An Orange County man who scored $14 million in illegal refunds for his clients was convicted Thursday of conspiracy and wire fraud.
Ronald L. Brekke, 55, helped prepare phony tax forms for nearly 1,000 people, most of them Canadians, claiming more than $763 million in fraudulent refunds, prosecutors said. After a two-day trial, a jury in federal court in Seattle deliberated for two hours before returning a guilty verdict.
Brekke took advantage of what’s known as an 1099 OID fraud, which according to the
Through a complex process, Brekke would draft false 1099 OID forms that listed his customers' debts as income while also claiming that an equivalent amount had been withheld and paid earlier to the IRS. His clients would then use the forms to claim on their tax returns that they were owed refunds in the same amount as their debts. One form claimed a $490,000 refund.
The IRS caught 98% of the false returns and declared the claims to be frivolous. But the agency ended up paying out $14 million to the few claims that had slipped through — money that will be all but impossible to recover because Brekke told clients to cash their fraudulent checks as soon as they received them and take the money back to Canada.
Brekke was arrested in his apartment in Garden Grove in November 2010 after two Canadian clients, Donald Mason and John Chung, were arrested in Bellingham, Wash., trying to cash two refund checks worth more than $350,000. Both were convicted in federal court in Seattle.
Brekke faces up to 65 years in prison when he is sentenced June 15. Mary Dimke, an assistant U.S. attorney who helped prosecute the case, said Brekke made about $400,000 during the two-year scheme. A PayPal account that customers allegedly used to transfer money to him was found with more than $290,000 in it; the jury ordered him to forfeit the money in the account to the government.