Two men whose phones were tapped as part of an investigation into illegal gambling in Wichita pleaded guilty Friday to federal gambling and income tax charges.
Danny Chapman, 67, pleaded guilty to one count of operating an illegal gambling business and one count of tax evasion, U.S. Attorney Tom Beall said in a news release. Daven Flax, 46, pleaded guilty to two counts of operating an illegal gambling business and one count of making a false statement on a tax return. According to court records, Chapman and Flax both were criminally charged Tuesday but their cases were filed under seal. They were made public Friday.
The men are among several Wichitans whose phone conversations were intercepted by the federal government in the spring or summer of 2015, including businessmen Brandon and Rodney Steven and Sedgwick County Commissioner Michael O’Donnell, who at the time was a state senator.
Last year Brandon Steven, who is a partner with his brother in health clubs, auto dealerships and other enterprises around Wichita, told The Eagle he was the subject of a federal inquiry into his playing of high-stakes poker and his involvement in trying to open a casino in Kansas.
Steven and O’Donnell have not been charged nor were they mentioned in the news release from Beall’s office. Federal officials have declined to discuss the investigation and have not said if the wiretaps were related.
Brandon Steven wouldn’t comment Friday when reached by phone after the guilty pleas by Chapman and Flax were announced.
O’Donnell, contacted by phone Friday afternoon, said he doesn’t know either Chapman or Flax but wouldn’t comment further.
$1.5 million in cash
Chapman in his plea agreement admitted to running an online sports betting operation from January 2013 to Feb. 10, 2017, where he acted as a bookmaker — a bookie — and had at least five people working under him. He also managed his own group of sports betters. Chapman and the people working for him would arrange for clients to place bets on sporting events using several gambling websites created and hosted in Costa Rica. They collected losses and keep some of the money for themselves.
Chapman’s employees would give a cut of their profits to Chapman, who would then pay some to the gambling organization in Costa Rica.
Chapman would make more than $2,000 a day. To avoid paying nearly $345,000 in federal income tax on his illegal earnings, he bought vehicles with cash and registered them to other people, including a colleague and a nephew. He also bought money orders and cashier’s checks using his family members’ names. He “told his accountant he only placed bets on his own behalf and did not take bets for others,” according to his plea agreement.
Chapman made most of his money and paid for most of his investments and property working as a bookie, according to court records. He’s been doing it since the late 1980s. Being a bookie was his primary line of work, court records say.
In February a neighbor of Chapman’s said she saw authorities search Chapman’s house and carry away items in white boxes. Some wore clothing that said “FBI.”
Court records show that about $1.5 million in cash was seized. That included about a half million in cash from two safety deposit boxes in Las Vegas, as well as cash seized from two homes in Wichita and another $480,500 that Chapman and his attorney turned over to federal officials in March.
Some of the searches were conducted in the week following the Super Bowl.
Authorities also seized collectible bills and gold coins, jewelry and $9,718 in Kansas Star Casino poker chips and 10 vehicles including two Porsches, three 1960s model Chevrolet Camaros, a 1963 Corvette and a Dodge Viper, court records show.
Chapman’s attorney, Matthew Leavitt, said Friday afternoon that he would not comment.
Illegal poker games
In his plea agreement, Flax admitted to running several illegal poker games in Wichita and taking a cut – or rake – from the amount of money bet in each hand. The games were by-invitation-only events held in homes or businesses and were not open to the public.
Flax used part of his cut to pay waitresses, dealers, caterers and others to work during the games and to rent the businesses where they were held. He kept the rest of the profits for himself or split it with people who helped him manage the illegal poker games.
He also admitted to working as a bookie in Chapman’s sports betting operation between at least January 2013 and Feb. 10, 2017, and that part of his income, investments and property were funded by that work. He lied to the IRS about the money he made from illegal gambling to avoid paying more than $65,000 in federal income tax, according to court records.
Sentencing dates for the two men are pending.
Running an illegal gambling business and tax evasion each carry penalties of up to five years in federal prison and up to $250,000 in fines.
Lying on a tax return carries a federal prison sentence of up to three years and a maximum fine of $100,000.
The government agreed to not pursue any additional charges connected to the case and to recommend a lenient sentences for both men exchange for their guilty pleas, according to court records.
Chapman will pay $344,935 in restitution to the IRS under his plea agreement. Flax will pay $117,161.