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The 2002 Breeders' Cup betting scandal was an incident that arose when computer programmer Chris Harn conspired with two friends, Derrick Davis and Glen DaSilva, to manipulate bets in the 2002
Breeders' Cup The Breeders' Cup World Championships is an annual series of Graded stakes race, Grade I Thoroughbred racing, Thoroughbred horse races, operated by Breeders' Cup Limited, a company formed in 1982. From its inception in 1984 through 2006, it was ...
, held at
Arlington Park Arlington Park (formerly known as Arlington International Racecourse) is a former horse race track in the Chicago suburb of Arlington Heights, Illinois. Once called the ''Arlington Park Jockey Club'', it was located adjacent to the Illinois Rou ...
in
Arlington Heights, Illinois Arlington Heights is a village in Cook County, Illinois, Cook County Illinois, United States. A northwestern Chicago metropolitan area, suburb of Chicago, it lies about northwest of the city's downtown. As of the 2020 United States census, 2020 ...
. This enabled him to arrange a $3 million
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payout to the trio. The scam was exposed when 43-1 longshot Volponi won the Breeders' Cup Classic. This unanticipated victory made Davis the sole winner of the Pick 6 jackpot. Eventually, Harn, Davis and DaSilva entered pleas of guilty. The incident was the largest betting scandal to take place in the United States in a century. It also exposed serious security flaws in the system used to collect bets for horse races.


Background

Harn was a computer programmer at Autotote, which handled the wagers for 65 percent of horse races in North America at the time. In the fall of 2001, Harn discovered unclaimed ticket data that if claimed, would total hundreds of thousands of dollars. Using this data, he reprinted the unclaimed tickets so that he and his friends could claim them at local tracks. However, cashing them was another matter. As an Autotote employee, he was restricted from making wagers himself. In any event, he was too well known at the tracks to cash them. To solve this problem, he talked DaSilva and Davis into cashing the tickets at various tracks. The three men had been friends and fraternity brothers at
Tau Kappa Epsilon Tau Kappa Epsilon (), commonly known as or Teke, is a social college fraternities and sororities, fraternity founded on January 10, 1899, at Illinois Wesleyan University. The organization has chapters throughout the United States and Canada, maki ...
during their days at
Drexel University Drexel University is a private university, private research university with its main campus in Philadelphia, Pennsylvania, United States. Drexel's undergraduate school was founded in 1891 by Anthony Joseph Drexel, Anthony J. Drexel, a financier ...
. DaSilva now lived in
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while Davis lived in
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. Davis and DaSilva traveled to several tracks in
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,
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, and
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to cash the vouchers. The three men then split the winnings. However, Harn soon realized that if they kept it up too long, they'd eventually be tracked down. He looked for a way to get one big payoff that could allow him to easily cover his tracks. He found it in the Breeders' Cup, the richest day in American horse racing. Harn decided to go for the Ultra Pick 6, in hopes of scoring a win by picking the winners of the six major races of the competition—the Classic,
Turf Sod is the upper layer of turf that is harvested for transplanting. Turf consists of a variable thickness of a soil medium that supports a community of turfgrasses. In British and Australian English, sod is more commonly known as ''turf'', ...
, Sprint,
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, Juvenile and
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.


Finding a weak link

At the time, all wagers placed at the numerous
off-track betting Off-track betting (or OTB; in British English, off-course betting) is sanctioned gambling on greyhound racing or horse racing outside a race track. U.S. history Before the 1970s, only the state of Nevada allowed off-track betting. Off-track bet ...
parlors around the country that were still live after the second race of a Pick 4 and the fourth race of a Pick 6 were forwarded to Autotote headquarters in
Newark, Delaware Newark ( )Not as in Newark, New Jersey. is a city in New Castle County, Delaware, United States. It is located west-southwest of Wilmington. According to the 2010 census, the population of the city is 31,454. The University of Delaware is ...
and to the track where the race was held. Harn discovered that there was a half-hour delay between the end of the second or fourth race and when the live wagers were forwarded—enough time to alter the results. Harn was uniquely positioned to take advantage of this weak link. He was a "super user"—the highest level of access at Autotote. In fact, he was responsible for maintaining the entire network. He had DaSilva set up an account at the Catskill Off-Track Betting Corporation in Pomona, New York. Harn liked Catskill because its security was fairly lax. Unlike other OTB parlors, it didn't require the bettor to be physically present to open an account, and also didn't have a transaction history file. It was also a fairly low-traffic facility, making it easier to alter bets. He'd set up the system himself, so he knew how it could be exploited.


