by Richard Resch

The Supreme Court of the United States reversed a defendant’s conviction for violating the second clause of 26 U.S.C.S. § 7212(a) (“Omnibus Clause”). In doing so, the Court announced the requirements for a conviction under the criminal tax statute, resolving a split among the United States Courts of Appeals.  

Between 2004 and 2009, the IRS opened and closed multiple investigations into the tax activities of Carlo Marinello. In 2012, the Government indicted him for several violations of various criminal tax statutes, including the Omnibus Clause. It forbids “corruptly or by force or threats of force (including any threatening letter or communication) obstruct[ing] or imped[ing], or endeavor[ing] to obstruct or impede, the due administration” of the Internal Revenue Code.

To be convicted of violating the Omnibus Clause, the defendant must have engaged in at least one of eight enumerated activities. The Government accused Marinello of engaging in five of the eight activities: (1) failing to maintain corporate books and records, (2) failing to provide complete and accurate tax information to tax accountant, (3) destroying business records, (4) hiding income, and (5) paying employees with cash.

At trial, the judge instructed the jury that it must find Marinello engaged in at least one of the five activities alleged by the Government in order to convict him. Additionally, it must conclude that he did so “corruptly,” meaning “with the intent to secure an unlawful advantage or benefit” for himself or someone else. However, the judge did not instruct the jury that it must conclude that he knew he was under investigation and intended corruptly to interfere with that specific investigation. The jury convicted him on all counts.

On appeal to the Court of Appeals for the Second Circuit, Marinello argued that a violation of the Omnibus Clause requires the Government to prove the defendant attempted to interfere with a “pending IRS proceeding,” such as a specific investigation. The Second Circuit rejected his argument and held that a defendant need not possess “an awareness of a particular [IRS] action or investigation.”

Marinello petitioned the U.S. Supreme Court for certiorari, asking it to decide whether the Omnibus Clause requires the Government to prove the defendant was aware of “a pending IRS action or proceeding, such as an investigation or audit,” when he or she engaged in at least one of the enumerated activities. Since the Circuit Courts of Appeals were split on this question, the Supreme Court granted the petition to answer it and resolve the Circuit split.

The Court began its analysis by discussing United States v. Aguilar, 515 U.S. 593 (1995), in which the Supreme Court interpreted a criminal statute worded much like the Omnibus Clause. The statute at issue in Aguilar made it a felony “corruptly or by threats of force, or by any threatening letter or communication, [to] influenc[e], obstruct[t], or imped[e], or endeavo[r] to influence, obstruct, or impede, the due administration of justice.” The Aguilar Court adopted a “nexus” requirement in order for a conviction under the statute, i.e., the defendant’s “act must have a relationship in time, causation, or logic with the judicial proceedings.”

The Aguilar Court explained that it adopted the nexus requirement for two important reasons. According to the Court, we “have traditionally exercised restraint in assessing the reach of a federal criminal statute, both out of deference to the prerogatives of Congress and out of a concern that a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.

In the present case, the Court stated that both of those reasons apply “with similar strength” to the Omnibus Clause. Regarding Congress’ intent, the Court concluded that the phrase “the due administration of the Tax Code—is best viewed … as referring to only some of those acts or to some separable parts of an institution or business.” The Court reasoned that if the Omnibus Clause applied “to the entire Code including the routine processing of tax returns, receipt of tax payments, and issuance of tax refunds” the numerous misdemeanors contained in the Tax Code would be transformed into felonies and would result in an unprecedented degree of overlap and redundancy.

Turning to the fair warning rationale of Aguilar, the Court pointed out that a broad interpretation of the Omnibus Clause, as argued for by the Government, would “risk the lack of fair warning and related kinds of unfairness” that led the Aguilar Court to adopt the nexus requirement. For instance, under a broad interpretation of the Omnibus Clause, “a person who pays a babysitter $41 per week cash without withholding taxes” could be charged with a felony, the Court warned. The Court concluded that if “Congress intended that outcome, it would have spoken with more clarity than it did in § 7212(a).”

The Supreme Court announced that “to secure a conviction under the Omnibus Clause, the Government must show (among other things) that there is a ‘nexus’ between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action.” It added that “routine, day-to-day work carried out in the ordinary course by the IRS” does not qualify as a “particular administrative proceeding.”

In addition to meeting the nexus requirement, the Court instructed that “the Government must show that the proceeding was pending at the time the defendant engaged in the obstructive conduct or, at the least, was then reasonably foreseeable by the defendant.”

Accordingly, for the foregoing reasons, the Supreme Court reversed the judgment of the Second Circuit and remanded the case for further proceedings consistent with this opinion. See: Marinello v. United States, 200 L. Ed. 2d 356 (2018). 

Subscribe today

Already a subscriber? Login

Related legal case