USCA4 Appeal: 24-4636 Doc: 108 Filed: 06/09/2026 Pg: 1 of 24
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 24-4634
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
CATHERINE ELIZABETH CHOLLET, a/k/a Liza Chollet,
Defendant - Appellant.
No. 24-4635
MICHAEL ELLIOT KOHN,
No. 24-4636
DAVID SHANE SIMMONS, a/k/a Shane Simmons,
Defendant - Appellant. USCA4 Appeal: 24-4636 Doc: 108 Filed: 06/09/2026 Pg: 2 of 24
Appeals from the United States District Court for the Western District of North Carolina, at Statesville. Kenneth D. Bell, District Judge. (5:22-cr-00060-KDB-SCR-2; 5:22-cr- 00060-KDB-SCR-1; 5:22-cr-00060-KDB-SCR-3)
Argued: May 6, 2026 Decided: June 9, 2026 Amended: June 9, 2026
Before NIEMEYER, THACKER, and RUSHING, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Thacker and Judge Rushing joined.
ARGUED: Justin Gelfand, MARGULIS GELFAND LLC, St. Louis, Missouri; Karl Walter Dickhaus, DICKHAUS LAW PARTNERSHIP, L.P., St. Louis, Missouri, for Appellants. Todd Alan Ellinwood, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Richard Lamb Brown, Jr., LAW OFFICES OF RICHARD BROWN, Monroe, North Carolina, for Appellant David Simmons. A. Tysen Duva, Assistant Attorney General, Jennifer Hodge, Deputy Assistant Attorney General, S. Robert Lyons, Katie Bagley, Joseph B. Syverson, Tax Section, Criminal Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Russ Ferguson, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina, for Appellee.
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NIEMEYER, Circuit Judge:
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. On appeal of their judgments, they raise numerous issues
challenging their convictions, including claims that the government violated the
Appointments Clause of the U.S. Constitution in prosecuting the crimes; that venue in the
Western District of North Carolina was improper; that the tax returns were technically true,
as the calculations followed the tax forms; and that the district court made erroneous
evidentiary rulings, among other challenges.
For the reasons given herein, we reject the defendants’ challenges and affirm.
I
Michael Kohn and his daughter Catherine Chollet were tax attorneys and partners
in The Kohn Partnership, LLP, a law firm in St. Louis, Missouri. David Simmons was an
insurance broker residing in Jefferson, North Carolina, who worked closely with Kohn,
Chollet, and The Kohn Partnership in assisting in the preparation of income tax returns on
behalf of clients in various states, including North Carolina.
Years ago, the defendants designed and began marketing and implementing a “tax
planning strategy” that they called the “Gain Elimination Plan” (GEP), under which well-
to-do clients could reduce their taxable income with deductions for business expenses paid
to limited partnerships that were created particularly for each client and that would be
mostly owned by a charitable organization. In concept, as the limited partnership would
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provide the client with intellectual property and business management services, the client
would pay the limited partnership royalties and fees, which the client would then deduct as
business expenses on the client’s income tax return.
Under the GEP’s design, the defendants would form a client-specific limited
partnership of which the client would own one to two percent. A preexisting charitable
organization, usually the Inter-National Foundation Corporation, would own the
remainder. The clients would, at least in concept, pay royalties or management service
fees to the limited partnership and then deduct those amounts as business expenses on their
income tax returns. In addition, the defendants told each client that the limited partnership
would need to insure the income stream to it and thus that the client would need to purchase
a life insurance policy on the life of the client. Simmons, as an insurance broker, would
obtain the policies, and he would share his commissions with Kohn and Chollet. To reduce
further expense to the client, the defendants advised clients that the GEP had a limited life
and that the client could cancel the insurance policy and buy out the charity’s interest in
the limited partnership for “next to nothing.”
