Sunday, July 14, 2024

Ashe County insurance agent convicted in tax fraud case

A federal jury in Charlotte convicted a Jefferson insurance agent of conspiring with two Missouri tax attorneys to defraud the IRS in a $4 million tax shelter scheme, according to the U.S. Attorney’s Office.

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 in Ashe County promoted, marketed, and sold to clients a fraudulent tax scheme known as the Gain Elimination Plan.

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

Kohn and Chollet advised clients that the “plan’s” limited partnership was required to obtain insurance on the life of the clients to cover the income that was allocated to the charitable organization. The death benefit 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 earned more than $2.3 million in commissions from selling the insurance policies, splitting the commissions with Kohn and Chollet. 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.

The indictment alleged that Kohn and Simmons caused the insurance company to issue more than $200 million in insurance policies based on false application information.

Simmons did not return a message left on his cellphone. Neither Kohn nor Chollett could be reached for comment.

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

A sentencing date has not been set. They each 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 penalty of three years in prison for each count of filing false personal tax returns. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

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