Photo: Flickr / GeoffLMV
In October 2009, Canadian-born Donald Mason and John Chung walked into a Bellingham, Wash. Bank of America and tried to deposit U.S. tax refund checks totaling more than $700,000.Little did they know their suspicious deposits would trigger an IRS investigation that would uncover a tax scheme so elaborate, it could have cost the U.S. more than $763 million in taxpayer dollars.
According to the IRS, it all started with Donald Brekke, a 55-year-old Orange County resident who allegedly helped nearly 1,000 taxpayers – including more than 600 Canadians like Chung and Mason – prepare fraudulent tax forms.
Both Chung and Mason, who were later arrested and convicted of fraud, were mentioned by Brekke in the tax preparation seminars he set up to promote his scheme as examples of what can happen to those seeking a fraudulent refund.
The seminars continued to take place even as Brekke was under investigation. He was eventually arrested in November 2010 and on March 15, a Washington District Court found him guilty of conspiracy and three counts of wire fraud, according to a press release.
But by the time investigators uncovered the scheme, the IRS says about $14 million in false claims had already been paid out to Brekke’s clients. He managed to pocket more than $400,000 for himself.
When asked how much money is lost through scams each year, Daniel Wardlaw, a spokesperson for the IRS Crime Investigations in Seattle, told Business Insider, “We don’t have figures in part because it is our policy to try to recover all fraudulent refunds, with interest and penalties.”
Brekke is due for sentencing on June 15 and faces up to 20 years in prison, according to the IRS.