Updated on 09/16/2011 9:40AM

Pick six trio surrenders

Reuters/Mike Segar
Chris Harn (top), Glen DaSilva (right), and Derrick Davis (left) are escorted into federal court in White Plains, N.Y., after surrendering Tuesday.

WHITE PLAINS, N.Y. - The three suspects in the Breeders' Cup pick six investigation surrendered to the authorities Tuesday, then were arrested and named in a criminal complaint accusing them of conspiring to commit wire fraud.

The suspects - the former Drexel University fraternity brothers Derrick Davis, Chris Harn, and Glen DaSilva - were handcuffed and then escorted by marshals into federal district court at 10:23 a.m. Eastern time. Later, the three appeared before U.S. Magistrate Judge Mark D. Fox, who released each of them on $200,000 bond and placed restrictions on their travel.

The three have not been charged with a crime, but prosecutors said they will pursue a variety of fraud and conspiracy charges when they present evidence to a grand jury over the next month as they seek an indictment. The United States attorney's office for the Southern District of New York will have until Dec. 17 to issue an indictment, according to Judge Fox.

James Comey, the U.S. attorney for the Southern District, said that investigators believe Harn, a former employee of Autotote Systems in Newark, Del., who was fired on Oct. 31, altered pick six and pick four bets placed by Davis and DaSilva through a telephone-wagering account at Catskill Off-Track Betting Corporation. Autotote, the country's largest totalizator company, processes wagers for Catskill.

Davis's bet, which triggered the investigation, accounted for all six winning tickets on the Breeders' Cup pick six on Oct. 26. The payout, which has been withheld, was $3.1 million. DaSilva's bets, placed on Oct. 3 and Oct. 5, paid $109,365, the complaint said.

"The complaint alleges that these defendants used their access to computer systems and Mr. Harn's expertise to create a sure thing," Comey said. "It also makes clear that they bet that law enforcement would not catch them, but that's a bet they couldn't fix."

This was the first public appearance for the three suspects, whose names emerged separately as the investigation unfolded. All three wore expensive-looking suits and refused to speak with reporters or answer questions.

Lawyers for the suspects denied the accusation in the criminal complaint, which was filed on Nov. 8 but was not made public until Tuesday. Comey and other officials involved in the investigation said they would not comment on any evidence beyond what was listed in the complaint.

The charge of conspiracy to commit wire fraud, if included in an indictment, would carry a maximum penalty of five years in prison and a fine of $250,000. Comey said that prosecutors would pursue additional charges that could put the suspects "behind bars for a lengthy period of time."

Harn, Davis, and DaSilva, all 29, attended Drexel University in Philadelphia and were fraternity brothers at Tau Kappa Epsilon, which is popular with business and computer students. None of the three graduated, although Harn and DaSilva attended the school for six years.

Investigators have said they believe that to alter the bets the three suspects exploited several security gaps in the way bets are processed. The gaps would allow tote company insiders to enter computer systems to change a pick six bet after the first four races and to change a pick four bet after the first two races, investigators said.

According to the complaint, Harn, a senior computer programmer at Autotote, had access to data collected by Autotote at remote sites around the country. The complaint said that Harn had access to bets placed through a Catskill betting hub in Poughkeepsie, N.Y., maintained by Autotote on Oct. 26, the day the Breeders' Cup was run at Arlington Park outside Chicago.

The complaint said that Harn reported to Autotote's headquarters in Newark, Del., on Oct. 26 even though he was not scheduled to work that day. On that day, Harn received a call on his cell phone from a cell phone used by Davis during the time the Breeders' Cup races were being run.

While at Autotote, Harn "was involved in upgrading Autotote's computer systems for the purpose of implementing the [touch-tone telephone] wagering system" that Autotote marketed and sold to racing clients, including Catskill, the complaint said.

Harn, who lives in Delaware, spoke only in brief sentences while appearing in court on Tuesday afternoon, and he stuttered during his first response to Judge Fox about whether he understood his legal rights. Former co-workers have said that Harn has struggled with a stuttering problem for most of his life.

Harn was the first to leave the courthouse, brushing aside reporters while quickly lighting a cigarette before getting into a car with his lawyer, Dan Conti.

Davis, the complaint said, opened his account at Catskill OTB on Oct. 18, eight days before the Breeders' Cup was run. On Oct. 26, he placed the disputed pick six bet from Maryland using Catskill's touch-tone telephone betting system, selecting a single horse in the first four races and all the horses in the final two legs. The wager, in a $12 denomination, cost $1,152.

At the hearing, prosecutors revealed that a urine sample provided Tuesday morning by Davis had tested positive for cocaine. A retest also was positive, according to court officials.

Through his lawyer, Steve Allen, Davis denied using cocaine at any time in the past.

"He has not used any drugs, and he has no idea why he would test positive," Allen told Judge Fox. The judge warned Davis that if he tested positive while released on bond, he could be put in jail.

The complaint said that DaSilva won a pick four bet placed through Catskill on races at Balmoral on Oct. 3. The bet used one horse in each of the first two races and all the horses in the last two. DaSilva opened the Catskill account earlier that day.

Two days later, DaSilva bet a pick six ticket with an identical structure to the bet Davis placed on the Breeders' Cup pick six, although in a $16 denomination. The payout on that ticket was $107,608.

On Oct. 7, DaSilva faxed Catskill a request for an $80,000 check, the complaint said, and DaSilva deposited the check on Oct. 15 into an account at Citibank in New York, where he lives.

Comey said that prosecutors are pursuing ways to freeze the bank accounts of the three suspects, but he would not provide details. "We are aggressively pursuing all ill-gotten gains," Comey said.

DaSilva's lawyer, Ed Hayes, said on Tuesday after his client's court appearance that "the government has not shown any evidence" that DaSilva's bets were not legitimate. Conspicuous by its absence in the complaint is any connection of DaSilva to Harn on Oct. 3 or Oct. 5, even though the complaint makes specific and explicit connections between Davis and Harn on Oct. 26.

"The only thing that we know for sure is that Autotote has the world's worst computer security," Hayes said. "And they have had the world's worst computer security for 20 years."

Racing and tote officials have raised questions about the quality of the security controls that underlie Autotote's system, pointing to the fact that company officials initially claimed that Davis's wager was legitimate. The company rapidly backtracked on Oct. 31 when it announced that it had fired Harn.

Comey said that computer experts in the F.B.I., the New York State Police, and the U.S. attorney's office would uncover more evidence down the road.

"This is our bread and butter: computer crime and garden-variety fraud," Comey said. "There's nothing really fancy here. I'm not worried about getting embarrassed on this one."