Can you be convicted of unknowingly impeding an IRS investigation? – UPDATED

Yes and no. The federal circuit courts are split on this issue. And that’s why the SCOTUS will hear the case of United States v. Marinello on Wednesday December 6th 2017.

“On its face, United States v. Marinello is about mens rea: Can one be convicted of obstructing the IRS if they are unaware that the IRS is conducting an investigation? In practice, though, this case is really about prosecutorial abuse of power, which is attracted when a criminal statute reaches innocent conduct. The dissenting judges in the Second Circuit recognized this danger: “Prosecutorial power is not just the power to convict those we are sure have guilty minds; it is also the power to destroy people.”

The statute, 26 USC § 7212(a), allows prosecution of one who “in any . . . way corruptly or by force . . . endeavors to obstruct or impede the due administration” of the IRS. The Second Circuit, where this case originated, does not require that the defendant know of an IRS investigation. It does not require contemporaneity of the obstructive act and IRS investigation. It does not even require that the act obstruct a particular investigation. As Mr. Marinello argues, the statute is “a general prohibition on conduct that hinders the IRS in any way.”

The facts are that Mr. Marinello ran a rather sketchy business in upstate New York: he was a poor bookkeeper, paid employees cash, did not keep bank statements or business records, and, well, didn’t always file tax returns. These activities spanned 1992 to 2010. The IRS investigation began, unbeknownst to him, in 2009. Eventually he was prosecuted for his bad business style, and convicted for obstructing an IRS investigation when he did not know there was an IRS investigation.

SCOTUS granted cert on this question:

Whether § 7212(a)’s residual clause requires that there was a pending IRS action or proceeding, such as an investigation or audit, of which the defendant was aware when he engaged in the purportedly obstructive conduct.

A circuit split arises from the more reasonable Sixth Circuit, which reads into the statute a saving mens rea requirement. The First, Second, Ninth and, yes, Tenth fall on the wrong side of this divide. See United States v. Sorensen, 801 F.3d 1217 (10th Cir. 2015).

Two Second Circuit judges issued a powerful dissent from the denial of en banc review, with a scathing indictment of the panel opinion. Some choice quotes:

The panel “cleared a garden path for prosecutorial abuse.”

“How easy it is under the panel’s opinion for an overzealous or partisan prosecutor to investigate, to threaten, to force into pleading, or perhaps (with luck) to convict anybody.”

The statute “affords the sort of capacious, unbounded, and oppressive opportunity for prosecutorial abuse that the Supreme Court has repeatedly curtailed.”

The panel had misconstrued the statute as “a prosecutor’s hammer that can be brought 

down upon any citizen,” rather than as a “specialized tool” to prevent obstruction of “active IRS investigations.”

The dissent, “decline[d] to defer to the Department of Justice’s views to determine the scope of a criminal statute.”

And, “If this is the law, no one is safe.”

The case will be argued this Wednesday, December 6, 2017. ” 

(Fom: Kansasfpd.blogspot.com)

UPDATE:

Because of a split in the circuits, the Supreme Court granted Marinello’s petition for certiorari. In a 7-2 opinion, the Supreme Court reversed the Second Circuit. The Court put the question before it and the answer in the following terms:
The question here concerns the breadth of that statutory phrase. Does it cover virtually all governmental efforts to collect taxes? Or does it have a narrower scope? In our view, “due administration of [the Tax Code]” does not cover routine administrative procedures that are near-universally applied to all taxpayers, such as the ordinary processing of income tax returns. Rather, the clause as a whole refers to specific interference with targeted governmental tax-related proceedings, such as a particular investigation or audit.
The Court looked to its decision in United States v. Aguilar, 515 U.S. 593 (1995), which involved similar wording in the obstruction of justice statute. In Aguilar the Court held to convict under that omnibus clause of the obstruction of justice statute the Government must prove the defendant intended to influence a judicial or grand jury proceeding and that his acts had a temporal, causal or logical relationship with the proceeding. The reasons for its narrow reading in Aguilar were deference to Congress and concerns about giving “fair warning … of what the law intends to do if a certain line is crossed.”
The Court observed that the words “obstruct or impede” are broad. The objective phrase is “due administration of this title.” The omnibus clause occurs in the context of language dealing with the obstruction of an officer or employee or the forcible rescue of property after seizure, acts “against individual, identifiable persons or property.” According to the Court the omnibus clause is a “catchall” to the types of obstructive conduct set out in sec. 7212(a), not to all interference with what the Government termed “the continuous, ubiquitous and universally known” administration of the internal revenue laws.
Following its textual analysis, the Court turned to the legislative history of sec. 7212(a). It found that both House and Senate Reports made it clear that Congress meant to limit the scope of sec. 7212(a)’s omnibus clause. The Court could find nothing in the legislative history to indicate an intent to make the omnibus clause a catchall for routine filing, return processing and similar activities under the Internal Revenue Code.

In a nutshell, all activities by IRS employees do not amount to an investigation and what the taxpayers does or does not do can’t rise to level of obstruction…unknowingly. Brings me back to first year criminal law and the concept of “mens rea” or the “guilty mind” where the accused must have some intent to violate the law.