Banker Bets His Career on an Addiction to Horse Racing--and Loses Big : Gambling: Ed Cheeseman went from bank vice president to prison inmate. He owes more than $600,000 and faces nearly two years behind bars.

The horses at Saratoga sang Ed Cheeseman’s siren song.

Come feel the ground shake as we pound down the stretch, they seemed to say. Come joke with the cock-o’-the-walk jockeys on misty mornings out in the backstretch.

Be a part of it, they beckoned.

“I liked the beauty,” he said. “I liked the excitement. I liked the sport. I liked the jockeys. I liked the trainers. There wasn’t anything I didn’t like.”

Except the betting.

The betting Ed Cheeseman loved.

Toward the end, his wager of choice was a $40 exacta box--$40 on each of the six combinations that three horses can form if they’re bet to finish first or second. That’s $240 a race and Cheeseman would sometimes lay it down five or six times a day.

Hit one and he was set for the day. But on a bad day, Cheeseman would slide $1,000 or $1,200 under the betting window with nothing coming back. A bad week and he could be down $5,000.

After a couple of bad seasons at Saratoga and at an Off Track Betting teletheater, Cheeseman--who had worked his way up in 19 years at National Savings Bank in Albany from teller to vice president for commercial loans--was starting to eye the money he was handling for investors. Perhaps it could help him get even.

After three or four losing years, Cheeseman was drowning in debt--according to the indictment, he owed $604,372 to National Savings, including $405,769 in funds a dozen clients thought he was investing for them in stocks and certificates of deposit instead of bad horses.

It was Oct. 14, 1992, and bank executives were calling him to account.

“I thought that day was the worst day of my life,” he said. “Right now, I can say that that day was one of the best days of my life. . . . I wouldn’t have stopped, so this had to happen to me. And hopefully, it doesn’t have to happen to other people.”

Cheeseman was fired. Two weeks later, he was indicted by a federal grand jury. On Dec. 2, 1992, Cheeseman stood before a judge in Albany and admitted to two felony charges of stealing to support his gambling habit.

In just a few months, the 41-year-old Cheeseman had gone from distinction to disgrace, from a banker’s pin-striped suit to an inmate’s standard-issue tan uniform.

Cheeseman never denied he was guilty. But in an interview in March, on the day before he surrendered to federal marshals to begin serving a sentence of nearly two years, Cheeseman said he does not yet fully understand how the allure of placing bets on horses could have brought his life so close to ruin.

For one thing, he did not come from a gambling or a horse background. Like most people who grow up in Albany, he went to Saratoga once in a while as a kid. But his father, himself a banker, would only bet a couple of dollars at a time.

For the son, though, horses grew into an enthusiasm--then an obsession.

“I didn’t think I had an addiction,” he said. “If you don’t bet with the casinos, if you’re not a card player, if you don’t bet baseball, basketball or football games, some people don’t think you’re a gambler.

“The money I was taking, the people I was giving the (fake) CDs to, they were always a percent or 2 (percentage points in interest) higher than the bank was paying because, in my mind, the money I was taking I was borrowing.”

A thoroughbred horse player like Cheeseman fits the profile of one kind of problem gambler, said Ed Looney, deputy director of the Gamblers Anonymous-affiliated Council on Compulsive Gambling in New Jersey.

“There’s a psychology to gambling, where the gambler will say, ‘I only gamble on a specific thing, therefore I am not a gambler,”’ Looney said.

There are probably millions of problem gamblers in the United States, but no one knows for sure because only a relative handful seek treatment, according to Looney. A study by the AP indicated earlier this year that compulsive gambling costs Americans about $330 billion a year in lost productivity, bankruptcies, illegal activities and other factors.

A betting banker like Cheeseman was especially susceptible to the charms of Saratoga, renowned among thoroughbred enthusiasts for the beauty and gentility of its five-week summer meets.

“Without a doubt it’s the ‘August place to be,’ ” he said, echoing the track’s advertising slogan. “Attorneys, accountants, bankers, builders, real estate people--that’s why it was a good place for me to go, because in one afternoon I could see 10 people.”

As his gambling losses mounted, Cheeseman conceived the idea of making good on the “loans” from his investors by profiting on the big upcoming stock sale when National Savings Bank was acquired by KeyCorp., an Albany-based banking company. But his scheme fell apart before the sale was complete.

His close-knit family and wide circle of friends were shocked at the news.

“It was like a bolt of lightning,” said Cheeseman’s brother-in-law, Ted Wolfstich of Loudonville.

“It surprised, it shocked,” Cheeseman agreed. “I think the No. 1 person that it shocked was my wife. It was a good job that I did. She knew that I was betting, but only once in a while. That was it.”

Worse, in a way, was that Cheeseman was so close to some of the people he took money from.

“We see many cases where people steal from what they see as anonymous institutions,” said Thomas Spina, the assistant U.S. attorney who prosecuted Cheeseman. “But he had established, personal relationships with people and took money directly from them.”

Ralph Musella, who had known Cheeseman since their college days 20 years ago, invested $6,500 with his friend.

“I don’t think in his own mind he ever meant to take anything from me. He didn’t think it was Ralph Musella’s money,” he said. “It was just that the disease had such a hold on him. . . . As I look at it now, he was almost the equivalent of an alcoholic bartender.”

More than 30 friends and relatives, including Musella and others Cheeseman had deceived, attended his sentencing in late February to show their support.

“It’s a classic case of a really very good man who did a bad thing,” Musella said.

But not everyone has been as forgiving as Musella, Wolfstich said.

“Some people feel betrayed,” he said. “Some people worked very hard and put their trust in him. . . . We all hope that someday everyone will be forgiving, that they can sit down and break bread with him or give him a hug.”

The bank made good on the money Cheeseman gambled away; Cheeseman is obligated to repay the bank for what he stole.

Prosecutors did not try to seize his share of the house in Niskayuna, about eight miles west of Albany, that he shared with his wife and two children.

Cheeseman, meanwhile, was assigned to a federal prison in Pennsylvania, where he works in a garage and gets counseling.