Fourth Circuit Affirms Convictions of Bullshit Tax Scam Promoters (6/14/26)

In United States v. Chollet, ___ F.4th ___ (4th Cir. 2026), CA4 here and GS here, the 4^th Circuit panel (Judges Niemeyer, Thacker, and Rushing) affirmed the conviction of three defendants, specifically rejecting various points that I discuss below.

The defendants were convicted of a variant of a marketed bullshit tax shelter. Two of the defendants—Kohn and his daughter Chollet—were tax lawyers; the third defendant was an insurance broker. I will not get into the specifics of the shams they created for their clients to (i) improperly hide their clients' income and resulting tax liabilities from the IRS and (ii) to make money for themselves as they shared in the false tax savings the taxpayers (clients) claimed. Suffice it to say that the scheme involved meaningless (i) limited partnerships, (ii) fake charitable contributions, (iii) fake royalties and management fees, and (iv) supposed life insurance policies.

Like all bullshit tax shelters and some bogus tax shelters that avoid the bullshit categorization, they work if they are not audited or otherwise discovered in the tax enforcement system. These tax enforcement system discovered and prosecuted these defendants. Most often, such scams result, if discovered, in civil tax and perhaps civil penalties. But, for some reason this one turned criminal. (I dare say that many similar bullshit tax shelters escape tax enforcement scrutiny and therefore “work” because of inadequate enforcement resources; for which I make an editorial comment: more enforcement resources would pay for themselves in multiples and promote fairness in and respect for the system.)

The counts of conviction are described as follows (Slip Op. 5-6]:

After a two-week trial, the jury convicted all three defendants of conspiracy to defraud the federal government, in violation of 18 U.S.C. § 371; Kohn on 16 counts of assisting in the filing of false tax returns, in violation of 26 U.S.C. § 7206(2); Chollet on 13 counts of assisting in the filing of false returns, in violation of § 7206(2); and Simmons on 11 counts of assisting in the filing of false returns, in violation of § 7206(2), and on 5 counts of filing false tax returns, in violation of § 7206(1). 

Some of the defendants’ arguments on appeal are of the “Hail Mary” procedural footfault genre. (The best recent example of that genre is the commotion plaguing the IRS and the courts about § 6751(b)’s written manager approval for penalties requirement as courts have flailed around trying to interpret and apply nonsensical statutory text. See e.g., Tax Court Rejects Various Hail Mary Claim, Including APA Claims, to Get Out of Penalty Free (10/8/25), here).

I will address the defendants’ points on appeal that I think readers of this blog may find interesting. I refer to these points as DEFENDANTS' POINT 1 (with serial number incrementing). a short description of the point and then a discussion of the point; in the final points discussion I am rather summary just putting readers on notice).

DEFENDANTS POINT 1: IMPROPER AUTHORIZATION OF CRIMINAL TAX PROSECUTION (SLIP OP. 6-11):

Defendants argued that the authorization of the criminal prosecution by Deputy AAG Tax (DAAG) Goldberg rather than by Acting AAG (AAAG) Hubbert means that the criminal prosecution had not been properly authorized. The panel held that Goldberg was properly authorized. Those interested in the maze of authorizations for tax prosecution might read that portion of the opinion.

Although this argument fails, I wonder if those defending tax prosecutions must now have an item on their checklists early in tax crimes prosecutions to check whether the prosecution was properly authorized. (This is analogous to the current civil penalty litigation checklist item for proper written manager approval for civil penalties.)

DEFENDANTS POINT 2: IMPROPER VENUE IN NORTH CAROLINA (SLIP OP. 11-15).

Proper venue requires that some significant element of the crime occurred in the district of prosecution, here WD NC. The panel opinion finds adequate facts to support venue in WD NC. I will not get into the details of its findings supporting venue.

