In one of the most important criminal tax cases in recent memory, Bernhoft Law obtained complete appellate reversals of all federal criminal tax convictions for a father and son who’d been unjustifiably hounded and persecuted by the IRS for over a decade.

And when the government announced its intention to retry the father and son after the 11th Circuit Court of Appeals reversed all trial convictions, Attorney Bernhoft began an investigation that would lead to both Jerry Marchelletta, Jr. and his father walking out of federal court in Atlanta, free men, on September 12, 2012.

Over the course of 4 years, Bernhoft Law deployed a unique strategic combination of Freedom of Information Act (“FOIA”) litigation, intense document review and mastery, penetrating investigation, and shrewd motion filings to expose a decade of outrageous government misconduct that had gone undetected by the Marchellettas’ previous counsel, ultimately leading to the Marchellettas’ complete and justified vindication.

The Phone Call

The Marchellettas telephoned Attorney Bernhoft in February of 2008, after Jerry Marchelletta, Jr. and his father had been convicted of several tax fraud and conspiracy counts by an Atlanta federal jury. As Jerry Marchelletta relates:

“We put our trust and confidence in the local federal criminal defense attorneys, and they assured us we’d be acquitted . . . that turned out not to be the case. After the trial went bad, my father emailed Bernhoft’s web site to me – he had seen the media coverage of Bernhoft’s recent felony tax acquittals for Wesley Snipes – and I knew right away that Bernhoft was our guy when I saw that picture of him with the cigar . . . that was a game-changing moment for my family and I.”

The Marchellettas initially hired Bernhoft for sentencing consultation and appeal, and the Bernhoft Law team went to work immediately, first helping to obtain release for the Marchellettas during the appeal – a rare circumstance where a federal trial judge allows a defendant not to report to federal prison and instead remain free until the appeal is decided. Release pending appeal was extremely important to Jerry, so that he could continue to be with his family and run the Circle drywall business, hoping against hope that the unjust convictions could be overturned on appeal.

Appeal Preparation Work Reveals Government Misconduct

Next Bernhoft turned to the appeal work, reviewing the trial docket and all filings, the discovery previously provided to the Marchellettas’ trial defense lawyers, and the trial transcripts themselves. During this appeal preparation work Bernhoft detected indicia of investigative and prosecutorial misconduct, including all the hallmarks of a “dirty” trial, such as insufficient discovery by the government, suspicious testimony from government witnesses, and the prosecutors savaging the Marchellettas with “class envy” arguments to prejudice them with the jury. Prosecutors don’t need to resort to such unethical tactics unless they’ve got something to hide.

So while the federal appeal work went forward, behind the scenes Bernhoft launched a comprehensive government misconduct investigation that would eventually break the case wide open.

The Marchellettas Appeal

Meanwhile, the appeal work went forward, leading to Bernhoft filing briefs with the 11th Circuit Court of Appeals. Bernhoft raised three issues and argued that each, independently, warranted reversal of all trial conviction counts: (1) prosecutorial misconduct during opening statement and closing argument; (2) the district court’s failure to instruct the jury on the Marchellettas’ core theory of defense, reliance on accountant; and (3) a complex technical tax issue arising under Internal Revenue Code Sections 301 and 316, as applied by the U.S. Supreme Court in Boulware v. United States, 552 U.S. 421 (2008).

See Attorney Bernhoft’s and the Government’s briefs here:

• Marchelletta Opening Brief
• Government Brief
• Marchelletta Reply Brief

On August 28, 2009, Attorney Bernhoft argued the case before the 11th Circuit Court of Appeals in Atlanta before a 3-judge panel consisting of the Honorable Judges Edmundson, Birch, and Hodges, masterfully advocating the Marchellettas’ cause and eliciting sharp questions and retorts from the Court to the Government. Almost one year later, on August 19, 2010, the Appeals Court issued what would be its first decision, reversing all tax convictions save the tax conspiracy conviction.

See the 11th Circuit’s Decision here:

• 11th Circuit Decision Original
• 11th Circuit Decision Westlaw

A great outcome, to be sure, but the war wasn’t over, because the Government had the right to retry the charges the Appeals Court reversed, and even if the Marchellettas prevailed with full acquittals at a retrial,

they would still face sentencing and imprisonment on the unreversed conspiracy conviction count from the first trial.

