Patricia B. Paterson, et al. - Page 5




                                         -5-                                          
               Despite Mr. Paterson’s efforts to avoid being caught at his            
          illegal activities, agents of the Minnesota Gambling Enforcement            
          Division searched Mr. Paterson’s home and his son’s apartment on            
          December 12, 1999.  The agents arrested Mr. Paterson and seized             
          gambling records covering 4 days of betting and three cellular              
          phones.  The gambling records seized indicate that Mr. Paterson             
          accepted an average of $96,070.50 of bets each day for those 4              
          days, a vastly larger amount than the gross wagers Mr. Paterson             
          reported on the Forms 730.  In fact, the total gross wagers                 
          accepted over those 4 days exceeded the total wagers Mr. Paterson           
          reported he accepted for the entire year 1997 or the entire year            
          1998.  Moreover, the seized records did not include a Saturday,             
          which is generally a high-volume day, and included one partial              
          day of wagering because the search commenced before the day’s               
          wagering was complete.                                                      
          Mrs. Paterson’s Activities                                                  
               Mrs. Paterson was aware of her husband’s illegal gambling              
          activities.  She has worked as a flight attendant for Northwest             
          Airlines (NWA) for approximately 25 years, but she worked only              
          limited hours during the years at issue.  In fact, NWA reported             
          it paid her only $3,105 in 1997 and $16 in 1998.                            
               Mrs. Paterson helped her husband hide his bookmaking                   
          activities although she did not accept bets herself.  She                   
          obtained the cellular phones in her name that were seized in the            









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