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Supreme Court agrees to hear Buffalo tax case

From Day One, Carlo J. Marinello II knew it was a one-a-million proposition.

After all, how many cases, especially one involving a small business owner from Buffalo, ever make it to the U.S. Supreme Court?

The nation's highest court surprised Marinello and a lot of others this week by agreeing to hear an appeal of his three-year old tax evasion conviction.

"Totally elated," said Joseph M. LaTona, Marinello's defense lawyer. "It's always a long shot to get to the Supreme Court."

No one can be sure why the court picked Marinello's case out of so many others, but LaTona thinks it has a lot to do with two New York appeals court judges who dissented in the case and suggested "no one is safe" from the IRS.

In the same blistering dissent, the judges said the case "cleared a garden path for prosecutorial abuse."

Judges warn of 'prosecutorial abuse' if Buffalo IRS ruling stands

Marinello, the owner of a small courier service in Buffalo, was convicted in Buffalo in 2014 of obstructing the IRS. The jury verdict hinged, in part, on the prosecution's contention that years of poor record keeping was grounds enough to convict the small business owner.

Even Marinello admits he spent little, if any, time keeping adequate records or filing tax returns and that his sole focus at the time was on building his company, Express Courier Group/Buffalo Inc.

The former small business owner also acknowledged destroying bank statements and commingling business income and personal expenses.

His case, LaTona argues, raises the question: Should sloppy bookkeeping send you to federal prison?

Eight of the 10 judges on the Second Circuit Court of Appeals who heard Marinello's case agreed with the verdict. They also found that Marinello did not have to be aware of the IRS investigation into his business in order to obstruct or impede the agency.

Two other judges disagreed and, in their dissents, warned of the potential consequences to taxpayers.

"If this is the law, no one is safe," said U.S. Circuit Judge Dennis Jacobs. “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 Jose Cabranes joined in Jacobs' dissent.

LaTona thinks a number of factors, including the tone and substance of the dissents, played a role in the Supreme Court's decision to hear U.S. v. Marinello.

He also pointed to a split in how the nation's appeals courts have come down on the IRS “omnibus clause.” By all accounts, three appeals court have ruled in favor of the IRS with just one, in Ohio, ruling against it.

"The dissents and the split in the circuit courts," LaTona said. "I think those two factors were the keys."

Marinello's petition to the court also may have benefited from two national organizations – the American College of Tax Counsel and the National Association of Criminal Defense Lawyers – that filed briefs in support of his case.

In its court papers, the College of Tax Counsel, a professional association of tax lawyers, said the case's consequences to everyday taxpayers is "neither imaginary nor hyperbolic.

Prosecutors declined to comment on the Supreme Court's decision but, in the past, were quick to note that, of Marinello's nine convictions at trial, only one involved the IRS omnibus clause that sparked the judges' dissent. The rest were for tax evasion.

“The defendant was convicted at trial on nine counts and the Second Circuit Court of Appeals affirmed the defendant’s convictions on all counts," Acting U.S. Attorney James P. Kennedy Jr. said in a prepared statement earlier this year.

The court is expected to hear the Marinello case as part of its October term.

Marinello, now 70, remains in federal prison.

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