Alarming Tax Precedent Faces High Court Scrutiny

WASHINGTON (CN) – The Supreme Court took up a tax-fraud case Tuesday that Second Circuit judges warned earlier this year had “cleared a garden path for prosecutorial abuse.”

Carlo Marinello, the septuagenarian former owner of Express Courier Group/Buffalo, was sentenced to 18 months in federal prison for failing to pay hundreds of thousands of dollars in personal or corporate taxes on U.S. and Canadian-generated revenue between 2005 and 2008.

Marinello was saddled with nine convictions, but only one involving the so-called “omnibus clause” of the criminal tax code has sparked controversy.

Casting a wide net, the statute punishes anyone who “corruptly… obstructs or impedes, or endeavors to obstruct or impede” the administration of all 27 volumes of the Internal Revenue Code.

Prosecutors argued that Marinello did not have to be aware of a government investigation to violate this clause. Jurors only had to find him guilty of one of eight offenses listed against him, and a federal judge instructed them that they did not need to agree upon which one.

When the Second Circuit embraced this broad reading of the statute in October 2016, other members of the New York federal appeals court called for a rehearing en banc.

All but two appellate judges rejected that rehearing, however, in February.

The case against New York courier company owner Carlo J. Marinello Jr. made few headlines outside of the local press in Erie County, N.Y.

In so doing, U.S. Circuit Judge Dennis Jacobs, his colleagues had “cleared a garden path for prosecutorial abuse.”

“If this is the law, nobody is safe,” Jacobs wrote. “The jury charge allowed individual jurors to convict on the grounds, variously, that Marinello did not keep adequate records; that, having kept them, he destroyed them; or that, having kept them and preserved them from destruction, he failed to give them to his accountant.”

U.S. Circuit Judge Jose Cabranes joined in the 13-page dissent.

“At some point, prosecutors must encounter boundaries to discretion, so that no American prosecutor can say, ‘Show me the man and I’ll find you the crime,’” the dissent continues.

Marinello’s attorney Joseph LaTona had vowed at the time to take the case to the U.S. Supreme Court.

Judge Jacobs had hinted at the possibility of high court review as well. “The panel opinion in Marinello affords the sort of capacious, unbounded and oppressive opportunity for prosecutorial abuse that the Supreme Court has repeatedly curtailed,” he wrote.

The dissenting judges also called the Second Circuit’s reading of the omnibus clause unnecessary, given that Marinello had eight strong convictions related to tax evasion.

“Indiscriminate application of this omnibus clause serves only to snag citizens who cannot be caught in the fine-drawn net of specified offenses, or to pile on offenses when a real tax cheat is convicted,” the opinion states.

The Michigan-based Sixth Circuit has ruled twice — in 1998 and 2014 — that knowledge of a pending IRS investigation was required to convict under the omnibus clause.

Per its custom, the Supreme Court did not issue any comment in taking up the case Tuesday. Marinello’s first name is spelled as Carl in the case caption.

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