A California man has been convicted in a scheme in which hundreds of Canadians filed fraudulent tax refund claims in the United States.
Ronald L. Brekke was found guilty this week of conspiracy and wire fraud after helping nearly 1,000 people falsely claim millions of dollars in tax refunds.
"There were around 630 Canadians who sought fraudulent refunds from the IRS under this [scheme]," said Daniel Wardlaw, spokesman for the U.S. Internal Revenue Service criminal investigation office in Seattle, Wash. The "enormous" scam reveals the public's vulnerability when it comes to fraudsters, he said.
While tax fraud schemes are common, "the idea on the part of the promoter is to find new victims who aren't aware," he said.
Brekke told his victims the U.S. Treasury would pay out tax refunds equal to their personal debt, a deception known as "1099 OID" fraud after the form used to claim the refund. He prepared fraudulent claims worth more than $763 million US, though only $14 million or so worth of the claims were paid out by the U.S. government, the IRS said.
A government trial brief shows the ploy earned Brekke more than $400,000 between February 2009 and his arrest in November 2010.
The scam started to fall apart after two of Brekke's co-conspirators, both Canadians, tried to cash refund cheques worth more than $350,000 each at a bank in Bellingham, Wash.
Donald Mason of Fort Saskatchewan, Alta., and John Chung of Kelowna, B.C., were arrested in October 2009 and the investigation led authorities to Brekke, whose promotional materials were found in Mason's hotel room. They were convicted of fraud in connection with the case.
"The promotional material made clear that Brekke was the mastermind of the scheme," American court documents read.
Emails obtained by IRS investigators showed at least two others organized seminars in Canada to draw more people into the scam, according to the documents.
Wardlaw said the IRS typically seeks to recover the full amount doled out in fraudulent refunds.
"There can be penalties involved. Our goal is to keep any people in the future from being penalized," he said, noting that preventing even one case can save a family from financial ruin.
Brekke faces up to 20 years in prison and is set for sentencing on June 15.