WHITE PLAINS, N.Y. - Three former fraternity brothers, whom prosecutors described as going from college chums to "partners in crime," surrendered yesterday to face allegations that they rigged horse racing bets to win more than $3 million.
"The three thought they found a way to turn a gamble into a sure thing," said Kevin P. Donovan, head of the FBI's New York field office, which investigated the bets made with telephones and computers.
The men, all of whom are 29 and were members of Tau Kappa Epsilon at Drexel University in Philadelphia in the early 1990s, were taken in handcuffs to a federal courthouse to appear on charges of conspiracy to commit wire fraud. If convicted, each man could face up to five years in prison and fines.
Two of them failed the drug tests routinely administered to suspects charged with a felony, authorities said. Davis - whose attorney described him as "dumbfounded" by the test results - was found to have cocaine in his urine and asked for a retest, which he also failed. DaSilva's urine had signs of cocaine and marijuana.
U.S. Magistrate Judge Mark D. Fox released all three on personal recognizance, backed by $200,000 bonds to be co-signed by family members. The men turned over their passports and agreed to restrict their travel. Davis and DaSilva were ordered to undergo thrice-weekly drug tests and face immediate imprisonment if drugs are detected.
The men, clean-shaven and dressed in suits, were permitted to leave with their attorneys. A preliminary hearing is scheduled for Dec. 11, and prosecutors said they will take the case to a grand jury, where more charges could be lodged in a formal indictment within 30 days.
In a seven-page criminal complaint filed Friday and unsealed yesterday, prosecutors revealed new details of a case that has stunned the racing world and prompted security reviews.
Harn and Davis are accused of placing three bets last month by telephone through Catskill Off-Track Betting Corp., of Pomona, N.Y. They were able to win more than $3 million because Harn, a senior computer programmer, had been assigned to upgrade Catskill's phone-betting system on behalf of his employer, Autotote, which processed bets for Catskill, the complaint said.
Davis bet the "Ultra Pick Six" on the Breeders' Cup, a day of races held this year at Arlington Park near Chicago on Oct. 26. He didn't attend, but he used his week-old Catskill account to place $1,152 in wagers on the Pick Six, in which gamblers attempt to predict the outcome of six consecutive races.
In Delaware, co-workers saw Harn that Saturday at his Autotote office, though he was not scheduled to work. According to the complaint, he used his password to enter Catskill's computer hub and spoke several times by cell phone to Davis while the races were being run.
Investigators believe that Harn was able to change Davis' bets on the first four races after they were run but before the Catskill computer forwarded them to Arlington Park's wagering hub. Davis bet all the horses running in the final two races, assuring his win.
The scheme allegedly took advantage of a little-known practice to retain multiple-race wagers at a distant site until after most races have been run and then to forward only the winners to the central computer.
The tiered procedure is intended to avoid inundating the central computer with losing wagers.
Harn, as a programmer for Autotote, the biggest processor of wagers in the country, would have been aware of this practice.
Davis' $3.1 million payoff was frozen after investigators flagged the unusual nature of his duplicate bets, which selected the winning horses in a single-single-single-single-all-all pattern. The FBI's organized crime unit and computer forensics specialists with the New York State Police cooperated in the probe.
They discovered a similar pattern on bets placed by DaSilva, who - against all odds- won a Pick Six and Pick Four wager within days of opening a Catskill account early last month. His payoffs: $1,757 and $107,608. He directed $80,000 of his winnings to be transferred to a bank account, which authorities have seized.
Attorneys for all three defendants say their clients have done nothing wrong.
"We don't believe the evidence supports the charges that have been brought. We intend to mount a vigorous defense," said Steven A. Allen of Baltimore, who represented Davis at yesterday's proceeding.
Daniel Conti of New York, representing Harn, said, "Chris has maintained his innocence, and nothing that occurred today has changed that."
Rae Downes Koshetz, an attorney defending DaSilva, said, "Right now there is simply an allegation. Nothing has been proven. There is no proof that he has done anything wrong."
James B. Comey, the U.S. Attorney for the Southern District of New York, termed the case "garden-variety fraud" and compared it in a dismissive way with the fabricated horse race in the movie The Sting. "There was nothing fancy here," Comey said.
The alleged crimes might have gone undetected if a long shot hadn't won the feature race of the Breeders' Cup, increasing the payout, or if the men had covered their tracks with a few more losing bets.
"Greed has a way of affecting people's judgment," said Michael J. Hoblock Jr., chairman of the New York State Racing and Wagering Board.
He said the case has exposed security deficiencies in racing's technological backbone that must be addressed.
National Thoroughbred Racing Association commissioner Tim Smith released a statement yesterday commending the investigators on their work and pledging to upgrade security. "We will do everything necessary to protect the interests of our fans and customers and to earn their confidence," he said.