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‘Nobody Is Safe’: Judges Sound Alarm on Tax Precedent

To pummel a disgraced New York courier company owner, the Second Circuit created a tax fraud precedent so broad that — in the words of two dissenting judges — “nobody is safe.”

MANHATTAN (CN) — To throw the book at a disgraced New York courier company owner, the Second Circuit created a tax fraud precedent so sweeping that — in the words of two dissenting judges — “nobody is safe.”

“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,’” U.S. Circuit Judge Dennis Jacobs wrote in a blistering dissent on Wednesday.

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.

Marinello, the 70-year-old former owner of Express Courier Group/Buffalo, is now serving a one-and-a-half-year federal prison sentence for failing to pay hundreds of thousands of dollars in personal or corporate taxes for U.S. and Canadian-generated revenue in 2005, 2006, 2007 and 2008.

Of his nine convictions, only one involving the so-called “omnibus clause” of the criminal tax code has sparked controversy at the Manhattan-based Second Circuit Court of Appeals.

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.

In October, three Second Circuit judges embraced this broad reading of the statute, sparking a call from one appellate judge to convene en banc to reconsider the ruling.

All but two appellate judges rejected a rehearing on Wednesday.

In so doing, Jacobs warned this morning, his colleagues had “cleared a garden path for prosecutorial abuse.”

"If this is the law, nobody is safe,” he 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.

In a phone interview, Marinello’s lawyer Joseph LaTona confirmed that he would take his client’s case to the U.S. Supreme Court.

“It’s a matter of grave concern, no question,” LaTona said, referring to the precedent.

Setting up an appellate split, 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.

Hinting that high court review could be promising, the dissent states: “The panel opinion in Marinello affords the sort of capacious, unbounded and oppressive opportunity for prosecutorial abuse that the Supreme Court has repeatedly curtailed.”

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 U.S. Attorney’s Office for the Western District of New York did not immediately respond to a telephone request for comment.

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