Share this article

print logo

In rare ruling, Supreme Court overturns Buffalo man's tax conviction

Carlo J. Marinello II did the unthinkable: He took on the Internal Revenue Service and won.

It took a decision from the U.S Supreme Court on Wednesday, but the former Buffalo small business owner won his appeal of a four-year-old obstruction conviction.

The high court, in a 7-2 decision, found that the criminal tax law that led to Marinello's conviction was overly broad and subject to potential abuse by prosecutors.

"This is a tremendous victory, not only for Carlo Marinello, but for all taxpayers," said Joseph M. LaTona, Marinello's defense lawyer.

Supreme Court rulings in local federal cases are a rarity; and the fact that Marinello, the former owner of a small courier service in Buffalo, won makes it even more unusual.

Marinello was convicted 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.

But during Marinello's appeal, LaTona argued that his prosecution raised an important question: Should sloppy bookkeeping send you to federal prison?

In the end, the court sided with Marinello.

"Carlo and I are elated," LaTona said Wednesday. "We anticipated a decision with crossed fingers because you never know what the court will do."

The Department of Justice in Washington, D.C., declined to comment on the decision.

No one knows for sure why the Supreme Court decided to hear Marinello's case, but LaTona thinks it had a lot to do with two New York appeals court judges who vigorously dissented in the case and suggested "no one is safe" from the IRS under the lower court's decision.

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

The Supreme Court looked at the role of prosecutors in enforcing the criminal tax law and found that Marinello's case fell short of the necessary legal threshold – a connection between his conduct and an audit, investigation or other administrative proceeding by the IRS.

In short, the court found that Marinello needed to know of the IRS investigation into his business and then "corruptly" intend to interfere with it.

"Just because a taxpayer knows that the IRS will review her tax return annually does not transform every tax code violation into an obstruction charge," Justice Stephen G. Breyer said in his majority opinion.

The court also rejected the government's argument that individual prosecutors should be left to decide what type of obstruction cases to pursue.

"To rely on prosecutorial discretion to narrow the otherwise wide-ranging scope of a criminal statute’s general language places too much power in the prosecutor’s hands," Breyer wrote.

The two justices who dissented were Clarence Thomas and Samuel A. Alito Jr.

The court's decison reverses the lower court rulings that went against Marinello, including the Second Circuit Court of Appeals ruling upholding his conviction.

In that appeal, eight of the court's 10 judges 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,” which bars any attempts to impede the agency. By all accounts, three appeals courts have ruled in favor of the IRS with one, in Ohio, ruling against it.

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."

In the past, prosecutors have declined to comment on the Supreme Court case, except 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.

There are no comments - be the first to comment