Thursday, July 9, 2020

Second Circuit Affirms Convictions, Rejecting Marinello and Bad Acts Evidence Arguments (7/9/20)

In United States v. Scali,  (2d Cir. 7/7/20), here, Unpublished, the Second Circuit affirmed the conviction of a prior lawyer for “ten criminal offenses, including: mail fraud, structuring cash deposits, tax violations, obstruction of justice, and perjury.”

For  most readers of this blog, the most interesting part of the decision is the discussion of Jury Instructions (Slip Op. pp. 10-11) regarding the Marinello issue.  Marinello v. United States, ___ U.S. ___, 138 S. Ct. 1101 (2018).  Marinello held that § 7212(a)’s tax obstruction crime (Omnibus Clause) requires:
  • A nexus to an administrative proceeding: “a ‘nexus’ between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action. That nexus requires a 'relationship in time, causation, or logic with the [administrative] proceeding.’”
  • A pending or reasonably foreseeable proceeding: “the [administrative] proceeding was pending at the time the defendant engaged in the obstructive conduct or, at the least, was then reasonably foreseeable by the defendant.”

Before the Supreme Court decided Marinello, the trend in the cases was to hold that tax obstruction did not require a relationship to a pending investigation. 

In Scali, the trial occurred while the case was pending in the Supreme Court, so that the outcome was not known when the case was submitted to the jury.  The Second Circuit easily affirmed the Marinello issue because of how the district court submitted the case to the jury to address the uncertainty in Marinello outcome ((Slip Op. 10-11):
The district court, aware that the Supreme Court was considering the scope of § 7212(a) in Marinello, provided the jury with a special verdict form that required the jury to indicate whether it unanimously found that Scali committed one or more of the specified obstructive acts "after becoming aware of a pending IRS proceeding, specifically the IRS's civil collection activities." Suppl. App'x at 763 (italics in original). In finding Scali guilty of Count Five, the jury checked "Proved" next to each of the six obstructive acts listed in the special verdict form. Accordingly, the jury's findings make clear that it found the required nexus between Scali's obstructive acts and the pending IRS proceeding of which Scali was aware, rendering any Marinello error in the jury instructions non-prejudicial. See United States v. Beckham, 917 F.3d 1059, 1064-65 (8th Cir. 2019) (holding a Marinello instructional error harmless because the overwhelming evidence established the nexus and knowledge requirement), cert. denied, 140 S. Ct. 857 (2020).
Another issue in Scali was the Government’s introduction of other year tax returns, which Scali claimed was improper “bad acts” evidence under FRE 404(b).  The Second Circuit rejected that claim, saying (Slip Op. pp. 7-8):
First, Scali argues that the district court violated Federal Rule of Evidence 404(b) by admitting the federal and state tax filings because the evidence only served to establish his propensity to commit the charged tax offenses. We disagree. This Court has explained that Rule 404(b) permits admission of a defendant's past taxpaying record as circumstantial evidence of willfulness to evade taxes in subsequent years. See United States v. Bok, 156 F.3d 157, 166 (2d Cir. 1998) ("[F]ailure to file state or federal returns . . . until told to do so by the IRS is indicative of an intent to evade the tax system."); see also United States v. Klausner, 80 F.3d 55, 63 (2d Cir. 1996) ("Patterns of understating or failing to report income are . . . evidence of willfulness."). Thus, the tax filings from uncharged  [*8] years were admissible as directly relevant to Scali's intent to evade taxes in the charged years.

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