As the government proved at trial, however, the charitable organizations never
agreed to become a partner in the limited partnerships. Indeed, no partnership agreements
were ever signed by the clients and the charitable organization, and thus no limited
partnerships existed. Moreover, the limited partnerships never provided intellectual
property or management services to the clients, and the clients never made any payments
of royalties and fees to the limited partnerships. Despite the absence of any economic
transactions, the defendants assisted the clients in claiming an arbitrary amount of business
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expense deductions that were false and not based on any payments made. With the
fabricated deductions, the clients were able to reduce their taxable income and the amount
of taxes that they paid to the IRS. The defendants offered the GEP in this form to clients
for over 11 years, resulting in their clients’ illegally avoiding the payment of, in the
aggregate, over $22 million dollars in income taxes.
Moreover, to obtain the life insurance policy for the limited partnerships, Simmons
provided false personal and financial information about the clients to the insurance
companies, and he and Kohn then coached the clients on how to answer questions about
their applications. Simmons received a commission on each policy in an amount
representing about 90 percent of the first year’s premium and then shared about $1.1
million of those commissions with Kohn and Chollet.
In view of the absence of limited partnerships and of any payments made by the
clients to the limited partnerships, the government asserted that the GEPs, as implemented,
lacked economic substance and thus were fraudulent.
In addition to assisting in the preparation of such false tax returns for her clients,
Chollet also used the same fraudulent GEP for herself, reducing her taxable income in the
amount of $350,000 over the period of five tax years.
Finally, Kohn and Chollet also prepared Simmons’ tax returns on which Simmons
underreported his income over several years, causing a loss to the IRS of over $480,000 in
taxes.
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
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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).
The district court sentenced Kohn to 84 months’ imprisonment, Simmons to 60
months’ imprisonment, and Chollet to 48 months’ imprisonment, and it imposed a term of
three years’ supervised release for each. The court also ordered the defendants to pay the
United States over $22.5 million dollars in restitution.
From the district court’s judgments dated November 14, 2024, the defendants filed
these appeals.
II
The defendants contend first that their prosecution was not properly authorized by
an “officer” of the United States; that the error was structural, in violation of the
Appointments Clause of the U.S. Constitution and the Federal Vacancies Reform Act,
5 U.S.C. § 3345 et seq.; and therefore that their indictment should have been dismissed.
See NLRB v. SW Gen., Inc., 580 U.S. 288, 293, 297–98 (2017); Probst v. Saul, 980 F.3d
1015, 1021 (4th Cir. 2020). Particularly, they maintain that their criminal tax prosecution
“had to be authorized by the Assistant Attorney General, Tax Division” (AAG-Tax) but
that, at the time of their prosecution, “there was no AAG-Tax.” Instead, “the Executive
Branch has circumvented the Appointments Clause and the Federal Vacancies Reform Act
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. . . by unilaterally installing ‘heads’ of the Tax Division.” Then, they set forth the record
on which they base their argument:
For purposes of this appeal, the following facts of record are beyond dispute: the Tax Division did not have an AAG-Tax; [David] Hubbert [who allegedly authorized the prosecution] was not the [Deputy] AAG, Criminal at the time he authorized this prosecution; [Stuart] Goldberg was the [Deputy] AAG, Criminal at the time this prosecution was authorized but Goldberg did not authorize this prosecution.
The defendants thus assume that David Hubbert authorized this prosecution, not
Stuart Goldberg, whom they say was the one who should have authorized it under Tax
Division Directive No. 138. But, in contradiction of this concession that DAAG Goldberg
had the authority to authorize the prosecution, they contend that the delegation of authority
to DAAG Goldberg under Tax Division Directive No. 138 violated 28 C.F.R. § 0.70,
which, they argue, prohibited the AAG-Tax from redelegating authority to a DAAG.
While there was an initial motions proceeding in the district court in which the court
was informed that David Hubbert had authorized the prosecution, on reconsideration and
with the benefit of additional information, the court found that “Goldberg was the Acting
DAAG, Criminal at the time this prosecution was authorized” and that he had “authorized
this prosecution as required by Directive 138.” The defendants then pivoted to attacking
the validity of Directive 138 on the ground that it violated 28 C.F.R. § 0.70, which, they
contend, placed the authority to prosecute them only in the AAG-Tax, not the DAAG,
Criminal of the Tax Division.
