IRS Criminal Investigation (IRS-CI) Presents: Tax Case of the Month

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November Tax Case of the Month

Tax shelter fraud scheme leads to 16 years in prison

Two tax attorneys from St. Louis and an insurance agent from North Carolina will spend a combined 16 years in prison for running a fraudulent tax shelter resulting in a tax loss of more than $22 million.

Michael Elliott Kohn, Catherine Elizabeth Chollet, and David Shane Simmons created and promoted the “Gain Elimination Plan,” a scheme that helped clients hide income and inflate business expenses. From 2011 to 2022, the group fabricated transactions using fake royalties and management fees. On paper, they funneled these fees into limited partnerships owned by charities, but in reality, the transactions were used to evade taxes.

To further the scheme, they required clients to buy life insurance policies linked to their hidden income. The death benefit for the policy was directly tied to the anticipated profitability of the clients’ businesses and how much of the clients’ taxable income was intended to be sheltered. Simmons, the insurance agent, earned more than $2.3 million in commissions by selling these policies and shared profits with Kohn and Chollet. Kohn and Chollet received more than $1 million from Simmons.

Simmons also filed false personal tax returns, underreporting his income and inflating expenses, which caused an additional $480,000 in tax losses.

The court sentenced the three as follows:

• Michael Elliott Kohn: seven years
• Catherine Elizabeth Chollet: four years
• David Shane Simmons: five years

The court also ordered them to serve three years of supervised release and pay more than $22.5 million in restitution.

This case demonstrates the IRS Criminal Investigation’s (IRS-CI) commitment to holding tax fraudsters accountable and protecting honest taxpayers from bearing the burden of others’ crimes.

Each month, IRS-CI leadership selects one criminal case adjudicated during the previous month to serve as the Tax Case of the Month. This month’s case was investigated by IRS-CI’s Charlotte Field Office.

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IRS-CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. IRS-CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.