Federal Prosecutors Allege Pick-Six Fraud

Federal prosecutors charged three former fraternity brothers Tuesday with manipulating a major computer betting system to create more than $3 million in winning pick-six wagers after races already had been run at this year’s Breeders’ Cup.

The alleged conspiracy was one of the biggest frauds in horse racing history, authorities said.

Named in the criminal complaint were Christopher Harn, Derrick Davis and Glen DaSilva, all 29, who attended Drexel University in Philadelphia.

Until he was fired recently, Harn was employed as a senior programmer by Autotote Systems Inc., which processes a large percentage of wagers placed on horse races throughout North America.

“This was an inside job,” said Michael J. Hoblock Jr., chairman of the New York State Racing & Wagering Board, who urged the racing industry to quickly tighten security.

“The complaint alleged that these defendants used their access to the computer systems ... to create a sure thing,” said James B. Comey, U.S. attorney for the Southern District of New York.

He compared the scheme to one depicted in the motion picture “The Sting,” adding, “The movie was already made but with much better-looking people -- Paul Newman and Robert Redford.”

In both the movie and in real life, Comey said, those involved took advantage of a time lag between the completion of the races and the reporting of their results.

“Here, the complaint alleges, there was a delay between the transmission of the wagering data on the pick six, and there was a window that was available that allowed Mr. Harn to manipulate the bets,” he charged.

Government lawyers alleged that the former members of the Tau Kappa Epsilon fraternity, who surrendered Tuesday to authorities here, rigged six winning pick-six wagers on Oct. 26 for the Breeders’ Cup races at Arlington Park in Arlington Heights, Ill.

Davis and Harn appeared before U.S. Magistrate Judge Mark Fox but did not enter pleas. They were released on $200,000 bond.

“Chris maintains his innocence and nothing that happened today is going to change that,” said Harn’s lawyer, Daniel Conti.

“My client’s position is that he did nothing illegal,” said Steven Allen, Davis’ lawyer.

Rae Koshetz, an attorney for DaSilva, declined to comment on the charges.

If convicted on the charges of conspiring to commit wire fraud by fixing bets that generated fraudulent winnings, the three defendants face a maximum of five years in prison and a $250,000 fine.

Comey said the investigation was continuing and that additional charges could be filed.

To win the pick six, a bettor has to correctly select the winning horse in six consecutive races.

For the final six Breeders’ Cup races, the bets were to have paid $3,067,821 -- money that is being withheld. Comey said the three conspired to use Harn’s computer access to alter bets after they were placed.

Court papers alleged that Davis made the bets through an automated New York Off-Track Betting telephone account.

As the Breeders’ Cup races were underway, the complaint charged, Harn connected Autotote’s computer in Delaware to an OTB computer in Poughkeepsie, N.Y., that had Davis’ records.

Harn had reported to Autotote’s Delaware facility, even though he was not scheduled to work that day. He was seen using his cellular phone in the office.

The complaint charged that Harn’s and Davis’ cellular phones were in contact with each other while the Breeders’ Cup races were being run, and that Harn’s cellular phone was also used to call OTB approximately when the pick-six wager was placed through Davis’ account.

Betting a single horse in each of the first four pick-six races, Davis selected all winners, even though two were longshots. He then bet on every horse in the last two races of the pick six, ensuring he could not lose since he had the first four races correct.

The court papers said that winning ticket information is examined “some time” after the races have been run. “Consequently, there is a lag between the time the result of a race is known and the time winning bets are identified,” documents filed by prosecutors said.

The complaint also alleged that DaSilva, perhaps in a rehearsal, collected on a winning pick-four bet at Balmoral Park, a harness track in suburban Chicago, and on a pick-six bet at Belmont Park in New York City in early October for a total of $118,000.

Both wagers were made through the same betting hub Davis used for the Breeders’ Cup.

On Tuesday, the Illinois Racing Board announced that it was suspending wagers indefinitely on pick-four, pick-six and pick-nine bets until the integrity of the tote system could be assured.

Hoblock, the New York state racing chairman, took pains to assure bettors that the criminal complaint filed Tuesday should “sound a message loud and clear to those who try to beat the system.”

Tim Smith, commissioner of the National Thoroughbred Racing Assn., said in a statement: “We commend the authorities on the arrests today in the pick-six case and support prosecutors to the fullest extent of the law. We have said from the beginning, our focus is not only on last month’s Breeders’ Cup pick six but also on protecting the long-term integrity of the entire pari-mutuel system....

“From the first indication that a problem existed, the horse racing industry has viewed this challenge very seriously. We will do everything necessary to protect the interests of our fans and customers and to earn their confidence.”

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Times staff writer Bill Christine in Los Angeles contributed to this report.