The defendants’ arguments fail on at least two fundamental levels. First, documents
in the record demonstrate that Acting DAAG Stuart Goldberg in fact authorized the
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prosecution of the defendants in this case on November 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. And second, the delegation
by the AAG-Tax in Tax Division Directive No. 138 was not prohibited by any language in
28 C.F.R. § 0.70.
The Appointments Clause of the Constitution authorizes the President, “with the
Advice and Consent of the Senate, [to] appoint . . . all other Officers of the United States,
whose Appointments are not herein otherwise provided for, and which shall be established
by Law.” U.S. Const. art. II, § 2, cl. 2. Such “Law” provides that the President must
appoint an Attorney General with the advice and consent of the Senate, see 28 U.S.C.
§ 503, and again, with the advice and consent of the Senate, must appoint 11 Assistant
Attorneys General (AAGs) to “assist the Attorney General in the performance of his
duties,” id. § 506. At the time this case was initiated, one of those AAGs was designated
as the head of the Tax Division (i.e., the AAG-Tax), although the office was vacant.
Moreover, the “functions” of the Department of Justice are also “vested” in the Attorney
General, id. § 509, and the Attorney General is authorized to delegate those functions to
“any other officer, employee, or agency of the Department of Justice,” id. § 510 (emphasis
added).
Section 0.70 of Title 28 of the Code of Federal Regulations (as in effect before
December 10, 2025) assigned a list of functions to the AAG-Tax, including, subject to a
few exceptions not applicable here, all “[c]riminal proceedings arising under the internal
revenue laws.” 28 C.F.R. § 0.70(b). By Tax Division Directive No. 138, the AAG-Tax,
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acting under the authority of 28 C.F.R. § 0.70, then delegated to the “Deputy Assistant
Attorney General, Criminal (‘DAAG, Criminal’)” most of the “powers and authority of the
AAG with respect to criminal proceedings,” including the “[p]rosecution of an attorney for
criminal conduct committed in the course of acting as an attorney,” but reserved to himself
authority over a few specific matters, including “[a]ction in . . . [a] subpoena of an attorney
for information relating to the attorney’s representation of a client.”
Thus, by delegation and subdelegation, the DAAG, Criminal or Acting DAAG,
Criminal had authority to authorize criminal prosecutions arising under the Internal
Revenue Code, including the prosecution of any “attorney for criminal conduct committed
in the course of acting as an attorney.”
On November 7, 2022, Acting DAAG, Criminal Stuart Goldberg, who had been
designated to his position in the Tax Division by Attorney General Merrick Garland,
specifically authorized the prosecution of the defendants for the crimes charged in the
indictment returned against them on November 16, 2022.
In view of these delegations and subdelegations, and the authorization of the Acting
DAAG, Criminal, we reject the defendants’ contention that their prosecution was not
properly authorized and therefore in violation of the Appointments Clause.
Nonetheless, the defendants fall back on their argument that Acting DAAG Stuart
Goldberg did not have authority to authorize the prosecution because his authority to do so
derived from Tax Division Directive No. 138, which, they argue, was inconsistent with
28 C.F.R. § 0.70(b). 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
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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. Not only would the defendants’ interpretation be
highly impracticable in light of the nationwide workload, but it would also be inconsistent
with the broad authority to delegate given generally to the Attorney General, see 28 U.S.C.
§ 510, and with the authority to redelegate that is recognized under administrative law.
Indeed, it is well-established that we will “approv[e] [a] broad subdelegation of authority
within administrative agencies where [the] subdelegation is in keeping with the nature of
statutory duties and with Congress’ intent.” House v. S. Stevedoring Co., 703 F.2d 87, 88
(4th Cir. 1983); see also 28 U.S.C. § 510 (authorizing the Attorney General generally to
delegate functions to “any other officer, employee, or agency of the Department of
Justice”).
