Latest Participant in OID-1099 Tax Fraud Scheme Sentenced to 18 Months in Prison

            The latest participant in a well-known fraudulent tax refund scheme will spend 18 months in prison for four counts of filing fraudulent tax returns, announced Acting U.S. Attorney Annette L. Hayes.  CHARLES SCOTT BROWN, 54, of Camas, Washington, was sentenced last week and ordered to pay more than $1.2 million in restitution to the Internal Revenue Service.  At the sentencing hearing U.S. District Judge Robert J. Bryan told him, “This is a huge tax theft, not a nickel and dime deal.  This is a serious, serious offense.  I don’t know how someone can do this and not expect to get jail time.”

            “This defendant is the latest in a line of U.S. and Canadian scammers illegally claiming huge tax refunds at the expense of law abiding Americans,” said Acting U.S. Attorney Annette L. Hayes.  “Now he is paying with his freedom, and with a share of his future earnings for the money he stole.”

            Between December 2007, and February 2008, BROWN submitted four fraudulent tax returns, claiming he was owed more than $1.2 million in tax refunds.  When the refund checks came in, BROWN used the money for travel to Mexico and Hawaii, shopping sprees at Nordstrom and Zappos.com, and luxury hotel stays with expensive dinners out.

“At IRS Criminal Investigation, our top priority is protecting the integrity of our nation’s tax system,” said Special Agent in Charge Teri Alexander.  “Together with the Department of Justice, we have a long history of identifying and prosecuting those who promote and use abusive tax schemes.  The 1099 OID scheme that was used by this defendant and others sentenced in this district is particularly troublesome. These individuals not only evaded their legal tax obligation, they took their fraud a step further and attempted to blatantly steal millions from the U.S. Treasury.  Our Special Agents are dedicated to ensuring that our tax laws are administered fairly under the law.  When unscrupulous individuals such as this defendant seek to take advantage of the taxpaying public, we will be there to bring them to justice.”

            Examples of other defendants prosecuted in the Western District of Washington for 1099 OID fraud include:

            The IRS has more information on 1099 OID fraud here: http://www.irs.gov/uac/Newsroom/IRS-Releases-the-“Dirty-Dozen”-Tax-Scams-for-2014;-Identity-Theft,-Phone-Scams-Lead-List.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI).  BROWN was prosecuted by Assistant United States Attorney Marci Ellsworth.