The scheme

Harn had DaSilva conduct two dry runs of their scheme. On October 3, DaSilva bet on the Pick 4 harness races at Balmoral Park, about 45 miles from
Arlington Park Arlington Park (formerly known as Arlington International Racecourse) is a former horse race track in the Chicago suburb of Arlington Heights, Illinois. Once called the ''Arlington Park Jockey Club'', it was located adjacent to the Illinois Rou ...
. After the first two races, Harn logged in and altered the original bets on the first two races, then picked every horse in the last two races. As a result, DaSilva netted $80,000 in winnings. Two days later, Harn and DaSilva repeated the pattern in a Pick 6 at
Belmont Park Belmont Park is a thoroughbred racing, thoroughbred horse racetrack in Elmont, New York, just east of New York City limits best known for hosting the Belmont Stakes, the final leg of the American Triple Crown of Thoroughbred Racing (United Stat ...
. This time, DaSilva scored $100,000. For the Breeders' Cup, Harn had Davis open an account at Catskill in case the authorities got suspicious of DaSilva. Davis then called Catskill from his home in Baltimore to buy a $12 Pick 6 ticket, picking one winner in the first four races. On Breeders' Cup Day, Harn slipped into his office at Autotote. To make sure he was covered, he remotely ejected the backup tape at Catskill before the first race. He then took several calls from Davis while the races were underway. After the fourth race, and half an hour before the Turf, Harn hacked onto the system and tracked down Davis' bet. He then changed Davis' original bet to reflect the actual four winners. After having the Catskill techs reinsert the tape, he bet on every horse running in the Turf and Classic, assuring that he would win. The plan worked, and they were able to turn their original $1,152 bet into almost $3.1 million in winnings--$2.57 million for winning the Pick 6, plus $498,000 in consolation prizes for picking five out of six winners.


Suspicions mount

Unfortunately for Harn and his friends, the Classic was won by Volponi, a 43-to-1 longshot. Had a horse won with shorter odds, or if more money had been bet on Volponi, there would have been more winners—and a smaller payout—and Davis' bet would have looked normal. As it turned out, Davis held the only jackpot winner. The nature of the bet raised suspicions as well. While most bettors pick more than one horse to increase their chances of winning, as mentioned above Davis selected only one horse for the first four races and effectively played the same ticket six times. It also seemed unusual that all the bets were placed through Catskill, a fairly small operation. The
New York Racing Association The New York Racing Association, Inc. (NYRA) is the not-for-profit corporation that operates the three largest thoroughbred horse racing tracks in the state of New York (state), New York, United States: Aqueduct Racetrack in South Ozone Park, Q ...
asked the New York State Racing and Wagering Board to launch an investigation. As a first step, the board asked Arlington Park and Catskill not to pay out Davis' winnings. The
New York State Police The New York State Police (NYSP) is the state police of the U.S. state of New York; it is part of the New York State Executive Department and employs over 5,000 sworn state troopers and 711 non-sworn members. The New York State Police are re ...
,
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and the U.S. Attorney for the Southern District of New York later joined in the investigation. Harn and Davis were very nervous, but finally decided their only course was to claim the bet was legitimate. Davis went to the press, maintaining his innocence. He said the only reason that the payout was so large was that he'd intended to make a $2 bet rather than the $12 bet he'd actually made. Davis demanded proof of any wrongdoing.