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. Indeed, § 510
authorizes the Attorney General, a principal officer, to delegate functions to “employee[s],”
not necessarily officers at all.
In sum, the prosecution of the defendants for the crimes charged in their indictment
was approved by the Acting DAAG, Criminal Stuart Goldberg, who was authorized by
explicit delegation to do so. We conclude that there was no violation of the Appointments
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Clause or the Federal Vacancies Reform Act, nor was there an inappropriate approval of
the prosecution.
III
The defendants Kohn and Chollet next contend that the government failed to
establish that the Western District of North Carolina was an appropriate venue in which to
prosecute the crimes charged under 26 U.S.C. § 7206(2) 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. Thus, they maintain that “all acts taken by Kohn and/or Chollet
— if any — in the preparation and presentation of the tax returns at issue were taken there.”
As they summarize their venue argument:
[A]ll tax returns were submitted to the IRS from St. Louis, Missouri, and the Government never established they were sent to a service center in the Western District of North Carolina (because that did not happen). Thus, the Government bore the burden of establishing some act of Kohn and/or Chollet that aided or assisted in procuring, counseling, or advising the preparation or presentation of each tax return at issue as to each count in the Western District of North Carolina — and the Government did not meet its burden.
Thus, they argue that we must reverse all their convictions under § 7206(2).
The district court submitted the issue to the jury, instructing it that, in assessing
whether the government had established venue for the 7206(2) counts by a preponderance
of the evidence, the jury had to “decide whether an act was committed by a defendant, or
caused to be committed, in furtherance of the preparation of filing of the false tax return at
issue, including whether a tax return was signed in, filed in, or mailed from the Western
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District of North Carolina.” Following the jury’s verdict finding venue to be proper, Kohn
and Chollet renewed a motion for judgment of acquittal on the § 7206(2) counts, arguing
that the evidence was insufficient to support the jury’s finding that venue was proper in the
Western District of North Carolina. The court, however, denied the defendants’ motion,
finding that the government’s evidence was sufficient to allow the jury to find that venue
in the Western District of North Carolina was proper. The court stated:
[T]he Government’s evidence showed that Kohn and Chollet effectively used Simmons, and his office manager Brandi Davis . . . , as their agents in collecting tax information from the clients associated with Counts 2-12, all but one of whom lived in this District. The taxpayer who was not a resident of this District testified that he often worked through Simmons’ office (which was located in this District) for tax-related matters because he had trouble getting in touch with Kohn. Thus, even if Kohn and Chollet completed the actual tax preparation in Missouri, there is ample evidence for the jury to have concluded that the Defendants either took specific actions in this District to aid or assist in the preparation of a false tax return or caused those actions to take place.
We thus must decide whether the evidence was sufficient for the jury to find by a
preponderance of the evidence that a conduct element of § 7206(2) was committed in the
Western District of North Carolina, and we will affirm whenever, “viewing the evidence
in the light most favorable to the government, any rational trier of fact could have found
venue by a preponderance of the evidence.” United States v. Sterling, 860 F.3d 233, 241
(4th Cir. 2017).
The Constitution provides that “[t]he Trial of all Crimes . . . shall be held in the State
where the said Crimes shall have been committed,” U.S. Const. art. III, § 2, and it
guarantees “an impartial jury of the State and district wherein the crime shall have been
committed,” id. amend. VI; see also Fed. R. Crim. P. 18 (“Unless a statute or these rules
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permit otherwise, the government must prosecute an offense in a district where the offense
was committed”). And when a crime is committed in more than one State, Congress has
provided that “any offense against the United States begun in one district and completed
in another, or committed in more than one district, may be . . . prosecuted in any district in
which such offense was begun, continued, or completed.” 18 U.S.C. § 3237(a).
