News and Press Releases

United States Attorney Jenny A. Durkan
Western District of Washington

California Man Sentenced For Tax Fraud Conspiracy That Resulted In More Than $14 Million Tax Loss

Defendant Promoted “Absurd” Scheme in U.S. and Canada

June 22, 2012

A California man who submitted false tax forms and promoted a tax fraud scheme in the U.S. and Canada was sentenced today in U.S. District Court in Seattle to 12 years in prison, three years of supervised release and $6,206,998 in restitution for conspiracy and wire fraud.  RONALD L. BREKKE, 55, of Orange County, California was convicted following a two-day jury trial in March 2012.  BREKKE promoted a tax fraud scheme known as “1099 OID” fraud.  Promoters of this scheme claim that the U.S. Treasury will pay out tax refunds equal to the value of a person’s personal debt.  BREKKE helped nearly 1,000 people in three countries claim over $763 million in fraudulent tax refunds.  At sentencing, U.S. District Judge John C. Coughenour said BREKKE “fundamentally failed to grasp our laws.”  The Judge told BREKKE, he could spend the rest of his life “tilting at windmills,” and “squander his remaining time on earth,” or instead come to accept that our laws are “rules that citizens of this country have made.” 

            “The defendant used his knowledge to exploit vulnerabilities in the tax system, to loot tax dollars,” said U.S. Attorney Jenny A. Durkan.  “He used citizens of the U.S. and Canada to hide his dirty work, and now will pay with a lengthy prison term.”

            BREKKE was indicted and arrested in late 2010, after two of his Canadian co-conspirators were arrested in Bellingham after trying to cash two refund checks exceeding $350,000 each.  The two Canadians, Donald Mason and John Chung, were convicted in U.S. District Court in Seattle, and the investigation revealed that BREKKE had been promoting the tax fraud scheme.  The IRS flagged the vast majority of the 1099 OID filings as frivolous, but refund claims totaling approximately $14 million were paid before the IRS detected the fraudulent nature of the returns.  About two-thirds of BREKKE’s customers were Canadians who had never paid a dime in income tax and were not owed any money by the U.S. Treasury.  Those submitting the phony claims were told to quickly move the money to Canada where it would be more difficult for the IRS to recover the money.  BREKKE took in about $400,000 in fees over less than a two year period from the people he aided in the fraud.

 BREKKE had been repeatedly warned and fined by the IRS for similar frivolous filings that he had submitted on his own behalf.  He also had received a public notice from the FBI warning him that the scheme was illegal.  In a recording played for the jury at his trial, BREKKE is heard telling people at a seminar that some of the filings would slip through resulting in a big payout for some of the filers.  The IRS has been able to get just over half the $14 million back, resulting in a restitution figure for BREKKE of $6,206,998.  The jury also found that $291,064 seized from BREKKE’s PayPal account at the time of his arrest was subject to forfeiture as the proceeds of his crime.

“The American tax system is designed to provide vital government services to our people.  It is not a slush fund for thieves and fraudsters,” said Kenneth J. Hines, the IRS Special Agent in Charge of the Pacific Northwest.  “Those who illegally target our nation’s tax dollars for personal financial gain, along with others who assist them, could face criminal prosecution and lengthy prison sentences.  The foreign nationals residing in other countries who participated are not shielded from prosecution, as a few Canadians who participated in this scheme learned the hard way.”   

The IRS has more information on 1099 OID fraud here:,,id=254383,00.html

Since his conviction BREKKE and his cohorts have continued to defy the authority of the justice system.  “Ronald Brekke has not simply failed to accept responsibility for his actions.
Rather, he has refused to accept the basic premise that he can be held accountable for his
actions…. He filed liens against the Court and others, including a multi-million dollar lien against [an] Internal Revenue Service employee…. He and his cohorts filed a frivolous bankruptcy action against the United States in the District of Arizona and attempted to “remove” this criminal action to the bankruptcy court….  He filed a free-standing action against the Court and the prosecutors, making a variety of frivolous claims.  He filed a score of frivolous papers in this Court, making a number of baseless assertions, including that he was entitled to damages from the government,” prosecutors wrote in their sentencing memo.

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, Mary K. Dimke and Tessa Gorman.



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