The Second Circuit decided the case of United States v. Marinello (Docket No. 15-2224) on Friday. You can see the 44-page decision here. The case involved small businessman, Carlo Marinello, who did not keep corporate records or file personal or corporate income tax returns for nearly two decades. Marinello was convicted by a jury in 2014 in the Western District of New York on nine counts of tax-related offenses. In his appeal, he raised three grounds. I’ll review two of them here. First, he challenged his conviction under the “omnibus clause” of 18 U.S.C. § 7212(a), which imposes criminal liability on one who “in any other way corruptly . . . obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title.” In making his argument, Marinello relied on the Sixth Circuit case, United States v. Kassouf, 144 F.3d 952 (6th Cir. 1998), which held that “due administration of this title” could only include a pending IRS action of which the defendant is aware. Second, he claimed that “a conviction under the omnibus clause cannot be premised on a defendant’s omission,” but rather must be based on an underlying affirmative act. (The third claim was a sentencing issue that was specific to his case).
The Court rejected both arguments. In dealing with the first argument, the Court strongly rejected the Sixth Circuit’s logic in Kassouf. In that case, the Sixth Circuit interpreted § 7212(a) by comparing it to 18 U.S.C. § 1503(a), which imposes liability on one who “. . . corruptly or by threats or force, or by any threatening letter or communication, influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice [.]” The Sixth Circuit relied on caselaw interpreting “the due administration of justice” under § 1503(a) to provide guidance on the term “the due administration of this title” under § 7212(a). Specifically, the Sixth Circuit relied on United States v. Aguilar, 515 U.S. 593 (1995), which found that “‘the due administration of justice’ under section 1503(a) only applied to pending grand jury or judicial proceedings.” By analogy, the Sixth Circuit interpreted “the due administration of this title” to require “that the defendant (1) have knowledge of (2) ‘some pending IRS action.’” The Second Circuit was not persuaded, finding the analogy “inapposite” for a couple of reasons. But their biggest beef was that the “statutes employ different statutory phrases” – i.e. “the due administration of justice” (§ 1503(a)) is not the same thing as the “due administration of this title” (§ 7212(a)). As the Court noted, “this difference indicates that the statutes carry different meanings.” The Second Circuit, then, joins the First, Ninth and Tenth Circuits in rejecting Kassouf.
As for the argument about an omission versus an affirmative act, the Court found that a defendant could not “escape criminal liability under the omnibus clause for a corrupt omission that is designed to delay the IRS in the administration of its duties merely because the offense conduct involved an omission.” For Marinello, that meant that his failure to document or provide proper accounting for his business was a sufficient act to be covered by 7212(a).