Thursday, December 28, 2017

Article with Predictions, Properly Hedged, on Outcome in Marinello (12/28/17)

Accounting Today has an article on Marinello reflecting some observations on oral argument and predictions as to the Supreme Court's final result in the case.  See Andrew Harrer/Bloomberg,, The ‘one-man conspiracy’ statute (Accounting Today 12/27/17), here.  I have covered the oral argument in Marinello.  See More on the Marinello Transcript of Oral Argument (Federal Tax Crimes Blog 12/9/17), here; and First Comments on the Marinello Oral Argument Transcript (Federal Tax Crimes Blog 12/6/17), here.  I am not able to make the type of predictions made in the Accounting Today article.

Here was some key excerpts from the Accounting Today article:
"Justice Sotomayor and Justice Gorsuch offered a reading of the tax obstruction statute that is likely to carry the day,” said Jeffrey Green, a partner at Sidley Austin. “That is, that the IRS must be engaged in some type of active proceeding, even if that is not a full-blown audit or investigation. The assistant to the solicitor general ably withstood withering questioning from the bench, but his appeal to the DOJ’s charging discretion was undone by the DOJ’s new policy requiring that the most severe charge be made in all cases.” 
* * * *\ 
“Not filing a tax return is a misdemeanor, not a felony,” Green noted. “But the government’s interpretation would make a felony obstruction charge automatic, because the IRS can’t do its job if they can’t look to see if you’ve reported all of your income.”
Green anticipates that the Court will reverse and remand to the Second Circuit to apply a new standard to the facts of Marinello’s case. 
“It’s almost certain that they will reverse,” he said. “It will be interesting to see where they will land. It will probably be a bit short of what the petitioner is asking for — that there needs to be a pending proceeding. Justices Sotomayor and Gorsuch offered a reading a bit broader than that. On remand, it could potentially be a danger for Mr. Marinello depending on how the Supreme Court writes the case.” 
“Quite likely it will be a 9-0 decision, and the opinion will be written by Justice Sotomayor,” he said. 
“My sense is that it will be reversed,” agreed Don Falk, an appellate litigation partner at Mayer Brown. “But the court won’t adopt either the petitioner’s or the government’s position.” 
“The court may decide based on the mens rea [knowledge of wrongdoing] component, or it may focus on the ‘administration of this title’ element. My best guess is that they would require some kind of affirmative action by the taxpayer that occurs after any contact by the IRS. A letter or phone call would be enough — it would not have to be a formal proceeding.” 
“It’s rare to hear a justice described a statute in such terms as ‘ungodly broad’ and still find it constitutional,” observed Hochman. “The reason is that the due process clause requires a statute to alert someone as to when they’re crossing a line in order to find them criminally responsible for their action. What they seemed [at oral argument] to be suggesting is that the statute covers many actions that they don’t believe to be potentially criminal.” 
“The indications seem to be that they will reverse,” he said. “It looks like Mr. Marinello found a right collection of justices to hear his case.”
One other point discussed in the article is that the tax obstruction crime, § 7212(a) Omnibus Clause, is a " one-man conspiracy statute."  The parallels between the defraud/Klein conspiracy and tax obstruction are striking.  Hence, as I have suggested before, whatever the Supreme Court does may affect the defraud/Klein conspiracy.

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