In an attempt to have the 11th Circuit reconsider its decision, Bernhoft filed a Petition for Panel Rehearing, requesting that the Court reconsider its decision and reverse the sole remaining trial conviction count, the Count I tax conspiracy charge. Although infrequent, the Court granted Bernhoft’s rehearing petition and ordered additional briefing.

See Bernhoft’s and the Government’s Rehearing Briefs here:

• Marchelletta Rehearing Petition
• Court Order Granting Rehearing
• Government’s Rehearing Response Brief
• Marchelletta Rehearing Reply Brief

The Last Remaining Conviction Count is Reversed

On December 22, 2010, in a rare move, the Court modified its initial decision and reversed the sole remaining conviction count. When Bernhoft telephoned the Marchellettas to give them the news, they were having their annual Circle company Christmas party. As Jerry Marchelletta relates:

“We’d been through years of unjustified persecution at the hands of people we were raised to trust, and after becoming thoroughly disillusioned with our justice system and doubting whether justice would ever be done, getting the final reversal news while we were celebrating our annual Circle Christmas party with all the friends and coworkers who supported us and believed in us all those years was more than special . . . it’s hard to put into words.”

See the 11th Circuit’s Final Rehearing Decision here:

• Court Final Rehearing Decision Original
• Court Final Rehearing Decision Westlaw

The Government made a last-gasp effort to save face by appealing to the U.S. Supreme Court, but the High Court declined to review the 11th Circuit’s reversal decisions. The Marchellettas’ 10-year ordeal appeared to be over, but was it?

The Government and IRS Announce They Want a Retrial

In spite of the embarrassing complete reversal of all trial convictions counts on appeal obtained by Attorney Bernhoft, and apparently unwilling to walk away gracefully from a case that should never have been brought in the first place, the Government and IRS announced they intended to retry the entire case, almost four years after the first trial in 2007. Knowledgeable sources were stunned by the Government’s unthinking decision, and here’s why.

Flash back to 2008. With the stench of investigative and prosecutorial misconduct hanging over the investigation and 2007 trial based on Bernhoft Law’s initial survey of the pretrial discovery and trial transcripts, the Bernhoft Law team launched a government misconduct investigation behind the scenes as the lengthy appeal process started to move forward. But how to wind back the hands of time and unearth secrets going back more than ten years, to the origin of an investigation the government claimed started in March 2001 with the seizure of a check at the Memphis FedEx hub – a seizure the government would later claim at trial was completely random and happenstance?

The Misconduct Investigation Moves Forward

The misconduct investigation focused initially on using Freedom of Information Act (“FOIA”) requests to obtain documents denied the defense before and during the first trial. What sparse documents the government did provide the defense back in 2007, along with trial testimony, showed that both U.S. Customs and IRS led the investigation. FOIA requests were therefore served on both agencies for all documents related to the check seizure and tax investigation. These FOIA requests, and the subsequent federal FOIA lawsuits the Marchellettas filed when the agencies stonewalled, revealed over one-hundred thousand pages of documents denied the Marchellettas before and during their 2007 trial.

This treasure trove of previously undisclosed documents proved that Marchelletta had been the victim of a government frame job orchestrated principally by IRS Criminal Investigation Special Agent Patricia Bergstrom and her cohort at U.S. Customs, Special Agent Kimberly Sellers. These two federal Special Agents had concealed dozens of their own interview reports and other evidence that exculpated Marchelletta of any criminal wrongdoing. Notably, these reports and other undisclosed evidence also proved that Special Agents Bergstrom and Sellers committed streaming perjury during the trial – perjury that went undetected by Marchelletta’s original defense attorneys because the government concealed these essential documents from them, in violation of Fed. R. Crim. P. 16, the U.S. Supreme Court “twin” decisions of Brady v. Maryland, 373 U.S. 83 (1963) and Giglio v. United States, 405 U.S. 150 (1972), and the Jencks Act.

