One enterprising criminal tax fraud promoter has put a new twist on the concept of “robbing Peter to pay Paul,” in a scheme which might be described as robbing Uncle Sam to pay citizens of the Great White North: persuading Canadian citizens to file fake United States tax forms to collect real refunds from these fraudulent claims.
A Canadian tax fraud promoter who was extradited from Canada and convicted at trial was sentenced to nine years in prison for conspiracy and three counts of wire fraud. The sentencing judge cited the “audacious nature” of his scheme.
Franzie F. Colaco, 54, of Brampton, Ontario, Canada, was convicted during a two-day jury trial. He was found guilty of conspiring with Ronald L. Brekke and others to promote a scheme known as “1099 OID” fraud. Under this scheme, tax filers use fraudulent Form 1099-OID forms to claim tax refunds equal to the value of the filer’s personal debt.
Colaco promoted this scheme throughout Canada and encouraged Canadian citizens to request refunds from the U.S. government.
The IRS flagged the vast majority of the 1099 OID filings as frivolous, but refund claims totaling approximately $14 million were paid to followers of Brekke and Colaco before the IRS detected the fraudulent nature of the returns.
“This defendant promoted theft of U.S. tax dollars by convincing Canadians they could get rich at others’ expense,” Acting U.S. Attorney Annette L. Hayes said in a statement. “This is a fraud — pure and simple — and one that will not go unpunished.”