On June 27, 2017, the United States Supreme Court agreed to hear a criminal tax case which challenges the Internal Revenue Code’s “omnibus clause” found in section 7212(a), a statute which imposes criminal liability on one who “corruptly . . . .  obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title.” The Court granted a petition for writ of certiorari filed by Carl Marinello who was convicted in 2015 of nine counts of tax-related offenses that allegedly occurred from 2005 through 2009.1

BACKGROUND

In 2012, Marinello was charged in a superseding indictment with corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws, in violation of 26 U.S.C. § 7212(a) (Count One), and willfully failing to file individual and corporate tax returns for calendar years 2005 through 2008, in violation of 26 U.S.C. § 7203 (Counts Two through Nine). At trial, defense counsel conceded that Marinello did not file his tax returns, but argued that Marinello could not be convicted on Count One – the omnibus clause – because he lacked the requisite criminal intent under Section 7212(a), in as much as he did not “corruptly” obstruct or impede the administration of the Internal Revenue Code. Count One alleged that Marinello had violated section 7212(a) by, among other thing[s]:

  1. failing to maintain corporate books and records for [Express Courier] of which the defendant was an employee, officer, owner and operator;
  2. failing to provide the defendant’s accountant with complete and accurate information related to the defendant’s personal income and the income of Express Courier;
  3. destroying, shredding and discarding business records of Express Courier;
  4. cashing business checks received by Express Courier for services rendered;
  5. hiding income earned by Express Courier in personal and other non-business bank accounts;
  6. transferring assets to a nominee;
  7. paying employees of Express Courier with cash; and
  8. using business receipts and money from business accounts to pay personal expenses, including the mortgage for the residence in which the defendant resided and expenses related to the defendant’s mother’s care at a senior living center.

Over Marinello’s objection, the district court declined to instruct the jury that it had to unanimously agree on at least one of the eight specified means by which Marinello allegedly violated section 7212(a) to find him guilty under that section. The jury convicted Marinello on all counts. He moved for a judgment of acquittal or a new trial and argued, in part, that the phrase “the due administration of this title” in section 7212(a) refers exclusively to pending IRS investigations, and that a defendant may be convicted under the omnibus clause statute only if he knowingly interferes with such an investigation. In support of his argument, Marinello cited United States v. Kassouf,2 a Sixth Circuit decision.

Marinello argued that he should be acquitted because there was no evidence that he had become aware of the IRS’s investigation until his June 2009 interview with an IRS agent, which occurred after the conduct alleged in the superseding indictment had already taken place. The district court rejected Marinello’s argument, noting that the Sixth Circuit’s Kassoufdecision was limited to its facts, and that other courts had declined to follow Kassouf’s reasoning. The district court concluded that knowledge of a pending IRS investigation is not an essential element of the crime under the omnibus clause in section 7212(a). 

On appeal, the Second Circuit Court of Appeals affirmed and declined to adopt Kassouf’sconstruction on the omnibus clause.

ANALYSIS

Section 7212(a) criminalizes certain “[a]ttempts to interfere with [the] administration of internal revenue laws.”  The statute provides:

[w]hoever [1] corruptly or by force or threat of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title[sic], or [2] in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall, upon conviction thereof, be [fined or imprisoned, or both].  

(emphasis added)

The second clause of section 7212(a), the “omnibus clause,” is a catch-all provision that criminalizes “any other way” of corruptly obstructing or impeding the due administration of the Internal Revenue Code. Marinello argued that the court should have held, as the Sixth Circuit did in Kassouf, that the statutory phrase “the due administration of this title” under the omnibus clause refers exclusively to pending IRS investigations or proceedings, of which the defendant must have knowledge in order to corruptly obstruct or impede. In Kassouf, the district court granted the defendant’s motion to dismiss the section 7212(a) count from his indictment finding that the government had not alleged as an element of the crime that the defendant had knowledge of a pending IRS proceeding or investigation. On appeal, the Sixth Circuit, agreed with the district court that “due administration of the Title requires some pending IRS action” – such as “subpoenas, audits or criminal tax investigations” – “of which the defendant was aware.”3 The Sixth Circuit largely based its conclusion on a comparison of the omnibus clause with another statute, 18 U.S.C. § 1503. The Second Circuit refused to follow Kassouf, and concluded that the text of section 1503(a) was distinguishable from section 7212(a). The Second Circuit also found that the legislative history of section 1503 makes clear that Congress intended section 1503 to apply only to grand jury or judicial proceedings, and no comparable legislative history points to interpreting section 7212(a) in a similar manner.  For these reasons the Second Circuit refused to adopt the Sixth Circuit’s analysis in Kassouf. The Court noted that its interpretation of section 7212(a)’s omnibus clause was consistent with three other circuits.

The Appeal is now pending at the Supreme Court. Oral argument is scheduled for December 5, 2017.