Federal authorities yesterday took the unusual step of ordering the state Lottery Commission to withhold a portion of a $14.3 million jackpot destined for fugitive mobster James (Whitey) Bulger, charging Bulger used the winnings as a way to launder money.
"Whitey Bulger never hit the lottery in the first place," said US Attorney Donald K. Stern. "We allege Bulger cooked up a scheme to launder illegally obtained money."
An FBI affidavit alleges that Bulger and two associates paid $2 million cash for one-half share of the winnings of a ticket bought by Michael Linskey in 1991 at the South Boston Liquor Mart. The cash, federal authorities allege, came from illegal gambling, extortion and loansharking overseen by Bulger and his associates.
Bulger himself kicked in $700,000 to buy one-sixth of the winning ticket, or $2.3 million in winnings, the FBI charges.
The FBI yesterday served a federal seizure warrant on the Lottery
Commission freezing the payment Bulger was supposed to receive Thursday and federal officials have filed a forfeiture action to confiscate the $1.9 million left of Bulger's share of the prize, which was being paid out over 20 years.
In federal civil forfeiture cases, the burden rests on the defendant to show the money was obtained by legal means.
Stern waved off questions about whether the forfeiture suit will aid the search for the reputed South Boston mobster.
"We didn't bring this case to entice him out of hiding," Stern said.
Bulger has been a fugitive since Jan. 5, when FBI and state police sought to arrest him as the alleged co-leader of the Winter Hill gang. Alleged New England Mafia boss Francis P. Salemme is also a fugitive from the charges. Stephen J. Flemmi, allegedly a gang partner, is in custody.
The forfeiture suit will force Bulger to either appear in court in the next month or give up his claim to the winnings slated to be paid out through 2010.
Stern declined to explain why no one moved earlier on Bulger's winnings. Bulger had been receiving the $119,000 payments annually since 1991 without a hitch, Stern acknowledged.
"If we knew where the money was, we could try to seize it," Stern said. But sources said that accumulating evidence in the racketeering case against Bulger had opened avenues of information that recently made the forfeiture suit possible.
Stern said Michael Linskey, Bulger and his reputed underlings in the Winter Hill gang -- Patrick Linskey, brother of the ticket buyer, and Kevin Weeks -- signed a notarized statement saying they had an advance agreement to split the win.
But Stern said the arrangement was made after Linskey won and that it was merely a smokescreen to derive a 20-year "legitimate income stream" for Bulger.
South Boston Savings Bank divided the check to Linskey among the four winners, and the Lottery distributed the tax burden among the "partners." The manner of handling the funds at the bank was set up as part of the money- laundering scheme, FBI Special Agent John E. Gamel said in the affidavit.
The Lottery is cooperating in the investigation and the bank's role in the alleged money-laundering is believed to be unwitting, sources said.
There is no allegation in the suit that the lottery win was rigged.
A bank spokesman, Richard Nicolezzo, said bank authorities could not comment.
Deirdre Coyle, spokeswoman for the Lottery, said the Lottery had been alerted late last week that the forfeiture suit and seizure warrant were being prepared.
Usually, the Lottery pays no attention to sharing agreements among winners, she said. But now, the Lottery will withhold Bulger's share and turn it over to US marshals. The rest of the winnings will be distributed as in the past.
Gamel said in the affidavit he contacted Michael Linskey last month about the winnings and was surprised to find him receptive.
Linskey indicated he had been "expecting us for years," Gamel said in the affidavit. Linskey's lawyer, Daniel J. Rull 3d, did not return a reporter's calls.