CANADIAN SENTENCED TO ONE YEAR PRISON TERM FOR THEFT OF U.S. FUNDS
Defendant Attempted to use Fake Tax Filings to Defraud the U.S. Treasury
A Kelowna, British Columbia welder was sentenced today in U.S. District Court in Seattle in connection with a widely advertised tax fraud scheme. JOHN CHUNG, 59, was sentenced to a year and a day in prison, three years of supervised release and $291 in restitution for theft of government funds. CHUNG has already forfeited to the government most of the $369,534 he sought to steal with the phony tax filings. At sentencing, Chief U.S. District Judge Robert S. Lasnik noted that CHUNG’s conduct was “a serious departure from the rest of your life.” Chief Judge Lasnik called those who were promoting the tax fraud scheme “snake-oil salesmen,” and he urged CHUNG to spread the word when he returned to Canada that “if it sounds too good to be true, it is.”
According to filings in the case, CHUNG attempted to execute what is referred to as “1099-OID fraud” -- falsely claiming that he was owed $369,534.60 in federal income tax that had been withheld on his behalf. On September 8, 2009, CHUNG filed a 1040NR tax return and phony 1099-OID forms with the Internal Revenue Service. The IRS initially did not detect the fraud and sent CHUNG a check. CHUNG then traveled to Bellingham, Washington, and opened a bank account to deposit the check. An alert bank employee notified the IRS when she became suspicious about the size of the refund check. A second Canadian, Donald J. Mason, was arrested the same day trying to execute a similar scheme. In court today, CHUNG’s defense attorney Stephan Illa, described how CHUNG had attended seminars presented by well dressed “experts” who claimed the tax refund scheme was legal. It was, Mr. Illa said, “the seduction of easy money.”
Assistant United States Attorney Thomas Woods noted that the scheme required CHUNG to engage in “cold, calculating conduct over several months . . . and at a variety of points he could have stopped.” In sentencing documents, prosecutors noted that the IRS has tried to publicize the fraud with web postings.
Speaking to the court, CHUNG said, “I’ve had six months to think about my situation... It was a greed situation... I’ll never do anything like this again.” CHUNG has been in custody at the Federal Detention Center at SeaTac since October 29, 2009. He pleaded guilty in February 2010. He will be deported to Canada following his prison term.
On April 13, 2010, Donald Mason was convicted at trial of theft of public money. He faces up to ten years in prison when sentenced by U.S. District Judge John C. Coughenour on August 6, 2010.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI) and the United States Secret Service.
The case was prosecuted by Assistant United States Attorneys Thomas Woods and Tessa Gorman.
For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110 or Emily.Langlie@USDOJ.Gov.
