Three individuals, Michael Elliott Kohn, Catherine Elizabeth Chollet, and David Shane Simmons, have been convicted of conspiring to defraud the United States in a tax shelter scheme. The scheme involved the promotion and operation of a fraudulent tax shelter known as the Gain Elimination Plan.

According to court documents and evidence presented at trial, the defendants designed the plan to hide clients' income from the IRS by inflating business expenses through fictitious royalties and management fees. These fees were paid to a limited partnership owned by a charity, but in reality, they were fabricated by Kohn and Chollet.

Kohn and Chollet advised clients that the limited partnership needed insurance on the clients' lives to cover the income allocated to the charity. Simmons, the insurance agent, earned over $2.3 million in commissions from selling these policies and split the commissions with Kohn and Chollet, who received over $1 million from Simmons.

The fraudulent scheme led to a tax loss of more than $4 million for the IRS. The defendants now face potential prison sentences, with a maximum penalty of five years for the conspiracy charge and three years for each charge of aiding in the preparation of false tax returns.

Acting Deputy Assistant Attorney General Stuart M. Goldberg and U.S. Attorney Dena J. King for the Western District of North Carolina announced the convictions. The IRS Criminal Investigation is currently looking into the case, with Trial Attorneys Kevin Schneider and Todd Ellinwood of the Tax Division and Assistant U.S. Attorney Caryn Finley prosecuting the case.