The controlling analysis for determining where a crime was committed begins with
the identification of “the act or acts constituting [the crime].” United States v. Cabrales,
524 U.S. 1, 6–7 (1998) (cleaned up). And once the “essential conduct elements” of the
crime are identified, the second step is discerning where they were committed. United
States v. Rodriguez-Moreno, 526 U.S. 275, 279–80 (1999). Venue is then proper in any
district where any conduct element of the crime was committed. See id. at 281–82; see
also 18 U.S.C. § 3237(a).
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.
26 U.S.C. § 7206(2). As such, we have recognized that “any such conduct constitutes a
continuation of the offense and forms a basis for establishing venue.” United States v.
Hirschfeld, 964 F.2d 318, 321 (4th Cir. 1992). In Hirschfeld, the defendant had read
§ 7206(2) “too narrowly” by focusing “only on where the return was prepared, mailed, and
filed.” Id. As we explained, “[t]he prohibition by its own terms reaches conduct which
consists of aiding and assisting in the preparation of a false return.” Id.
The record here shows that even though Kohn and Chollet resided and worked in
Missouri, they aided, assisted, counseled, and advised their clients in the Western District
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of North Carolina in preparing and presenting false tax returns on their behalf. All of the
clients involved in this prosecution, with the exception of Damian Novak, lived and worked
in the Western District of North Carolina.
Indeed, 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. The government’s evidence showed that from
his office in the Western District of North Carolina, Simmons actively assisted in procuring
and transmitting information from the clients and obtaining insurance policies that were a
necessary part of the GEP. And while Kohn and Chollet prepared the tax returns in
Missouri and filed them from there, they procured information from their clients directly
or through Simmons in North Carolina and advised their clients in North Carolina about
their returns. The record contains numerous emails showing the exchanges of information,
and Kohn and Chollet sent their clients in North Carolina signature forms for them to sign
in creating limited partnerships and bank accounts that were part of the scheme. They even
registered some of the limited partnerships in North Carolina. Moreover, Kohn and Chollet
sent their clients in North Carolina drafts of the tax returns to receive their approval before
filing them. The one client who did not live in North Carolina testified that he dealt with
Kohn through Simmons in North Carolina because Kohn was hard to reach, providing
information to Simmons for transmission to Kohn and Chollet.
The conduct elements of § 7206(2) include “aid[ing],” “assist[ing],” “procur[ing],”
“counsel[ing],” and “advis[ing]” the preparation of false tax returns, and we conclude that
the evidence in the record amply supports a finding that some conduct elements of Kohn
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and Chollet’s crimes took place in North Carolina. 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. See 18 U.S.C. § 3237(a).
IV
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. See Bronston v. United States, 409 U.S. 352, 359–62 (1973);
United States v. Good, 326 F.3d 589, 590 (4th Cir. 2003). They point out that the
indictment charged them with willfully aiding and assisting in the preparation of tax returns
“which were false and fraudulent” by reporting “false items” on the “total income” lines,
knowing that “the amounts on [those] lines . . . were substantially understated.” Yet, the
defendants argue, the “total income” lines on the tax returns were literally truthful as they
accurately followed the tax form’s instruction to include there a calculation of the amounts
listed on preceding lines. One type of 1040 form, for example, stated on line 22, “Combine
the amounts . . . for lines 7 through 21” and advised, “This is your total income.” They
argue that, because the “total income” lines on the various forms represented an accurate
calculation of the referenced antecedent lines, the “total income” line was literally true and
therefore could not support a charge of advising the preparation of a false income tax return.
See United States v. Reynolds, 919 F.2d 435, 437 (7th Cir. 1990) (recognizing and applying
the literal truth defense). Therefore, they argue, the district court erred in refusing to grant
their motions for judgments of acquittal on the § 7206(2) counts.
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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.”
