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 Bowmen. 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").