Caught

The fact that the nature of the ticket changed so abruptly after the first four races (the same four winners picked for the first four races on every bet and then every possible combination of horses in the last two races) led investigators to wonder early on if someone had hacked into the system and changed the ticket. Naturally, the focus turned to the Autotote system. Autotote immediately suspected an inside job, and questioned all of its employees in Newark. They soon discovered that Harn wasn't scheduled to work on the day of the race, but had still been in the office. Even more seriously, they discovered Harn had tapped into the system and altered Davis' ticket after the first four races. When Harn couldn't explain his activity or what he was doing at work in the first place, Autotote fired him and turned over the results of its own investigation to New York State and federal officials. Investigators soon discovered that Harn and Davis had been members of Drexel's Tau Kappa Epsilon chapter. Not long after that, they discovered DaSilva had been a member of that fraternity at the same time as Harn and Davis, and also had an account at Catskill. They soon discovered that DaSilva's bets at Balmoral and Belmont were similar in nature to the larger bet Davis made at the Breeders' Cup—raising suspicions that they were dry runs for the Breeders' Cup bet. The New York State Police also seized computers from Autotote and Harn's house, and also subpoenaed Harn's phone records. On November 12, Harn, Davis and DaSilva were each charged with one count of
wire fraud Mail fraud and wire fraud are terms used in the United States to describe the use of a physical (e.g., the U.S. Postal Service) or electronic (e.g., a phone, a telegram, a fax, or the Internet) mail system to defraud another, and are U.S. fede ...
in
White Plains, New York White Plains is a city in and the county seat of Westchester County, New York, United States. It is an inner suburb of New York City, and a commercial hub of Westchester County, a densely populated suburban county that is home to about one milli ...
.
James Comey James Brien Comey Jr. (; born December 14, 1960) is an American lawyer who was the seventh director of the Federal Bureau of Investigation (FBI) from 2013 until Dismissal of James Comey, his termination in May 2017. Comey was a registered Repub ...
, the U.S. Attorney for Southern New York, portrayed the scheme as a 21st-century version of ''
The Sting ''The Sting'' is a 1973 American caper film. Set in 1936, it involves a complicated plot by two professional grifters (Paul Newman and Robert Redford) to con a mob boss ( Robert Shaw). The film was directed by George Roy Hill, who had dir ...
''. In the face of mounting evidence—including numerous calls from Davis' cell phone to Harn's Autotote phone and witnesses who saw Harn logged into the Catskill site while on the phone— Harn opted to cooperate with investigators. He not only admitted rigging the Breeders' Cup bet and the test runs he'd conducted with DaSilva, but also told investigators about his scheme to cash unpaid tickets—something they didn't know anything about. Federal law requires anyone cooperating with prosecutors to disclose all criminal activity in which they'd engaged. On November 20—a week after the indictment—Harn pleaded guilty to conspiracy to commit wire and
computer fraud Computer fraud is the use of computers, the Internet, Internet devices, and Internet services to defraud people or organizations of resources. In the United States, computer fraud is specifically proscribed by the Computer Fraud and Abuse Act (CFAA ...
and conspiracy to commit
money laundering Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds i ...
. He admitted to rigging the Breeders' Cup, Balmoral and Belmont bets. He also admitted to bilking legitimate winners out of $92,500 with his duplicate ticket scheme. On December 11, DaSilva pleaded guilty to similar charges, but claimed he didn't know Davis was in on the scheme and that he took no part in the Breeders' Cup bet. The next day, Davis pleaded guilty to conspiracy to commit wire fraud and gave up all claims to the money. On March 20, 2003; Harn was sentenced to a year and a day in federal prison. Davis received 37 months while DaSilva received two years. The $3.1 million payoff was split among 78 people who'd gotten five out of six races right; each got $39,000 in addition to their original $4,600 consolation prizes.


Fallout

Even though Autotote officials characterized the scheme as the actions of a "rogue software engineer", the
National Thoroughbred Racing Association The National Thoroughbred Racing Association (NTRA) is a broad-based coalition of American horse racing interests consisting of leading thoroughbred racetracks, owners, breeders, trainers and affiliated horse racing associations, charged with incr ...
took swift action in the face of a growing outcry once the nature of the scam emerged. It required all tote companies to modify their software to transmit betting information immediately after the bet has closed. It also pressured its member tracks into not doing business with parlors that didn't have the ability to record wagers taken over the phone. The scheme was profiled on the
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television series '' Masterminds.''


References

{{DEFAULTSORT:2002 Breeders' Cup Betting Scandal Horse racing controversies Sports betting scandals Horse racing in the United States Breeders' Cup betting scandal 2002 in American sports Horse racing in Illinois Breeders' Cup betting