For the Defense - Vol. 3, Issue 2 - 2018 - 29
A
dopted in 1954, 26 U.S.C. § 7212(a)
criminalizes "[a]ttempts to interfere with
[the] administration of the internal
revenue laws." While section 7212(a) appears
to focus on conduct directed against IRS agents
and employees, the Department of Justice
has long used the so-called Omnibus Clause
of that section - which makes it a crime to "in
any other way corruptly or by force or threats
of force (including any threatening letter or
communication) obstruct[] or impede[], or
endeavor[] to obstruct or impede, the due
administration of this title," id. - to prosecute
conduct occurring outside of audits or
investigations.
In Marinello v. United States,1 the Supreme
Court rejected the government's broad
interpretation of the Omnibus Clause, handing
the white-collar defense bar an important
victory. Significantly, the Court in Marinello
continued its recent trend of narrowly
construing broadly-framed criminal statutes
and restricted the application of the Omnibus
Clause to conduct that obstructs a particular
investigation or proceeding of which the
defendant was (or should have been) aware.
Factual Background
Between 1992 and 2010, Carlo Marinello
operated a courier business in Buffalo, New
York. In connection with that business,
Marinello failed to keep records reflecting
its income or expenses, often destroying
or shredding documents. He also paid his
employees in cash; failed to report their
income to the IRS; paid personal expenses with
corporate funds; and, most significantly, did not
file personal or corporate tax returns.
In December 2004, the IRS initiated an
investigation into Marinello's tax compliance.
That investigation was eventually closed because
the IRS could not determine the extent of
Marinello's unreported income. While Marinello
was apparently unaware of that investigation,
in 2005, on the advice of counsel, he consulted
a CPA regarding his non-compliance. The CPA
asked for documentation necessary to prepare
corporate tax returns, but Marinello was unable
to provide the necessary records. Despite
having been advised of the importance of
good documentation, Marinello failed to
keep appropriate books and records over the
ensuing years.
In 2009, the IRS re-opened its investigation.
In the course of the investigation, an IRS
agent interviewed Marinello, who admitted
that he had earned sufficient income to
require payment of taxes but claimed
he "never got around to" filing returns.
Marinello also admitted paying personal
expenses out of his business and confirmed
that he had not kept (or had shredded)
records reflecting the business's income and
expenses.
Marinello was indicted on eight
misdemeanor counts of willfully failing to
file tax returns in violation of 26 U.S.C. §
7203, and one felony count of corruptly
endeavoring to obstruct and impede the
due administration of the Internal Revenue
laws in violation of 26 U.S.C. § 7212(a).
Specifically, the 7212(a) charge was predicated
on Marinello's (1) failure to maintain proper
books and records; (2) failure to provide
information to his accountant; (3) destruction
of records; (4) cashing of checks issued to the
business; (5) concealment of business income
in non-business accounts; (6) transferring
assets to another person to conceal their
improper use; (7) paying employees in cash;
and (8) paying personal expenses out of the
business.2 Following his conviction and the
denial of his post-trial motion, Marinello was
sentenced principally to three years in prison.
The Second Circuit Opinions
On appeal to the United States Court of
Appeals for the Second Circuit, Marinello
argued that, to obtain a conviction under
the Omnibus Clause, the government must
establish (a) the existence of a pending IRS
investigation and the defendant's knowledge
of that investigation, and (b) an affirmative
act as opposed to an omission. On October
14, 2016, a unanimous panel consisting of
Circuit Judges Robert Sack and Rosemary
Vol. 3, Issue 2
l
For The Defense
29
Table of Contents for the Digital Edition of For the Defense - Vol. 3, Issue 2 - 2018
Contents
For the Defense - Vol. 3, Issue 2 - 2018 - 1
For the Defense - Vol. 3, Issue 2 - 2018 - 2
For the Defense - Vol. 3, Issue 2 - 2018 - Contents
For the Defense - Vol. 3, Issue 2 - 2018 - 4
For the Defense - Vol. 3, Issue 2 - 2018 - 5
For the Defense - Vol. 3, Issue 2 - 2018 - 6
For the Defense - Vol. 3, Issue 2 - 2018 - 7
For the Defense - Vol. 3, Issue 2 - 2018 - 8
For the Defense - Vol. 3, Issue 2 - 2018 - 9
For the Defense - Vol. 3, Issue 2 - 2018 - 10
For the Defense - Vol. 3, Issue 2 - 2018 - 11
For the Defense - Vol. 3, Issue 2 - 2018 - 12
For the Defense - Vol. 3, Issue 2 - 2018 - 13
For the Defense - Vol. 3, Issue 2 - 2018 - 14
For the Defense - Vol. 3, Issue 2 - 2018 - 15
For the Defense - Vol. 3, Issue 2 - 2018 - 16
For the Defense - Vol. 3, Issue 2 - 2018 - 17
For the Defense - Vol. 3, Issue 2 - 2018 - 18
For the Defense - Vol. 3, Issue 2 - 2018 - 19
For the Defense - Vol. 3, Issue 2 - 2018 - 20
For the Defense - Vol. 3, Issue 2 - 2018 - 21
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For the Defense - Vol. 3, Issue 2 - 2018 - 28
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