Minnesota ‘Sovereign Citizen’ Receives $19M After Filing $350M in Fraudulent Tax Refund Claims

A Minnesota man who claimed to be exempt from U.S. tax laws has been convicted in what federal prosecutors describe as one of the largest tax fraud schemes in the state’s history.

Deandre Kareme Johnson, a 48-year-old from Sauk Rapids who identified himself as a “sovereign citizen,” filed more than $350 million in fraudulent tax refund claims over several years, ultimately receiving approximately $19 million in improper payments from the Internal Revenue Service.

After a four-day trial in federal court, Johnson was found guilty of multiple counts of filing false tax returns and making false claims against the United States. The jury deliberated for just three hours before returning the guilty verdict.

According to court documents, Johnson exploited a known tax fraud scheme involving Form 1099-OID (Original Issue Discount). This tactic, commonly used by tax protesters and sovereign citizens, involves falsely claiming that financial institutions had withheld large amounts of income tax from the filer. Johnson used this method to claim massive refunds to which he was not entitled.

“This defendant deliberately abused our tax system to enrich himself by millions of dollars,” said U.S. Attorney Andrew Luger in a statement following the verdict. “Tax fraud isn’t just about money—it undermines the integrity of a system that depends on honest reporting from all Americans.”

The sovereign citizen movement, which the FBI classifies as a domestic terrorist threat, is based on a complex set of beliefs that generally assert that individuals are separate from, and not subject to, federal or state government authority. Adherents typically reject tax laws, court jurisdiction, and government regulations.

Internal Revenue Service Criminal Investigation Division Special Agent in Charge Justin Campbell noted that Johnson’s case represents one of the most egregious examples of tax fraud they’ve encountered in the region.

“While most taxpayers file honest and accurate tax returns, Mr. Johnson deliberately created and submitted hundreds of false documents to claim refunds he knew he wasn’t entitled to,” Campbell said. “This verdict sends a clear message that IRS Criminal Investigation and the Department of Justice will vigorously pursue those who attempt to defraud America’s tax system.”

The investigation revealed that Johnson began filing fraudulent returns in 2015. By manipulating the 1099-OID form—a tax form typically used to report original issue discount income from debt instruments—he falsely claimed that banks had withheld substantial taxes from his accounts that needed to be refunded.

Financial experts note that sovereign citizen tax schemes have cost the U.S. Treasury billions of dollars over the past decade. The IRS has continuously updated its systems to better identify suspicious claims, but sophisticated fraud attempts can sometimes slip through automated detection systems.

Johnson’s case highlights ongoing challenges for the IRS, which has faced budget constraints and staffing shortages while combating increasingly complex tax fraud schemes. The agency has recently received additional funding to improve its enforcement capabilities, particularly for high-dollar fraud cases like this one.

Tax law experts point out that the IRS has designated sovereign citizen tax schemes as “frivolous tax arguments” for years, but believers in these theories continue to attempt various methods to avoid tax obligations.

“What makes these cases particularly troubling is that there are organized groups that promote these tax evasion strategies online and through seminars,” said former IRS attorney Rebecca Walters, who now specializes in tax compliance. “They convince vulnerable people that these schemes are legitimate when they’re clearly not.”

Johnson faces a maximum penalty of five years in prison for each false claims count and three years for each false tax return count. Sentencing has been scheduled for later this year. Prosecutors have also indicated they will seek restitution for the full amount fraudulently obtained from the U.S. Treasury.

The case was investigated jointly by the IRS Criminal Investigation Division and the Treasury Inspector General for Tax Administration, with assistance from state and local authorities.