Tax Shelter Fraud

[Lee B]

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."

 

I am always amazed how gullible the victims are?  I had a client about 10 years ago who  invested  $300,000

in a pyramid scheme that guaranteed a 12 % return. Most of the victims were here in the Pacific Northwest.

The pyramid scheme was forced into a bankruptcy liquidation and my client ultimately recovered about $200,00.

 

[Lee B]

Actually it was a Ponzi Scheme, very similar to what Bernie Madoff did for many years.

[Max W]

It's amazing what some tax pros try to get away with.   I had an a CPA, more than 30 years ago who was an ex IRS Criminal Investigator.

He though he knew what he could get away with.  He and his assistant, also a CPA, inflated expenses on clients business returns.   One of the clients got audited and it led to the IRS looking at other returns that had been prepared by them.   It ended up with hefty jail sentences and fines.