Armed with this new information, and while Marchelletta’s Petition for Panel Rehearing to reverse the sole remaining conviction count was still pending before the Eleventh Circuit Court of Appeals, Bernhoft filed a Fed. R. Crim. P. 33 motion for a new trial, based on massive discovery violations and other outrageous government misconduct. Bernhoft’s 107-page motion and memorandum, supported by 71 exhibits comprising hundreds of pages of previously undisclosed materials, accused the IRS and the Government of railroading Marchelletta by the perjurious testimony of the two lead federal Special Agents, and concealing thousands of pages of exculpatory materials from the defense.

Bernhoft’s motion and exhibits proved the Government’s entire case against Marchelletta was an unconscionable fraud from start to finish. Some of the more egregious examples were:

• concealing thirteen U.S. Customs Reports that proved Customs Special Agent Sellers committed perjury at trial about the origin, nature, and scope of her investigation;
• concealing IRS Special Agent Bergstrom’s own Special Agent’s Report and the critically important IRS Request for Grand Jury Form 9131, both proving that SA Bergstrom committed streaming perjury at trial about the origin, nature, and scope of her investigation;
• violating the Marchellettas’ constitutional rights by vouching for the trial testimony of undisclosed Confidential Informant Shawn McBride, who also committed streaming perjury at trial, then concealing his extensive criminal history and the fact he was a “professional” confidential informant for the FBI who worked for the FBI during the infamous Gold Club case, then lying to the District Court to conceal these facts;
• Special Agents Sellers and Bergstrom falsely alleging that Marchelletta did business with the Osama Bin Laden construction company and had illegally laundered billions of dollars in order to get their superiors to sign off on their bogus investigation;
• IRS Special Agent Bergstrom lying to her IRS FOIA colleagues to conceal the existence of over 90,000 pages of documents from her “secret” files that should’ve been disclosed to the Marchellettas prior to trial; and
• Threatening the Marchellettas’ CPA into drafting fake tax returns to be used as evidence at trial, and otherwise suborning the CPA’s trial perjury.

All Conviction Counts Reversed and the Misconduct Investigation Continues

In what some observers thought was an unusual coincidence, the Appeals Court granted Marchelletta’s Petition for Rehearing the very next day after Bernhoft filed his Rule 33 motion to dismiss, on October 5, 2010. Then, as related above, the Court issued its final order on December 22, 2010 and reversed the sole remaining conviction count. (The Appeals Court’s final decision also “mooted” Bernhoft’s Rule 33 motion to dismiss, because there were no longer any remaining conviction counts to obtain a new trial on). Marchelletta was once again an innocent man under the law, but the IRS and the Government had other plans.

After the Government announced its intention to retry the reversed conviction counts, the Bernhoft Law Team plowed forward with its misconduct investigation. All along, behind the scenes, Bernhoft had been gathering evidence from witness interviews conducted by Maurice E. “Buddy” Pearson, a former FBI Special Agent appointed by J. Edgar Hoover and the recipient of twenty-three FBI Director Commendations during his storied FBI career. Pearson’s brilliant detective work and witness interviews were key in cracking open the Government’s remaining secrets.

The True Story of the IRS’s Fraudulent Persecution of Jerry Marchelletta Unfolds

The new information obtained by Bernhoft after the Appeals Court’s final December 22, 2010 decision was deeply disturbing and appalling. The Government had actually started investigating Marchelletta in 1999, although the Special Agents testified at trial that the investigation began when a Marchelletta company check was “fortuitously” seized at the Federal Express Memphis hub two years later, on March 16, 2001, a blatant lie.

In fact, the Federal Express package containing the check never entered the Federal Express stream of commerce. That’s right: Federal Express showed no record of the package ever being scanned into its software, picked up by a driver, or entering its shipping chain. So much for the Government’s lies that the check seizure was just “happenstance, a “lucky coincidence” but for which Marchelletta would’ve gotten away with bloody tax murder. Lies, deceit, and fraud were the IRS’s and the Government’s stock in trade.

In addition to this incredible revelation, Bernhoft’s investigation revealed that IRS Special Agent Bergstrom and Assistant U.S. Attorney Paul Monnin had early on enlisted the “support” of rogue Union operatives who hated Marchelletta and his policy of hiring all races, creeds, and religions at his company. These rogue Union operatives performed “trash runs” on Marchelletta’s home and offices, deployed undercover operatives to try and entrap company managers into violating labor rules, and then illegally shared this information with the Government.

