Insurance agent, lawyers charged with multi-million dollar scams

A North Carolina insurance agent and two St. Louis tax attorneys have been indicted on charges related to a $200 million insurance scam and operation of a fraudulent tax shelter that caused a tax loss to the IRS of tens of millions of dollars.

David Shane Simmons, a North Carolina insurance broker, and attorneys Michael Elliott Kohn and Catherine Elizabeth Chollet have been charged with conspiracy to defraud the United States and assisting clients in filing false statements of income, according to the Department of Justice.

The DOJ alleged that the three conspired to defraud the United States by promoting, marketing and selling to clients a tax scam known as the Gain Elimination Plan (GEP). Simmons, Kohn, and Chollet allegedly designed the GEP to conceal client income from the IRS by fraudulently inflating business expenses through bogus royalties and management fees. Those fictitious fees were paid — on paper — to a limited partnership largely owned by a charity, the DOJ said. In reality, Kohn and Chollet allegedly fabricated the royalties and fees.

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The indictment also alleges that Kohn and Simmons collaborated in a scheme to defraud an insurance company by providing false insurance application information on behalf of their clients. The false information allegedly included fictitious representations about clients’ finances and the purpose of insurance policies. In total, the insurance company issued more than $200 million in insurance policies based on false information, the DOJ said. Simmons reportedly earned large commissions on these policies, most of which he shared with Kohn and Chollet. Simmons also allegedly filed false tax returns by underreporting his business income and inflating his expenses.

If convicted, Simmons, Kohn and Chollet each face a maximum of five years in prison for conspiracy to defraud the United States and three years for each of multiple counts of aiding and abetting the preparing false tax returns. Simmons and Kohn also face up to 20 years each for wire fraud, and Simmons faces an additional three years for multiple counts of filing false personal income tax returns.