Criminal – Defendants convicted of tax return fraud

Where three individuals convicted of conspiracy to defraud the government and assisting in the preparation of false and fraudulent tax returns challenged their convictions on multiple grounds, but each of their arguments was rejected, their convictions were affirmed.

Background

Michael Kohn, Catherine Chollet and David Simmons were convicted of conspiracy to defraud the government and assisting in the preparation of false and fraudulent tax returns.

Appointments Clause

Defendants maintain that their criminal tax prosecution could not proceed because it “had to be authorized by the Assistant Attorney General, Tax Division” but that, at the time of their prosecution, “there was no AAG-Tax.” The court disagrees.

First, documents in the record demonstrate that Acting DAAG Stuart Goldberg in fact authorized the prosecution of the defendants in this case on Nov. 7, 2022. And while DAAG Goldberg was the Acting DAAG, Criminal at the time, he was, as Acting DAAG, nonetheless authorized to approve the defendants’ prosecution.

The defendants nevertheless argue that Goldberg did not have authority to authorize the prosecution because his authority to do so derived from Tax Division Directive No. 138. They contend that Tax Division Directive No. 138 was an unlawful delegation because 28 C.F.R. § 0.70 directed that the AAG-Tax “conduct[], handle[], or supervise[]” “[c]riminal proceedings arising under the internal revenue laws.” While the regulation does indeed confer such authority on the AAG-Tax, there is no language that requires him to carry out those responsibilities personally and that prevents him from delegating functions to subordinates.

The defendants contend further that the delegation made by Tax Division Directive No. 138 violates the Appointments Clause because it permits a principal officer of the government “to delegate his authority to an inferior officer by way of an internal policy directive.” But they have provided no authority for such a proposition.

Venue

Kohn and Chollet next contend that the government failed to establish that the Western District of North Carolina was an appropriate venue because the government failed to prove that they committed any conduct element in that district. They assert that they practiced law at The Kohn Partnership located in the Eastern District of Missouri and that they lived there as well.

The offense at issue here makes it a crime to willfully (1) aid or (2) assist in or (3) procure, (4) counsel or (5) advise the preparation or presentation of a false tax return. As such, this court has recognized that “any such conduct constitutes a continuation of the offense and forms a basis for establishing venue.”

The evidence showed that not only were most of Kohn and Chollet’s clients located in the Western District of North Carolina, so too was Simmons, who was instrumental in implementing the scheme. Because some conduct elements of § 7206(2) took place in the Western District of North Carolina, venue for the prosecution of those crimes properly lay there.

Falsity

The defendants also contend that the “total income” lines on their clients’ tax returns were “literally truthful” and that therefore they could not have been convicted of aiding in the filing of false tax returns. The district court rejected the defendants’ argument, reasoning that “their assertion that 1+2=3 is ‘literally true’ holds no water when the evidence was sufficient to prove beyond a reasonable doubt that ‘1’ and ‘2’ were the result of fabricated deductions and fees.” This court agrees with the district court. The “total income” line was not true because it depended on lines that included deductions for business expenses that were fabricated.

Remaining arguments

First, contrary to the defendants’ arguments, the government’s redactions of the line-number references did not broaden the possible bases for conviction so as to amount to an impermissible amendment. Second, the defendants argue that the district court abused its discretion in admitting expert testimony through a lay witness. While a few statements may have crossed slightly into the territory of expert testimony, any such testimony was clearly harmless.

Third, the district court did not abuse its discretion in admitting at trial evidence of Kohn’s previous guilty plea of endeavoring to obstruct the due administration of the internal revenue laws. Even if it were not waived, the evidence of his prior conviction was directly tied to the representations he made about that conviction to clients when marketing the scheme at issue in the current case.

Fourth, the district court did not abuse its discretion in failing to give a reliance-on-counsel instruction, as Simmons requested. A defense of advice of counsel must necessarily fail where counsel acted as an accomplice to the crime and, in any event, any error was harmless in light of the good-faith instruction that the court did provide. Finally, the evidence was sufficient to support the convictions.

Affirmed.

United States v. Chollet, Case Nos. 24-4634, 24-4635, 24-4636, June 9, 2026. 4th Cir. (Niemeyer), from WDNC at Statesville (Bell). Justin Gelfand and Karl Walter Dickhaus for Appellants. Todd Alan Ellinwood for Appellee. VLW 026-2-213. 24 pp.

Full-Text Opinion
VLW 026-2-213