I do note that fans of criminal venue should read Abouammo v. United States, 608 U. S. ___ (2026), SC here and GS here [to come]. Abouammo addresses venue for the crime of knowingly falsifying a document with the intent to obstruct a federal investigation. 18 U. S. C. §1519, here. The holding (excerpted from the Syllabus) is:

A defendant charged with violating §1519 must be tried in the district where the falsification occurred; he cannot be tried in a different district where the investigation was located because no “conduct constituting the offense” happened there. The Constitution twice safeguards a defendant’s venue right: Article III instructs that “Trial of all Crimes” shall “be held in the State where the Crimes shall have been committed,” §2, cl. 3, and the Sixth Amendment entitles criminal defendants to a jury “of the State and district wherein the crime shall have been committed.” To implement that constitutional rule, courts generally determine the location of the offense’s “essential conduct elements” by identifying “the conduct constituting the offense”—the things a defendant must do to violate the statute—and then ascertaining the place where those criminal acts occurred. United States v. Rodriguez-Moreno, 526 U. S. 275, 279–280.

Tax crimes enthusiasts know that tax crimes involving false returns often are committed for venue purposes in a local district where the taxpayer files the return (either by mail or electronically) and in the service center where the return is filed. The more direct tax analogy to Abouammo is a criminal tax investigation that often occurs in the district in which the taxpayer resides, but for multiple participant investigations might be in one of several districts including the district where the investigation is centered. For example, I represented a defendant in the sprawling criminal grand jury investigation centered in SDNY of KPMG and related persons and parties involved in tax shelters such as BLIPS in the first decade of 2000. The tax schemes investigated and prosecuted were marketed by KPMG and related parties throughout the country. The resulting criminal prosecution in SDNY had 19 defendants spread geographically throughout the United States with critical factual elements in the districts where they resided or promoted the tax shelters. If that investigation had been obstructed (not to suggest that it was) by any of the geographically distributed defendants, targets, or subjects in their local districts or in districts other than SDNY, the tax crimes and obstruction charges would have permitted venue either in the local districts where the obstructive event occurred or in SDNY where the investigation obstructed was centered. Abouammo's narrow holding may have some gravity in this context.

DEFENDANTS POINT 3: LITERALLY TRUE BRONSTON DEFENSE (SLIP OP. 15-17):

The Bronston-inspired literal truth defense often is raised where some element of the crime is a false statement that may be literally true but misleading. The defendants make a convoluted argument that the § 7206(2) false return convictions were based on return reporting line items that were literally true because they accurately summarized other reporting positions (which may be false). The panel opinion rejects that defense.

DEFENDANTS' MISCELLANEOUS POINTS 4 (SLIP OP. 17-24):

 The penal opinion rejects the following points in a miscellaneous discussion:

1. Constructive amendment of the indictment (Slip Op. 17-18).

2. Admission of expert testimony by an IRS Special Agent not qualified as an expert (Slip Op. 18-20).

3. Improper Admission of one defendant’s past criminal tax conviction (Slip Op. 20-22). Of all the miscellaneous points rejected, this is the most interesting one to read because the defendant Kohn was a two-timer—meaning stupid. (Even one-timers are stupid because tax crimes require willfulness (knowing violation of a known legal duty); but two-timers are stupid squared. The clients I represented in criminal investigations and prosecutions were not stupid enough to do it again (well, with one exception anyway). Significantly, apparently to guard against Kohn’s targeted purchases of this current criminal scheme learning about his prior conviction,

One of the allegations in the indictment was that in promoting the GEP to clients, Kohn not only misrepresented his educational background, but also told clients false and incomplete information about his previous guilty plea, bragging that it showed that he would go to great lengths in representing and protecting his clients.

That’s pretty stupid too, but I suspect that, like many purchasers of bullshit tax schemes, Kohn’s purchasers thought that, if anyone were investigated or prosecuted, the promoters (such as Kohn) would be and the purchasers would not be; they simply wanted to believe that Kohn would fall on his sword to protect them; hence Kohn's bragging may have been a feature to make purchase of the scam more palatable. (Relatedly, in the early KPMG investigative stages of the KPMG matter, KPMG foolishly pulled out all stops to delay the investigation (thereby, they thought, running out the statute of limitations on civil and criminal enforcement; that is a long story, so I won’t get into it here).

4, Failing to give reliance-on-counsel instruction (Slip Op. 22-23).

5 Evidence Insufficiency for Conspiracy conviction (Slip Op. 23-24).