We agree with the district court and find that the defendants’ argument is too clever
by half. While the defendants followed the forms’ instructions and accurately calculated
the “total income” based on the amounts they had entered on other lines, that accurate
calculation did not make the entry in the “total income” line true — it was an accurate
arithmetical calculation, deducting the listed business expenses from income to arrive at
“total income,” but the deductions were fabricated and therefore false, making the “total
income” line also false. In short, an accurate calculation does not render the total true
when the components themselves are false. See United States v. Crockett, 435 F.3d 1305,
1315 (10th Cir. 2006) (recognizing that because the total income line, alleged as false in
the indictment, was “derived arithmetically from the other lines, the understatement of . . .
wage and salary income automatically caused . . . [the] total income [line] to be
understated”).
The defendants’ reliance on Reynolds does not help them. In Reynolds, the
defendant was charged with providing a false return because line 7 on his return was false.
The defendant pointed out, however, that the veracity of line 7 depended directly on “the
accuracy of his entry on line 1,” and line 1 instructed him to include all “‘wages, salaries,
and tips,’” which he had listed “exactly as it appeared on the forms W-2,” despite the fact
that he also had non-W-2 income. 919 F.2d at 437. The Reynolds court applied the “literal
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truth” defense because line 7 depended on line 1, and the amount entered on line 1 was
literally true. But contrary to the defendants’ argument here, the Reynolds court did not
indicate that as long as the sums were correctly computed, then line 7 was “literally true,”
providing a defense to a § 7206 charge. Rather, the court reasoned that line 7 was true
because it “depend[ed] on the accuracy of [the] entry on line 1,” and line 1 was indeed
“literally correct,” as it included all W-2 income, as instructed. Id.
Here, the “total income” line was not true because it depended on lines that included
deductions for business expenses that were fabricated. The circumstances here are
fundamentally different from those presented in Reynolds.
At bottom, we conclude that the district court did not err in denying the defendants’
motions for judgments of acquittal based on the literal truth defense.
V
As to the defendants’ remaining arguments, we conclude that they are not persuasive
and do not merit extensive discussion.
A
First, the defendants contend that the district court impermissibly allowed the
government to amend the indictment by redacting parentheticals identifying — incorrectly,
in a few instances — the line numbers on the tax returns where the “total income” amounts
were reported. The defendants argue that this was a constructive amendment that
impermissibly broadened the basis for conviction and that “the error [was] fatal and
reversible per se.” (Citing United States v. Whitfield, 695 F.3d 288, 307 (4th Cir. 2012)).
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We disagree. The redactions of the line-number references did not broaden the
possible bases for conviction so as to amount to an impermissible amendment. See United
States v. Burfoot, 899 F.3d 326, 338 (4th Cir. 2018) (explaining that a defendant’s Fifth
Amendment right to a grand jury is violated “when the indictment is effectively altered to
change the elements of the offense charged, such that the defendant is actually convicted
of a crime other than that charged in the indictment” (cleaned up)). Here, both before and
after the redactions, the indictment alleged that the “total income” items on the relevant tax
returns were false, and all that was removed from the indictment was the line number where
the “total income” was entered. That in no way broadened the potential basis for
conviction.
B
Second, the defendants argue that the district court abused its discretion in admitting
expert testimony through a lay witness. IRS Special Agent Robert Elias testified as a lay
witness about his undercover engagement with the defendants during the government’s
investigation. The defendants maintain that although Special Agent Elias was never
qualified as an expert under Federal Rule of Evidence 702, he “repeatedly offered opinions
rooted in accounting, tax law, and forensic analysis.” The defendants, however, only raised
this objection once when Elias was asked, “[a]s a CPA,” whether it was his “understanding
that insurance premiums normally are not deductible,” and he was allowed to respond,
“Yes. As a CPA, certified public accountant, that would be my understanding, that they
are not deductible normally.” On appeal, however, the defendants raise several other
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instances that they claim were improper opinions, including (1) Elias’s testimony
explaining that “a P & L is . . . a profit and loss statement,” which shows “how much you
make” and “[w]hat your expenses are”; (2) his testimony that Kohn’s statement to him that
“he [Kohn] could amend the 1120-S [corporate return] without input from the other
partner” struck him “as very odd” because, for a partnership, “both partners have to agree
to the return and what’s going to go on it”; and (3) Elias’s statement explaining to the jury
the difference between a Form 1120-S corporate return and a partnership return.
