Carlo J. Marinello II owned Express Courier Group/Buffalo, Inc., in Buffalo, N.Y. a courier service operated between the U.S. and Canada. He did not file tax returns, pay federal taxes, and systematically destroyed the company’s business records while unaware he was under investigation by the Internal Revenue Service for a portion of 2005 – 2008.
Marinello was charged with failing to file 2005 – 2008 individual and corporate tax returns. He was also charged pursuant to I.R.C. § 7212(a) with corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue Code. He was convicted at trial of violating I.R.C. § 7212(a), which was upheld by the Second Circuit Court of Appeals.
The Supreme Court reversed, holding that the government must demonstrate a connection or nexus between an actual IRS administrative proceeding and the taxpayer’s/defendant’s actions in order to achieve a conviction under I.R.C. § 7212(a). The proceeding – an investigation or audit, must be in process when the defendant’s obstruction occurs or, at least be reasonably foreseeable by the defendant.
The Supreme Court’s holding does not require proof that the defendant actually knew of the investigation or audit. Rather, relying on United States v. Aguilar, 515 U.S. 593 (1995), which involved a conviction for obstruction of justice pursuant to 18 U.S.C. § 1503, the defendant’s actions must have a relationship in time, causation, or logic with the proceeding in question. The defendant must hinder an actual IRS administrative proceeding, investigation or audit.
The primary rationale underlying the Supreme Court’s narrowing of I.R.C. § 7212(a) prosecutions, was its concern that the government’s broad interpretation of the scope of that provision could ensnare taxpayers not complying with the Internal Revenue Code, yet not intentionally impeding an audit, investigation or proceeding. For example, the government’s expansive reading of section 7212(a) might result in prosecution of a taxpayer claiming a deduction without proper substantiation of such deduction, even though the taxpayer was not seeking to impede an IRS audit or investigation.
The Supreme Court’s Marinello holding erects a significant barrier to IRS obstruction prosecutions under I.R.C. § 7212(a). The government is now required to prove the defendant’s actions were somehow related in time, causation, or logic with an actual IRS administrative proceeding, investigation or audit.