From left, Jim Cassidy, Danny Nikolic and Mark Zahra.

From left, Jim Cassidy, Danny Nikolic and Mark Zahra. Photo: Lee Besford, Pat Scala

THE betting agencies never suspected a thing. Why would they? It was only relatively small bets placed in Queensland, Victoria and Western Australia on Smoking Aces. For instance, in Perth, one lucky punter collected around $70,000 off the back of two five-grand wagers.

But had the betting companies involved known the identity of some of the punters, their suspicions would more than likely have been aroused.

The Gold Coast punter who placed a winning bet on Danny Nikolic's ride Smoking Aces at Cranbourne on April 27 last year was a good mate of Danny's Gold Coast-based brother, John. He won at least $60,000.

Danny Nikolic riding Smoking Aces in Seymour in August.

Danny Nikolic riding Smoking Aces in Seymour in August. Photo: Brett Holburt

In Melbourne, a punter who was a close associate of Danny Nikolic bet a couple of thousand on Nikolic's ride and won around $25,000. Another punter who pocketed a few grand after Smoking Aces' win was Tommy Nikolic, Danny's younger brother.

The Perth punter was millionaire businessman and convicted cannabis trafficker Peter Jones, who not only owned several horses that Nikolic had ridden successfully interstate, but was known for joining the champion jockey at his infamous post racing carnival celebrations, events that started at pubs and often continued in nightclubs and hotel suites. All up, these four men closely tied to Danny Nikolic - Peter Jones, Tommy Nikolic, the Melbourne punter and the Gold Coast punter, collected around $200,000, a tenfold return on their wagering.

So was it just good luck? Or had they been told by an insider that Smoking Aces was a strong prospect?

It is these questions that Australia's most serious racing corruption inquiry is seeking answers to. In the process it is uncovering a wide range of dubious associations and behaviour involving Australia's leading jockeys.

The inquiry by the Victoria Police is not only examining information suggesting that Nikolic was ''tipping'' inside information to these four men about the prospects of Smoking Aces, but whether he tried to engineer the outcome of the Cranbourne race in concert with another jockey in order to increase the horse's chances of winning. As The Sunday Age reveals today, there is, according to numerous racing industry sources, strong circumstantial evidence to support the police's suspicions.

The key to understanding the Smoking Aces scandal is what occurred in the months and years before the race.

Racing stewards have long suspected Nikolic of tipping to his punting associates and, occasionally, riding to increase their chances of betting success. A major case brought by stewards in 2010 made similar allegations, but was rejected by Victoria's racing tribunal because of insufficient evidence.

Several racing sources who have had dealings with Nikolic describe a talented but erratic jockey who not only regularly tipped, but played punters off against each other by giving deliberately false information about the chance of his horse winning to lengthen its odds.

Nikolic is not alone in tipping - policing agencies have information which shows beyond doubt several top jockeys, including Jim Cassidy and Craig Newitt, have tipped. Cassidy has privately told investigators he sees nothing wrong with the practice because most jockeys do it. The practice occupies a grey area but becomes a clear breach of the rules of racing if money is given to a jockey in return for tips on his mount.

In most cases, this conduct has been uncovered accidentally as jockeys' voices have featured unexpectedly on the tapped phone conversations of gangsters. (For example, Newitt gave tips in late 2006 to a major drug trafficker who was convicted this year of Australia's biggest ecstasy importation.)

Generally, nothing has been done about this because racing authorities can't access or use police information - a problem no state government seems eager to confront.

In the case of Smoking Aces, trainers and jockeys have privately confirmed that police have recently confronted several industry players about what is suspected to have happened in connection to the Cranbourne race fix.

According to some they have sought to speak to, detectives are interested in not only what happened on the day, but in the lead up to the race.

The weeks before the April race were stressful for Nikolic. His former father-in-law, racing identity Les Samba, was murdered and Nikolic was struggling to get regular rides on top horses. Some time before the race, Nikolic fell out with several Caulfield-based racing figures. One, trainer Byron Cozamanis, refused to take directions from Nikolic on how Smoking Aces should be trained. Sources say jockey Mark Pegus, who was doing trackwork for Cozamanis, also argued with Nikolic about Pegus' availability to ride certain horses. (Nikolic was later charged by police with assaulting Pegus, in a matter still before the courts).

To several observers, Nikolic appeared to have an unusually large say in the Smoking Aces pre-race preparation as the horse was moved from the Cozamanis stable to new trainers. Nikolic also wanted to influence how at least one other jockey would ride their mount on April 27. It is understood that jockey Mark Zahra was offered a $5000 kickback for riding his horse in a way which would favour Nikolic's ride. Zahra agreed to help out, effectively becoming part of a conspiracy to secretly shorten Smoking Aces' chances of winning. The only thing left to do was punt.

And so, in the hours before the race, the bets were laid. In the last few months, Perth's Peter Jones, the Melbourne punter and the Gold Coast punter and Tommy Nikolic have been approached by authorities about their successful betting on Nikolic's horse.

''Peter [Jones] was up at St Kilda Road [police crime department headquarters]. And he was shitting himself,'' says one source.

Which leads to the next question on everybody's lips in Australian racing: did police conducting an investigation into the murder of Samba inadvertently capture conversations that will prove Nikolic engaged in race fixing?

And if this corruption was only uncovered because police stumbled onto it, how widespread is it? And, perhaps most importantly, will racing authorities (who have no police powers) or police (who only recently began directing resources to fighting racing corruption) get to the bottom of it?

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Email us at investigations@theage.com.au