UNITED STATES OF AMERICA v. CATHERINE ELIZABETH CHOLLET

Background Michael Kohn, Catherine Chollet, and David Simmons were convicted after a jury trial for conspiracy to defraud the government and for assisting in the preparation of false and fraudulent tax returns. The opinion describes their promotion and implementation of a tax strategy called the Gain Elimination Plan, under which clients claimed business-expense deductions through purported limited partnerships largely owned by charitable organizations. According to the court, the charitable organizations never agreed to become partners, no partnership agreements were signed, no partnerships existed, no services were provided, and no royalties or fees were actually paid. Even so, the defendants helped clients claim deductions that reduced taxable income and taxes owed. The scheme operated for more than eleven years and resulted in more than twenty-two million dollars in avoided taxes. Simmons also provided false information to insurance companies in connection with life-insurance policies tied to the plan, and commissions were shared with Kohn and Chollet. Chollet used the same plan on her own returns, and Kohn and Chollet also prepared Simmons’ returns that underreported income. The district court imposed prison terms, three years of supervised release for each defendant, and more than twenty-two and a half million dollars in restitution. The court’s reasoning The court rejected the defendants’ Appointments Clause and Federal Vacancies Reform Act challenge. It concluded that the record showed Acting Deputy Assistant Attorney General Stuart Goldberg authorized the prosecution and that, as Acting Deputy Assistant Attorney General, he had authority to do so. The court also concluded that Tax Division Directive Number one hundred thirty-eight validly delegated authority and that nothing in Title twenty-eight, Code of Federal Regulations, Section zero point seventy prohibited that delegation. The opinion states that the defendants raised numerous additional challenges, including improper venue, arguments that the returns were technically true because they followed the forms, and evidentiary objections, and the court rejected those challenges and affirmed for the reasons given in the opinion. For the reasons given herein, we reject the defendants’ challenges and affirm. What it means going forward The convictions, prison sentences, supervised-release terms, and restitution order remain in place. The decision also confirms, on the excerpt provided, that the Tax Division prosecution authorization used here was valid.