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As case heads to Supreme Court, Buffalo businessman freed from prison

Carlo J. Marinello II is on a run of sorts.

Two weeks ago, the Buffalo man learned the U.S. Supreme Court will hear an appeal of his 3-year-old tax conviction.

A federal judge last week ordered him released from prison more than a year early.

In granting Marinello his freedom, U.S. District Judge William M. Skretny, the same judge who oversaw his trial, pointed to his upcoming Supreme Court case and the possibility that his only felony conviction might be reversed.

Skretny's ruling came just a week after federal prosecutors agreed not to oppose Marinello's release.

For the former small business owner, now 70, the developments of the past few weeks are an acknowledgement of why he spent five years fighting the government, according to his lawyer, Joseph M. LaTona.

Marinello's release after 21 months in prison is the latest development in a prosecution that started out as a little known tax case. The case garnered headlines when two federal appeals judges in New York City, in an unusually provocative dissent, said Marinello's prosecution means "no one is safe" from the IRS.

They also said the criminal case "cleared a garden path for prosecutorial abuse."

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

"Too much power. Too much discretion," LaTona said. "No prosecutor should be able to indict a taxpayer because they don't like the records they keep."

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

The jury also found Marinello guilty of several counts of tax evasion, all misdemeanors. He was sentenced to a year in prison on those lesser charges and, because of the one felony obstruction charge, a total of three years in prison.

"He's already served his time for the misdemeanors," LaTona said.

Even Marinello admits his business records were inadequate, and that he was lax in filing tax returns. He also acknowledges destroying bank statements and commingling business income and personal expenses.

In his defense, he argued, his sole focus at the time was on building his company, Express Courier Group/Buffalo Inc.

LaTona, in his petition to the Supreme Court, said his client's appeal raises the question, should poor bookkeeping land you to prison?

In ordering Marinello's release, Skretny pointed to the "substantial question of law" raised by his appeal to the nation's highest court.

The court's decision came after eight of the 10 judges on the Second Circuit Court of Appeals who heard Marinello's case agreed with the jury 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," U.S. Circuit Judge Dennis Jacobs said. “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.' "

LaTona thinks Marinello's petition to the Supreme Court also benefited from a split in how the nation's appeals courts view the IRS “omnibus clause” at the heart of his appeal.

Three appeals court have ruled in favor of the IRS with just one, in Ohio, ruling against it, according to court records.

Supreme Court agrees to hear Buffalo tax case

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."

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


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