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Thursday, November 14, 2024

Tax professionals sentenced for fraudulent scheme causing significant IRS losses

Attorneys & Judges
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Lisa O. Monaco Deputy Attorney General | Official Website

Two tax attorneys and an insurance agent have been sentenced to a total of 16 years in prison for their involvement in a fraudulent tax shelter scheme. The individuals were found guilty of conspiring to defraud the United States and aiding clients in filing false tax returns.

Michael Elliott Kohn, an attorney, received a seven-year sentence. Catherine Elizabeth Chollet, also an attorney, was sentenced to four years. David Shane Simmons, an insurance agent and broker, was sentenced to five years.

Court documents revealed that between 2011 and November 2022, Kohn and Chollet from St. Louis, along with Simmons from Jefferson, North Carolina, promoted the Gain Elimination Plan. This plan was designed to hide clients’ income from the IRS by inflating business expenses through fictitious royalties and management fees paid to a limited partnership owned by a charity.

Kohn and Chollet instructed clients that the partnership needed life insurance policies to cover income allocated to the charity. The death benefits were tied to the expected profitability of the businesses and the amount of taxable income sheltered.

Simmons earned over $2.3 million in commissions from selling these policies and shared these earnings with Kohn and Chollet. They received more than $1 million from Simmons. Furthermore, Simmons filed false personal tax returns underreporting his business income which led to a tax loss exceeding $480,000.

Overall, their actions resulted in more than $22 million in tax losses for the IRS.

Besides imprisonment, U.S. District Judge Kenneth D. Bell ordered each defendant three years of supervised release and restitution payments totaling $22,515,615 to the United States.

The announcement came from Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Dena J. King for the Western District of North Carolina.

The case was investigated by IRS Criminal Investigation with prosecution led by Trial Attorneys Kevin Schneider and Todd Ellinwood of the Tax Division alongside Assistant U.S. Attorney Caryn Finley for the Western District of North Carolina.

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