In United States v. Huff, 2014 U.S. Dist. LEXIS 174978 (SDNY 2014), defendant Huff
allegedly defrauded both the Internal Revenue Service ("IRS") and clients of "02HR," a professional employer organization, by directing 02HR to fail to pay to the IRS and to insurance companies $58 million in funds provided to 02HR by clients to cover their tax and insurance obligations.For that conduct, he was charged with wire fraud, tax evasion and tax obstruction. I focus on the tax obstruction charge in a single count, Count 7, the same charge involved in Miner, Kassouf and Bowman. I cut and paste immediately below the Court's entire discussion of the issue:
III. Count Seven
Count Seven charges Huff with corruptly endeavoring to obstruct and impede the due administration of the tax laws by causing 02HR employees to, inter alia, file false Forms 941, cease filing Forms 941, cease making payments to the IRS, divert funds intended for the IRS, and conceal from 02HR's clients its failure to make payments to the IRS, in violation of 26 U.S.C. § 7212. Indictment ¶ 21. Extrapolating from cases successful prosecutions under Section 7212, Huff argues that a conviction under this provision requires "proof of a scheme [either] to conceal income or to impede an IRS investigation or proceeding, neither of which is alleged in the Indictment." Def's Reply at 18-19.
Huff is correct that it is difficult to find cases in which defendants have been convicted under Section 7212 without either impeding an IRS proceeding or, more often, concealing their own income. However, the mere lack of cases falling outside this dichotomy does not transform the two precedential patterns into statutory requirements.
First, courts have found that the "omnibus clause" under which Huff has been charged is, as its title implies, subject to an expansive interpretation. See United States v. Kelly, 147 F.3d 172, 176 (2d Cir. 1998) (noting that "the second or 'omnibus' clause is not so limited, and renders criminal 'any other' action which serves to obstruct or impede the due administration of the revenue laws" and that "the plain language of section 7212 does not support [a] narrow interpretation of the statute").
Second, numerous cases support the proposition that the omnibus clause can be used to cover a variety of conduct, including concealing others' income or helping others evade tax payments. See, e.g., United States v. Ohle, 678 F. Supp. 2d 215, 232-33 (S.D.N.Y. 2010 ) (" [A]llegations  which allege that Ohle participated in a scheme to conceal his own income and the income of others from the IRS charge a violation of Section 7212(a) with sufficient specificity.") (emphasis added); United States v. Popkin, 943 F.2d 1535, 1541 (11th Cir. 1991) (affirming violation of § 7212 where defendant attorney created a corporation to help his client disguise the character of illegally earned income and repatriate it); United States v. Floyd, 740 F.3d 22, 32 (1st Cir.) cert. denied sub nom. Dion v. United States, 135 S. Ct. 124 (2014) (calling "the filing of false tax documents . . . .'a quintessential violation of the statute,'" and noting it as an allegation distinct from "concealment of income or other assets from the IRS," which "can [also] form the basis for a violation of the statute").
Here, the actions alleged, including directing the filing of false tax returns, misleading clients into believing their tax obligations had been paid, and diverting tax payments in a manner intended to be difficult to trace, though not directed to concealing Huff's own income, seem clearly intended to deprive the IRS of revenue and make it difficult for the IRS to find and collect funds owed, and therefore to impede the administration of the tax laws. Accordingly, Count Seven adequately alleges a violation of Section 7212.