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Man Pleads Guilty to Tax Fraud in Lottery Ticket-Cashing Scheme

Posted: Thursday, Jun 27,2019 | Time: 06:35 am | Edited by: The Lottery Lab Staff

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Clarence Jones, an 80-year-old man, pled guilty to conspiring to commit tax fraud by filing false tax returns as part of a lottery ticket cashing scheme. He bought lottery tickets from winners for cash and enabled the winners to avoid paying taxes on the prizes. Massachusetts state lottery officials were alarmed at how frequently he claimed large prizes. They suspected him to be involved in a nefarious lottery scheme. He was finally caught and will be sentenced on August 13.

How he did it?

Jones involved two store owners, who also pled guilty, in a scheme where he would buy winning tickets from lottery players for cash. The real winner would keep the cash and not pay the taxes on their winnings. Then Jones would claim the prize as his own, report the winnings on his tax returns, and report enough alleged gambling losses on his taxes to offset the lottery prizes.  According to the report, Jones has been doing this since the year 2011 and paid less than $16,000 in federal taxes on a total of about $52,000 through 2017. Massachusetts police are cooperating with Massachusetts Lottery in the investigation of Jones.

Lottery’s role in preventing illegal activities

This is not the first time the lottery association has taken action to prevent illegal activities. The lottery association encourages transparency and integrity to protect public confidence of all lottery games. It important for their business to keep their reputation clean.

Therefore, the Massachusetts state lottery has adopted a new policy that is expected to disrupt the way lotteries work. The policy states that if an individual claims six or more lottery prizes worth $1,000 or more each within any 12-month period, the lottery executive director will have the authority to suspend the ability of that individual to claim additional prizes for a certain period of time. This policy is primarily focused on eliminating attempts such as Jones to fraudulently claim lottery prizes.

Mr. Jones first caught the attention of lottery officials almost two decades ago, when he cashed in 319 tickets worth $412,482 in 1998. By early August 2017, Jones had claimed $486,422.50 from 401 winning lottery products. It became obvious that something was not right. A follow-up audit conducted by the auditor, Jones DeNucci, found that this practice is ongoing and has become widespread. The lottery association is taking serious precautions to prevent such illegal activities to maintain the transparency and integrity of lottery games.

This news suggests 3 pieces of advice:

  1. If you are a regular lottery player and you have won three or four prizes over $1,000, expect that lottery commissions will take an interest in you.  Your best approach may be to directly engage them and ask what you should do to avoid making them suspicious.
  2. If you are approached by someone like Mr. Jones who offers to purchase your winning ticket for cash, understand that you can be implicated in their tax evasion scam.  Politely decline the offer and ask your financial advisor’s advice for legal ways to minimize tax implications.
  3. Finally, don’t try to fool the government when it comes to taxes, they are always looking for scammers. Instead, focus on tools like frequency analysis or transition matrices to improve your odds of winning. Not only is it legal, but you might win!

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