‘Sovereign’ Tax Cheat Bilked Millions from Treasury; Gets 12 Years

An antigovernment “tax-cheat guru” who claims the federal government has no authority over him found out differently last week when a judge ordered him to spend 12 years behind bars and pay $6.2 million in restitution.

Ronald L. Brekke, 55, of Orange County, Calif., helped nearly 1,000 people in three countries file for a total of $763 million in bogus tax refunds from the U.S. Treasury.

IRS officials say they “flagged the vast majority” of the filings from Brekke and his clients as frivolous. Even so, some $14 million in tax refunds was paid out before the agency detected the fraud.

About two-thirds of Brekke’s customers were Canadians who had never paid any U.S. income tax and were not owed any refunds from the U.S. Treasury, IRS criminal investigators say. Those submitting the claims were told to quickly move the refund money to Canada so it would be more difficult for the IRS to recover.

Brekke promoted his fraudulent tax scheme on the Internet and at “tax refund seminars” he held in the United States and Canada.

At his sentencing Friday in Seattle, U.S. District Judge John C. Coughenour said Brekke “fundamentally failed” to grasp and follow U.S. laws in the mistaken belief they don’t apply to him. Unless he accepts those laws, the judge told Brekke, he will “squander his remaining time on earth … tilting at windmills.”

Under Brekke’s scheme, sovereign citizens and others with assorted antigovernment agendas were told +that the federal government would issue tax refunds equal to the value of a person’s personal debt.

In a two-year period, he took in approximately $400,000 in fees from the people he assisted, court documents say. He continued despite repeated warnings and fines by the IRS for similar filings he submitted on his own behalf. Brekke also received a public notice from the FBI, warning him that his scheme was illegal.

After he was charged, Brekke filed mountains of frivolous legal documents in federal court, leading federal prosecutors to take the unusual step of seeking an obstruction-of-justice enhancement for sentencing. To back up their claim, prosecutors filed with the court a photo showing a huge pile of his bogus paperwork.

Using a common sovereign citizen technique known as “paper terrorism,” Brekke also filed a multimillion-dollar lien against an IRS employee involved in the administrative forfeiture of $291,064 seized by the government from Brekke’s PayPal account.

Little is known about Brekke’s background because – steadfastly claiming the federal government has no control over him – he refused to cooperate with a federal probation officer who wrote a presentencing background report.

Assistant U.S. Attorney Thomas Woods said in a sentencing memorandum that one thing is clear about Brekke: “He does not believe that this (federal) court has the authority to hear this case. Even though he helped individuals steal millions of dollars from the U.S. Treasury, he maintains that he cannot be held accountable for his actions.’’

“Even worse,’’ the prosecutor added, Brekke “has repeatedly claimed ‘damages’ and demanded that the government pay him money” for bringing criminal charges against him.

Brekke was convicted on March 15 of conspiracy and wire fraud following a two-day jury trial in Seattle. The defense called no witnesses.

The investigation into Brekke’s activities began after two Canadian co-conspirators were arrested in October 2009 in Bellingham, Wash., when they tried to cash two IRS refund checks exceeding $350,000 each.

Convicted of fraud, Donald Mason, of Fort Saskatchewan, Alberta, was sentenced to 33 months in prison, and John Chung of Kelowna, British Columbia, was sentenced to a year and a day. A third conspirator, Wonita Chung, also of Kelowna, was sentenced to 18 months. Brekke’s promotional materials were found in Mason's hotel room, leading authorities to him.

Kenneth J. Hines, the IRS special agent in charge of the Pacific Northwest, said the U.S. tax system “is not a slush fund for thieves and fraudsters.”

“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,” Hines said. Foreign nationals residing in other countries are not shielded from prosecution, “as a few Canadians who participated in this scheme learned the hard way.”