Although it is uncommon, it does happen. There really is nothing TDs can do about it if the player's official USCF rating is low and his online rating is sky high. I have heard stories of that from my friend who is an expert but I personally have never seen it happen. What some people do to continue this little trick is they play, take the prize money, do another tournament (with a low entry fee) and lose on purpose to lower their ratings again and repeat the process. However, like I said, this is fairly uncommon because most people strive to reach their full chess potential. Nonetheless, it has and will happen again. In response to your second question, if you are interested in doing a local tournament, you can look local ones up in your area at the USCF website or in the magazine called Chess Life. If you want to do a big one with a lot of competitors and a lot of prize money, then you may have to consider traveling to another city (I live in New York and there are chess tournaments all over the place. I got lucky)
Prize tournaments and ratings question:
Google Continental Chess Association to find the big prize money tournaments for class players. There are others, but that's the organization that runs the biggest ones.They run tournaments all over the country for big money - you may not have to travel far. The caveat is that the entry fees are $100-300 depending on a few things. Obviously, the bigger entry fees correspond to bigger prize funds.
There's nothing wrong with not playing tournaments for a while, getting stronger, and then winning a class prize.
RapidGeneralX's scheme won't quite work, though. Well, maybe it will. It's immoral. There are a couple things that prevent this from working particularly well. First, if you win over $2000 in a class event, you get a rating floor. For instance, you win $4000 in the U1200 section, you now have a rating floor of 1200. If you're earning less than that, frankly, it'll be quite a bit of time and entry fees to get back below whatever ratings threshold you're shooting for, perhaps you have something better to do with your time and money. I'm fairly sure people would notice if you went 5-0 in an U1200 tournament to win small beans, like $600, then sunk a few tournaments to get under 1200 again, and tried again, but I don't know if there's a formal mechanism.
Losing on purpose is not worth my time or money, and goes against my ethics. My plan is to study hard while staying off the radar, then win, then disappear for another year, raising my strength another 400 points, then strike again in the next higher section. I'm sure by the time I'm rating above 2000 it would be very difficult for me to climb fast enough to steal an event again any time soon, and I'd be competing with other torpedos. Still, if I go to a $100 entry big even for under 1600, followed by another $100 entry event for under 2000, I bet I could make off big. After that I'll just stick to online chess for free, until my rating gets high enough to get a computer company to have me play their program for cash.
Classes are 200 rating points apart, FYI. Should make it a little easier for you. Best of luck, though it's hard to improve to this sort of level without playing regularly.
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What if someone is rated 2000 on this site, but has a USCF rating of 1200 from a USCF tournament ten years ago, and shows up trying to get into one of the lower sections to make some money. Would the USCF likely check with this site and shake a finger at him?
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It would be the same as checking your Scrabble rating.
Well I sure don't have to lose on purpose. After a short winning streak of winging attacks I played someone at my own level and discovered my sacrificies did not pay off. I need to really be ready to click "decline" when asked for a rematch, so I can copy down the moves and analyze them. Without having games to analyze, all I learned was that I can't trust my gut, though in blitz I almost have to.
How many people study their butts off to attain 2000 level skill before finally showing up to tournament unrated or with an old much lower rating and then practically steal the prize? Do tournament directors watch out for this sort of thing?
What if someone is rated 2000 on this site, but has a USCF rating of 1200 from a USCF tournament ten years ago, and shows up trying to get into one of the lower sections to make some money. Would the USCF likely check with this site and shake a finger at him?
And how common are big chess tournaments with 10+ contestants per category and plenty of prize money? Is there one it every big city every year, or would I have to fly into New York?