Ashe County man convicted in $4 million tax evasion scheme

CHARLOTTE, N.C. (QUEEN CITY NEWS) — An insurance broker out of Ashe County was found guilty of a fraudulent tax scheme in a case that also involved two defendants from St. Louis.

A federal jury in Charlotte on Thursday found two tax attorneys and an insurance agent guilty of conspiring to defraud the United States government. They were accused of helping clients file false tax returns based on their promotion and operation of a fraudulent tax shelter, said Dena J. King, U.S. Attorney for the Western District of North Carolina.

“Today’s guilty verdict sends a clear message that we will not tolerate tax fraudsters who promote and operate fraudulent tax schemes,” said King in a statement. “Their conduct compromises the integrity of our tax system and burdens the rest of us with the weight of their deceit.”

According to court documents and evidence presented at trial, from 2011 to November 2022, Michael Elliott Kohn and Catherine Elizabeth Chollet, both attorneys and residents of St. Louis, and David Shane Simmons, a licensed insurance agent and broker based out of Jefferson, promoted, marketed and sold to clients a fraudulent tax scheme known as the Gain Elimination Plan.

The defendants designed the GEP to conceal their clients’ income from the IRS by inflating business expenses through fictitious royalties and management fees. These fees were “paid,” on paper, to a limited partnership largely owned by a charity. In reality, Kohn and Chollet fabricated the fees, the court documents show.

The two St. Louis attorneys, Kohn and Chollet received more than $1 million from Simmons. Simmons also filed false personal tax returns that underreported his business income and inflated his business expenses, resulting in a tax loss of more than $480,000.

In total, the defendants caused a tax loss of more than $4 million.

A sentencing date has not been set. They face a maximum penalty of five years in prison for the conspiracy charge and a maximum penalty of three years in prison for each charge of aiding and assisting in the preparation of false tax returns. Simmons also faces a maximum sentence of three years in prison for each count of filing false personal tax returns.

Assistant U.S. Attorney Caryn Finley in Charlotte and Trial Attorneys Kevin Schneider and Todd Ellinwood of the Tax Division are prosecuting the case.

For the latest news, weather, sports, and streaming video, head to Queen City News.