Not long after that, they discovered DaSilva had been a member of that fraternity at the same time as Harn and Davis, and also had an account at Catskill. They soon discovered that DaSilva's bets at Balmoral and Belmont were similar in nature to the larger bet Davis made at the Breeders' Cup—raising suspicions that they were dry runs for the Breeders' Cup bet. The New York State Police also seized computers from Autotote and Harn's house, and also subpoenaed Harn's phone records. On November 12, Harn, Davis and DaSilva were each charged with one count of wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
in White Plains, New York
White Plains, New York
White Plains is a city and the county seat of Westchester County, New York, United States. It is located in south-central Westchester, about east of the Hudson River and northwest of Long Island Sound...
. James Comey, the U.S. Attorney for Southern New York, portrayed the scheme as a 21st century version of The Sting
The Sting
The Sting is a 1973 American caper film set in September 1936 that involves a complicated plot by two professional grifters to con a mob boss . The film was directed by George Roy Hill, who previously directed Newman and Redford in the western Butch Cassidy and the Sundance Kid.Created by...
.
In the face of mounting evidence—including numerous calls from Davis' cell phone to Harn's Autotote phone and witnesses who saw Harn logged into the Catskill site while on the phone— Harn opted to cooperate with investigators. He not only admitted rigging the Breeders' Cup bet and the test runs he'd conducted with DaSilva, but also told investigators about his scheme to cash unpaid tickets—something they didn't know anything about. Federal law requires anyone cooperating with prosecutors to disclose all criminal activity in which they'd engaged.
On November 20—a week after the indictment—Harn pleaded guilty to conspiracy to commit wire and computer fraud and conspiracy to commit money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
. He admitted to rigging the Breeders' Cup, Balmoral and Belmont bets. He also admitted to bilking legitimate winners out of $92,500 with his duplicate ticket scheme. On December 11, DaSilva pleaded guilty to similar charges, but claimed he didn't know Davis was in on the scheme and that he took no part in the Breeders' Cup bet. The next day, Davis pleaded guilty to conspiracy to commit wire fraud and gave up all claims to the money.
On March 20, 2003; Harn was sentenced to a year and a day in federal prison. Davis received 37 months while DaSilva received two years. The $3.1 million payoff was split among 78 people who'd gotten five out of six races right; each got $39,000 in addition to their original $4,600 consolation prizes.
Fallout
Even though Autotote officials characterized the scheme as the actions of a "rogue software engineer,", the National Thoroughbred Racing AssociationNational Thoroughbred Racing Association
The National Thoroughbred Racing Association is a broad-based coalition of horse racing interests consisting of leading thoroughbred racetracks, owners, breeders, trainers and affiliated horse racing associations, charged with increasing the popularity of horse racing and improving economic...
took swift action in the face of a growing outcry once the nature of the scam emerged. It required all tote companies to modify their software to allow bets to be forwarded immediately after it closed. It also pressured its member tracks into not doing business with parlors that didn't have the ability to record wagers taken over the phone.
The scheme was profiled on the Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
television series Masterminds
Masterminds (Canadian TV series)
Masterminds was a true crime documentary television series produced in Canada with truTV .As of February 2011, the program is broadcast on History Television and Global TV in Canada and truTV in the United States....
.