Canadian Sentenced after Claiming $350,000 U.S. Tax Refund

A Canadian citizen was sentenced to nearly three years in a U.S. federal prison after he tried to deposit a $350,000 U.S. federal tax refund in a Washington State bank.

Donald J. Mason, 58, a Canadian citizen who resides in Fort Saskatchewan, Alberta, was sentenced on Friday in U.S. District Court in Seattle to 33 months in prison, two years of supervised release and $387.64 in restitution for theft of public money. Mason submitted fraudulent documentation claiming he was entitled to a tax refund of more than $350,000. A check was sent to his home in Canada, but alert bank employees in Bellingham, Wash., put a hold on the check and all but $387.64 of the money was recovered.

The jury convicted Mason in April following a two-day trial. At sentencing, U.S. District Judge John C. Coughenour told Mason his sentence reflected the seriousness of the crime and “getting the message [of deterrence] across to those who are prone to engage in schemes like this.”

According to records filed in the case, Mason was arrested last October at the Bank of America branch in Bellingham where he deposited a U.S. government check for $359,926.80. The check had been mailed to Mason’s home in Canada, after he submitted fraudulent tax forms indicating that various financial institutions had withheld federal income tax on his behalf. Based on the phony forms, the IRS sent Mason the check. Mason’s wife had also submitted similar forms claiming more than $333,000 in income tax had been withheld. The IRS caught that fraud and sent her a letter warning about frivolous tax filings.

The fake filings are part of a widely disseminated scheme called “1099-OID” fraud, based on the forms used to try to fraudulently claim a tax refund.

An alert bank employee put a hold on the funds when Mason deposited them in the Bank of America account on Oct. 26, 2009. Mason returned to the bank over the next few days and attempted to withdraw large sums in cash. He was arrested on Oct. 29, after the IRS informed the bank that the check had been fraudulently obtained. After he was arrested, law enforcement recovered a laptop from Mason. The laptop revealed that Mason had downloaded IRS publications about the fraudulent scheme and that someone had sent him an FBI warning about the scheme.

Even after he was convicted, Mason continued to claim that he was entitled to the money, and attempted to stop the return of the funds to the U.S. Treasury by filing a claim in the related forfeiture action. In asking for a 33-month prison sentence, Assistant United States Attorney Thomas Woods noted that Mason remains defiant and unrepentant for his crime.

“This offense involved the attempted theft of nearly $700,000 from the United States Treasury,” Woods wrote in his sentencing memo. “Mason knew what he was doing was illegal, reflected by his travel to Bellingham, his conduct at the bank, and the fact that he proceeded with the scheme after receiving the FBI warning and numerous IRS publications discussing the fraudulent nature of the scheme. There is no doubt that Mason intended to grab as much money as quickly as he could and then return to the perceived safety of Canada.”