Most appallingly, the rogue Union operatives were found responsible for illegally picketing company job sites, terrorizing the Marchellettas’ children at their daycare centers, sending fake Valentine cards to Marchelletta’s children filled with disparaging comments, and distributing handbills mocking Marchelletta, Senior’s devout faith as a “fake minister” in the neighborhood where he lived. These were the kind of people the IRS and the Government had made common cause with in service of their unjust persecution of Marchelletta.

With this new information in hand, and with the September 24, 2012 jury retrial fast approaching, Bernhoft filed a Motion to Dismiss the Retrial Indictment for Outrageous Government Misconduct on August 6, 2012, incorporating all of the arguments and evidence from his Rule 33 Motion for a New Trial filed two years earlier, along with reams of damning new evidence and information.

As set forth in Attorney Bernhoft’s final motion to dismiss, the sum of outrageous Government misconduct included:

• Fabricating evidence, including a forged U.S. Customs Report presented to the court, the defense, and the jury as an authentic, official report;
• Forging signatures on official U.S. Attorney letters requesting IRS involvement in a Grand Jury investigation;
• Suborning the perjury of several key prosecution witnesses;
• Threatening, coercing, and intimidating witnesses who wouldn’t “toe” the Government’s false and fraudulent line;
• Illicit collusion and conspiracy with private parties, including rogue Union operatives, in order to obtain documents and information that couldn’t be obtained through legal means;
• The provisioning of official IRS and U.S. Customs memoranda of interviews that contained patently false statements regarding core issues in the case;
• Concealing the fact that IRS Special Agent Bergstrom had initiated an FBI Organized Crime (“OC”) investigation of Marchelletta, but that the FBI quickly shut the investigation down because they discovered, contrary to Bergstrom’s false representations, that Marchelletta didn’t have anything to do with any organized crime;
• Concealing the fact that early on, the Special Agents had enlisted the investigative assistance of multiple federal law enforcement agencies, including: Immigration and Customs Enforcement (“ICE”); Social Security Office of Inspector General (“SSA OIG”); United States Postal Inspection Service (“USPIS”); United States Secret Service (“USSS”); Defense Criminal Investigation Service (“DCIS”); Joint Terrorism Task Force (“JTTF”); National Insurance Crime Bureau (“NICB”); Air Force Office of Special Investigations (“AFOSI”); United States Department of Labor, Office of Inspector General (“DOL OIG”); and Office of Labor Racketeering and Fraud Investigations (“OLRFI”);
• Concealing the fact that these early-2000s investigations by a dozen or so federal law enforcement agencies revealed that Marchelletta hadn’t done anything wrong, much less anything criminal; and
• Concealing the fact that Customs Special Agent Sellers herself had concluded Marchelletta hadn’t broken any laws, and consequently shut down her Customs criminal investigation in early 2003.

THE VINDICATION

The District Court set a hearing on Bernhoft’s motion to dismiss for August 10, 2012, and oral argument was taken. In spite of what knowledgeable observers thought was a clear indication at the hearing that the Court would at least order a pretrial evidentiary hearing on the motion, three days later the District Court denied the motion outright in a one-paragraph order, with the retrial set to commence in about a month.

See Bernhoft’s Hearing Oral Argument Transcript here:

• Hearing Transcript

See the Court’s Denial Order here:

• Order Denying Motion to Dismiss

Nevertheless, conversations were had after the order issued – the contents of which cannot be revealed here – and the Court set a hearing for September 12, 2012. At that hearing the Court granted a joint motion to dismiss all retrial charges, and Jerry Marchelletta and his father walked out of court free men – free men not under the odious cloud of IRS and Government persecution for the first time in over a decade.

See the Court’s Final Dismissal Orders here:

• Final Dismissal Order
• Final Dismissal Order – Marchelletta Sr

Epilogue

While you may never have to face an unjust inquisition like the Marchellettas did, it pays to make sure the attorneys you hire for civil and criminal tax matters have the skill, knowledge, experience, strategic skill, and execution capabilities required when the IRS comes calling.

Video of Bernhoft giving an “off the cuff” presentation on the Marchelletta case after the dismissals.