Federal Rule of Evidence 701 permits a lay witness to give opinion testimony in
certain circumstances. Specifically, it provides that “[i]f a witness is not testifying as an
expert, testimony in the form of an opinion is limited to one that is: (a) rationally based on
the witness’s perception; (b) helpful to clearly understanding the witness’s testimony or to
determining a fact in issue; and (c) not based on scientific, technical, or other specialized
knowledge within the scope of Rule 702.” Fed. R. Evid. 701; see also United States v.
Johnson, 617 F.3d 286, 292–93 (4th Cir. 2010).
In this case, while we recognize that perhaps a few statements may have crossed
slightly into the territory of expert testimony, any such testimony was clearly harmless.
First, the defendants have not attempted to satisfy the plain-error standard applicable to
those portions of Elias’s testimony to which they did not make an objection below. Second,
the potentially problematic statements were extremely limited and perhaps even justified
under Rule 701. Third, it seems clear that Special Agent Elias — an IRS agent for more
than 20 years who had previously earned a CPA license and was currently pursuing a
doctorate degree in accounting — could have been qualified as an accounting expert under
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Rule 702. See United States v. Smith, 640 F.3d 358, 366 (D.C. Cir. 2011) (concluding that
error was harmless in part because the witness “would have qualified as an expert and
testified about the slang conversations under Rule 702”); United States v. DeLoach, No.
99-4441, 2000 WL 274972, at *3 (4th Cir. Mar. 14, 2000) (per curiam) (“[W]e find that
even if the court erred by admitting it as lay testimony, the error was harmless because [the
witness] could have been certified as an expert under Rule 702”). And fourth and finally,
an IRS agent who was duly qualified as an expert witness at trial under Rule 702 did indeed
make many of the same points that Special Agent Elias made, rendering the arguably
impermissible testimony cumulative.
C
Third, Kohn argues that the district court abused 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, in violation of 26 U.S.C. § 7212(a).
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. Prior to trial, Kohn
filed a motion in limine to exclude any evidence of the conviction, but the district court
denied the motion, ruling that the government “may ask . . . witnesses whether they were
comforted or lulled into working with the Defendants” by misrepresentations about Kohn’s
prior conviction.
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In light of the court’s ruling on the motion in limine, Kohn’s counsel told the jury
during his opening statement that “[y]ou may learn over the course of this trial that 22 years
ago. Mr. Kohn made the biggest mistake of his life, and he accepted responsibility for it.
He pled guilty to impeding or obstructing the IRS for conduct that occurred 26 to 30 years
ago . . . .” Kohn and the government subsequently agreed to a stipulation for describing
that conviction, and the court specifically advised the jury of its limited use, emphasizing
that it was “very important[]” that the jury “not conclude from this evidence that Mr. Kohn
has bad character in general or that because . . . he did commit similar acts, that he is more
likely to have committed this crime with which he is currently charged.” Thereafter, three
former clients and the undercover IRS special agent provided testimony about Kohn’s
statements regarding his prior conviction, and the government also introduced a letter from
Kohn to a client about the conviction.
Kohn now contends that the district court abused its discretion in admitting the
stipulation, arguing that it was inadmissible under Federal Rule of Evidence 404(b), and
that, in any event, it was unduly prejudicial under Rule 403.
We conclude that the district court did not abuse its discretion. First, it would appear
that Kohn waived this issue by raising the fact of his conviction preemptively in his opening
statement to the jury and in entering into a stipulation with the government as to how to
describe it for the jury. Cf. Ohler v. United States, 529 U.S. 753, 760 (2000) (holding “that
a defendant who preemptively introduces evidence of a prior conviction on direct
examination may not on appeal claim that the admission of such evidence was error”).
