Robert Nardoza

United States Attorney's Office

(718) 254-6323

ANDREW C. HRUSKA, Acting United States Attorney for the Eastern District of New York, MICHAEL J. THOMAS, Special Agent-in-Charge, Internal Revenue Service - Criminal Investigation, New York, and JAMES H. LAWRENCE, Commissioner, Nassau County Police Department, announced today that VINCENT HOGAN and CLEMENT IMPERATO, two former directors of the Pari-Mutuel Department of the New York Racing Association Inc. ("NYRA"), entered guilty pleas to charges that they conspired with NYRA and other NYRA employees to defraud the United States. IMPERATO was employed most recently as vice-president of the Pari-Mutuel Department (1988-1996). In 1996, he retired and was promptly re-hired as a consultant for the Pari-Mutuel Department, where he remained until January 2002. HOGAN was employed as the director of the Pari-Mutuel Department (1988-2002). Upon IMPERATO's departure in 1996, HOGAN assumed responsibility for the Pari-Mutuel Department.

HOGAN and IMPERATO were charged in an indictment filed in December 2003 with participating in a scheme that enabled NYRA's pari-mutuel employees to falsely deduct from their federal and state taxable income millions of dollars for purported un-reimbursed employee expenses. In addition, HOGAN was charged with making illegal payments to a union official. Today's guilty pleas by HOGAN and IMPERATO followed guilty pleas earlier this year by their co-defendants and former pari-mutuel tellers, JAMES BOGGIANO, BARBARA FASONE, DENNIS KING and GERALD PONTRELLI, to conspiracy to defraud the United States based on their participation in the fraudulent scheme. To date, 23 of the 24 defendants charged with federal crimes in connection with this scheme have entered guilty pleas. The only remaining defendant, NYRA, entered into an agreement with the government in which it accepted responsibility for its conduct, admitting virtually every allegation contained in the indictment, and agreed, among other things, to (i) cooperate fully with the government's continuing investigation; (ii) pay $3 million in fines and costs of prosecution; (iii) make changes to its management structure; and (iv) the appointment of an independent monitor by the Court.

NYRA's Pari-Mutuel Department and Account Shortages

NYRA is a non-profit corporation licensed by the State of New York to operate thoroughbred racetracks at Belmont Park, Aqueduct Raceway, and Saratoga Racecourse. NYRA's Pari-Mutuel Department conducted pari-mutuel betting operations and employed approximately 250 regular (non-seasonal) tellers and mini-dealers, who were members of the Division of Mutuel Employees ("DME") of Local Three of the International Brotherhood of Electrical Workers. NYRA's pari-mutuel tellers and dealers were responsible for selling betting tickets and vouchers to the public and for paying cash winnings to individuals holding winning betting tickets. All betting transactions were tracked by a computer system, which, at the end of each day, indicated the cash balance that should be in the custody of each teller and dealer. Discrepancies were referred to as "shorts." Legitimate shorts were the result 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 employees reporting fictitious voucher sales, for which no cash was received. A legitimate short reimbursed to NYRA by an employee could be legally deducted from the employee's taxable income as an un-reimbursed employee expense. At the conclusion of each calendar year, NYRA issued short certifications to its mutuel employees certifying the total dollar amount that each employee purportedly reimbursed NYRA from his or her own personal funds for shorts, including bogus shorts, to enable the employees to document the deductions claimed on their income tax returns for un-reimbursed employee expenses.

The Scheme To Defraud

The indictment alleged that mutuel employees 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 un-reimbursed employee expenses on their individual income tax returns. The indictment charged that each year, NYRA, IMPERATO and HOGAN falsely certified that the amounts returned by the mutuel employees to NYRA were reimbursements for account shortages, fully aware that the shortages included bogus shorts and that the short certifications would be used by the mutuel employees to support false tax deductions. In this manner, NYRA, IMPERATO and HOGAN provided the mutuel employees with significant amounts of additional income, the source of which was the taxes that should have been paid to the United States and to New York State on the amounts falsely reported and certified as shorts. The end result was a taxpayer-financed perquisite provided by NYRA to its employees. According to the charges, from January 1980 through December 1999, NYRA certified approximately $19 million in shorts reported by its mutuel employees. For the calendar years 1994 through 1999, approximately 143 mutuel employees deducted a total of approximately $8,000,000 as un-reimbursed employee expenses for account shortages on their federal income tax returns. In January 2000, NYRA advised its mutuel employees that varying degrees of disciplinary measures would be imposed in response to the reporting of shorts. Although there were no accompanying training measures or changes in betting transaction procedures, the amount of shorts reported in 2000 dropped approximately 98% from previous years.

In announcing the guilty pleas, Acting United States Attorney ANDREW C. HRUSKA stated, "Today's guilty pleas illustrate the significance of NYRA's management's role in the tax evasion scheme. This prosecution demonstrates the government's continuing commitment to exposing fraud aided by corporate management and to ensuring that NYRA operate in a manner consistent with the law." Mr. HRUSKA thanked the New York State Racing and Wagering Board for its assistance in the investigation, and stated that the investigation is continuing.

Special Agent-in-Charge MICHAEL J. THOMAS stated, "Pursuing corporate fraud and white-collar crime are among our top priorities. All taxpayers must pay their fair share. Large corporations, such as the New York Racing Association and their officers, are not above the law! Cheating from the government will not be tolerated. The pleas today signal IRS' commitment to stop this type of corporate abuse from the American tax system." Nassau County Police Commissioner JAMES H. LAWRENCE stated, "We are proud of the cooperative effort between federal and local authorities that contributed to the success of this investigation."

Penalties and Sentencings

At sentencing before the Honorable Arthur D. Spatt in the U.S. District Court in Central Islip, New York, IMPERATO, HOGAN, BOGGIANO, FASONE, KING and PONTRELLI each faces a maximum sentence of five years in prison, three years of supervised release, a $250,000 fine and restitution. The sentencings of IMPERATO and HOGAN are scheduled for September 10, 2004 at 9:00 a.m. and 10:00 a.m. The sentencings of BOGGIANO and FASONE are scheduled for July 30, 2004 at 1:30 p.m. and 2:00 p.m., respectively. KING's sentencing is scheduled for August 6, 2004 at 1:30 p.m., and PONTRELLI's sentencing is scheduled for July 23, 2004 at 2:30 p.m.

The government's case is being prosecuted by Assistant United States Attorneys Suzanne Jaffe Bloom and Burton T. Ryan.

The Defendants Who Pleaded Guilty Today

CLEMENT IMPERATO

Brooklyn, NY

DOB: 07/01/35

VINCENT HOGAN

Saratoga Springs, NY

DOB: 05/17/37

The Co-Defendants Who Pleaded Guilty Earlier this Year

JAMES BOGGIANO

Howard Beach, NY

DOB: 11/02/44

BARBARA FASONE

Rockaway Park, NY

DOB: 01/16/38

DENNIS KING

Centereach, NY

DOB: 12/24/46

GERALD PONTRELLI

Whitestone, NY

DOB: 02/04/39