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Man convicted of tax fraud scheme | U.S. District Court
A California man who submitted false tax forms and promoted a tax fraud scheme in the U.S. and Canada was convicted today of conspiracy and wire fraud following a two-day jury trial in U.S. District Court in Seattle.
The jury deliberated about two hours before finding 55-year-old Ronald L. Brekke guilty on all counts.
The Orange County, Calif. man was indicted and arrested in late 2010, after two of his Canadian coconspirators were arrested in Bellingham after attempting to cash two refund checks exceeding $350,000 each.
The two Canadians, Donald Mason and John Chung, were convicted in U.S. District Court in Seattle, and the investigation revealed that Brekke had been promoting the tax fraud scheme. Brekke faces up to 20 years in prison when sentenced by U.S. District Judge John C. Coughenour, on June 15. The jury also found that $291,064 seized from Brekke’s PayPal account at the time of his arrest was subject to forfeiture as the proceeds of his crime.
Brekke promoted a tax fraud scheme known as “1099 OID” fraud. Promoters of this scheme claim that the U.S. Treasury will pay out tax refunds equal to the value of a person’s personal debt. Brekke helped nearly 1,000 people claim over $763 million in fraudulent tax refunds by preparing phony tax forms on their behalf.
The IRS flagged the vast majority of the filings as frivolous, but refund claims totaling approximately $14 million were paid before the IRS detected the fraudulent nature of the returns. Brekke had been repeatedly warned and fined by the IRS about the frivolous filings. He also had received information from the FBI that the scheme was illegal. In a recording played for the jury, Brekke told people at a seminar that some of the filings would slip through resulting in a big payout for some of the filers. In closing argument, prosecutors said that Brekke “knew the tax system’s vulnerabilities and exploited them… and the result was people getting free money who never paid a dime into the U.S. Treasury.”