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But even if it were not waived, Kohn’s challenge lacks merit. The evidence of his
prior conviction was not freestanding but directly tied to the representations he made about
that conviction to clients when marketing the GEP at issue in the current case. This made
the prior conviction relevant, intrinsic evidence. Similarly, the district court did not abuse
its discretion in concluding that the evidence was not unfairly prejudicial under Rule 403.
Indeed, Kohn’s counsel noted below that the whole point of the stipulation was to “reduce
the danger of prejudice on the balance,” and the stipulation was followed by a strongly
worded cautionary instruction given by the court.
D
Fourth, Simmons argues that the district court abused its discretion in failing to give
a reliance-on-counsel instruction, as he had requested. In rejecting Simmons’s request, the
court explained that “there was virtually no evidence of Mr. Simmons’s reliance on specific
advice based upon what’s required, [i.e.,] full disclosure of all relevant facts and the
specific advice rendered and evidence that that advice was followed.” Nonetheless, the
court did give the jury a more general good-faith instruction.
In challenging the court’s decision, Simmons points to an email from Kohn about
the treatment of a single-member LLC on Simmons 2016 tax return, as well as testimony
regarding checks that Simmons had sent to Kohn that purported to be for “legal advice that
The Kohn Partnership provided for Gain Elimination Plan clients.” This evidence,
however, falls far short of demonstrating that the district court abused its discretion in
finding an inadequate evidentiary basis, given the more extensive requirements for
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asserting the defense. See United States v. Butler, 211 F.3d 826, 833 (4th Cir. 2000).
Moreover, a defense of advice of counsel must necessarily fail where counsel acted as an
accomplice to the crime. See United States v. West, 392 F.3d 450, 456–57 (D.C. Cir. 2004);
United States v. Bush, 626 F.3d 527, 539 (9th Cir. 2010). Finally, we are satisfied that any
error would be harmless in light of the good-faith instruction that the court did provide.
See United States v. Mallory, 988 F.3d 730, 739 (4th Cir. 2021).
E
Fifth and finally, the defendants argue that the evidence was insufficient to support
a conviction for conspiracy to defraud the government. They argue that “the Government
charged that the defendants attempted to defraud the IRS by use of the GEP” but then failed
to prove that the GEP was illegal. Principally, they point to the testimony of the
government’s expert witness, who acknowledged that such plans “can be completely
legal.” And if it was legal, they contend, the government failed to show that they conspired
to commit an illegal act.
It appears that although the defendants raised other grounds in support of their
motions for a judgment of acquittal, they failed to make this argument before the district
court, at least explicitly, thereby waiving it. See United States v. Chong Lam, 677 F.3d
190, 200 (4th Cir. 2012). But even if they had somehow preserved it with their more
general Rule 29 motions, the argument lacks merit.
The defendants emphasize repeatedly that the government’s expert witness testified
that a GEP “can be completely legal.” But this argument fails to recognize that the expert
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witness’s full answer was that GEP plans “can be completely legal . . . if they have
economic substance.” She testified further that the plans implemented by the defendants
in this case lacked economic substance. In short, the government never argued nor
attempted to prove that the GEP, as a concept, was illegal. Rather, it argued and proved
that the plan, as implemented, involved the fabrication of business expenses to lower
clients’ taxable income and that therefore, lacking any real economic substance, it was
fraudulent.
Additionally, Chollet argues that there was no testimony to establish that she joined
the alleged conspiracy. But, as the district court concluded, there was evidence that Chollet
prepared a number of the returns at issue and reviewed others. The testimony showed that
Kohn and Chollet worked as a team. Chollet also used the GEP to shelter her own income.
And she was recorded telling the undercover IRS agent that he could have confidence in
plan because “the IRS never really comes in and has a global look at what you’re doing. . . .
They’re never going to see the moving pieces of the plan as a whole between different
taxpayers.”
We thus reject the defendants’ arguments of insufficient evidence.
* * *
For the reasons given, we affirm the judgments of the district court.
AFFIRMED