Friday, December 17, 2004

Not a Sure Thing

A system of effectively compensating employees used by the New York Racing Association (NYRA) resulted in extensive tax evasion charges for the NYRA and a number of its employees.  A press release from the U.S. Attorney for the Eastern District of New York describes the deferred prosecution agreement the NYRA entered into related to a long-running scheme to permit employees to deduct unreimbursed business expenses for which they had been reimbursed.  The press release describes the practice as follows:

Mutuel employees were assigned teller boxes or dealer bags to hold the proceeds of betting transactions conducted through their assigned betting windows and terminals. All betting transactions, including cash received and cash disbursed, were tracked by a computer system, which, at the end of each day, indicated the cash balance that should be in each teller box and dealer bag. Discrepancies were referred to as "shorts." Legitimate shorts were the results of inadvertent errors by the mutuel employees in handling betting transactions; bogus shorts were the result of employees taking cash for their personal use, or by the employees reporting fictitious voucher sales, for which no cash was received.

From 1980 through December 1999, NYRA permitted its mutuel employees to report shorts in any amount, as long as they were reimbursed to NYRA by the employees, either by a cash payment or by a deduction from the employee's next paycheck. If the reported shorts were reimbursed, NYRA neither disciplined the mutuel employee nor provided any corrective or training measures in response to the reporting of excessive, consistent or bogus shorts.

According to the charges unsealed today, from January 1980 through December 1999, NYRA certified approximately $19 million in shorts reported by its mutuel employees. The indictment alleges that mutuel employees, including BOGGIANO, FASONE, KING and PONTRELLI, as well as the 17 mutuel employees who have previously pleaded guilty to tax charges in this case, routinely took cash from their teller boxes and dealer bags and falsely reported the cash as legitimate shorts. These amounts were then returned by the mutuel employees to NYRA, either by cash payments or through deductions from weekly paychecks. The employees then falsely reported the shorts as unreimbursed employee expenses on their individual income tax returns.

Unlike the heart-warming story of Seabiscuit, this tale involves an employer willing to abuse the tax system for nearly two decades. (ph)

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