11/21/2002 12:00AM

Counterfeit tickets fooled machines


NEW YORK - When investigators first targeted Chris Harn, one of three suspects in the Breeders' Cup pick six scandal, little did they know that the case would grow to include a counterfeit ticket scheme that involved unredeemed bets and took advantage of self-operated mutuel machines.

Several officials involved in the investigation said Thursday that investigators did not learn of the bogus ticket scheme until Harn, one of three suspects in the case, described it to prosecutors as part of his guilty plea agreement, which was formally accepted at federal court Wednesday in White Plains, N.Y.

The scheme underscores recent concerns about the security of racing's electronic betting system, which has prompted a wide-ranging review led by the consulting firm of former New York mayor Rudolph Giuliani.

Harn, 29, entered guilty pleas to two federal conspiracy counts, admitting that he altered pick four and pick six tickets worth $3.2 million and nearly $100,000 in bogus winning tickets that were cashed at tracks across the East Coast. The counts carry a maximum sentence of 25 years in jail, but prosecutors said they expect Harn's sentence to be far less because of his cooperation with the prosecutor, James Comey, the U.S. attorney for the southern district of New York.

The two other suspects, Glen DaSilva, 29, of New York, and Derrick Davis, 29, of Baltimore, were named as recipients of a portion of the proceeds from both scams in Harn's plea agreement. The lawyer for Davis has said that he intends to fight the charges. DaSilva's lawyer said Thursday that he is consulting with his client.

Harn likely revealed the bogus-ticket scheme to prosecutors because plea agreements usually require defendants to give a full accounting of any criminal activity. If any other criminal activity is discovered after a plea bargain is reached, the deal can be voided, legal experts said Thursday.

According to tote and racing officials, the tickets produced by Harn were likely generic representations of winning tickets that could have been identified as counterfeits by most mutuel tellers or racing officials. Instead, they were cashed at self-operated machines, eluding human detection.

In his guilty plea, Harn admitted to printing out bogus winning tickets in the "tens of thousands" of dollars beginning in November 2001. A spokesman for the U.S. attorney's office, Mark Kulstad, said that further details about the scheme could not be disclosed because the investigation was still in progress.

One person involved in the investigation said that Harn had told prosecutors that he divided the proceeds equally between himself and either Davis or DaSilva, depending on who cashed the tickets. The scheme, which started in November 2001, went on for nearly a year and netted nearly $100,000, the person said.

"We haven't really settled on a good number, but we know it was around that much," the person said.

The tickets, which were reproductions of bets that had not been cashed by winning horseplayers, were redeemed at Belmont Park and Aqueduct in New York; Monmouth Park and The Meadowlands in New Jersey; and Philadelphia Park in Pennsylvania, the plea said. Uncashed tickets are usually stored on the computers that process wagers for at least a year after being placed.

Harn was a senior programmer at Autotote, the country's largest tote company, before being fired on Oct. 31 after the company conducted an internal investigation. The guilty plea said Harn used "unauthorized access" to locate uncashed winning tickets that were retained by Autotote on its computer systems. Harn then used Autotote's printers to create counterfeit tickets that could be redeemed for the same amounts, officials said.

All of the tracks that the officials said were used to cash the tickets are Autotote customers.

A former totalizator employee who spoke on the condition of anonymity said that printing out uncashed tickets would be a simple matter for an insider. The only risk, the former employee said, would be if the legitimate ticket buyer tried to cash after the fake tickets had already been redeemed, which could tip off an investigation.

The employee said that information about uncashed tickets are kept in computer files called "outs" that are sorted by track. The files can be accessed by employees with the password to the system.

To create a fake ticket, the insider would "go into the system and look for the outs for a particular track," the former employee said. "You can go down to the ticket level in there. So you find a $100 show bet that someone hasn't cashed in months, read the serial number, and then print out a ticket that has that serial number encoded into the bar code."

The fake tickets would have to be cashed at a self-automated terminal, the employee said, because the counterfeits would lack information that is reproduced on legitimate tickets, such as the name of the track and the number of the race.

"The vouchers wouldn't look perfect, but the self-service machines really only need the bar code," the employee said. "A mutuel teller would know it wasn't a real ticket."

A high-ranking racing official said that tote companies were warned by the Thoroughbred Racing and Protective Bureau in 1994 that the "outs" file presented an opportunity for fraud after investigators uncovered a scheme in Southern California where a person had attempted to alter bar codes on tickets. The person was not an employee of a tote company, the official said.

Self-automated machines are a particularly ripe target for scams, many racing officials said. Some described crude schemes to extract dollars from the machines - the "string-around-the-quarter" variety - while others described other more sophisticated scams like the 1994 bar-code alteration scheme in California.

"All these things play upon the lack of security and the growth of automation," said the former tote employee.

Tickets from self-automated machines are not regularly checked for irregularities, racing officials at a number of tracks said on Thursday.

In New York, the tickets collected from self-automated machines during the year are placed in storage until April 1 of the following year, according to Jim Gallagher of the New York Racing Association, which operates Aqueduct, Belmont, and Saratoga Race Course. The tickets are normally discarded on April 1 after consultations with New York tax and finance officials, Gallagher said.

John Corckran, the chief executive officer of AmTote, said that the tickets from self-automated machines are not usually checked. Corckran said that the auditing responsibilities for the tickets in most states falls on the tracks, although tote employees normally open up the machines to retrieve the tickets. Rhonda Barnat, a spokeswoman for Autotote, said that inspection of tickets is a track responsibility.

In Maryland, specifically, the tickets are removed from the machines at night and then placed in bags behind the mutuel counters, Corckran said. When asked what happens to the tickets after they are bagged, Corckran said: "I guess they throw them out."

Lou Raffetto, the chief operating officer of the Maryland Jockey Club, said that it would be "physically impossible" to check all the tickets in self-automated machines. Raffetto said the machines process 45 percent of the MJC's on-track handle.

"I'm not sure if that's the point anyway," Raffetto said. "The problem was with a guy going into Autotote's system and the lack of controls they had there. I'm comfortable with the job that AmTote does here."