Roy D. Garner v. United States

501 F.2d 228

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 11, 1972
• Docket: 71-1219
• Status: Published

Opinions

KOELSCH, Circuit Judge.

Appellant Garner appeals from the judgment convicting him of conspiring to violate federal gambling statutes.

To prove that appellant was engaged in the “business of betting and wagering,” and essential element of the conspiracy as charged, the Government offered into evidence appellant’s federal income tax returns for the years 1965 through 1967, on which appellant had reported gambling as the source' of most of his income. The returns were admitted over appellant’s objection.

In 1927, the Supreme Court held in United States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037 (1927), that a person could not refuse to file a federal income tax return on the ground that certain disclosures in the return would tend to incriminate him. The Court, per Mr. Justice Holmes, said: “It would be an extreme if not extravagant application of the Fifth Amendment to say that it authorized a man to refuse to state the amount of his income because it had been made in crime.” 274 U.S. at 263-264, 47 S.Ct. at 607. The Court did suggest that a taxpayer might refuse to answer certain questions on the return which might incriminate him, but that he could not refuse to file any return at all, because, “[m]ost of the items [on the return] warranted no complaint.” 274 U.S. at 263, 47 S.Ct. at 607.

What Sullivcm left open, and what no Supreme Court case has yet decided, is this question: to what extent and under what circumstances may incriminating information supplied by a taxpayer in an income tax return be used against the taxpayer in a criminal prosecution unrelated to the income tax laws ?

First, it must be pointed out that recent Supreme Court decisions dealing with the right of persons to refuse to file reports with the Government, when such reports would have the “direct and unmistakable consequence of incriminating [the person reporting] .” [Marchetti v. United States, 390 U.S. 39, 49, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968); Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968); Haynes v. United States, 390 U.S. 85, 88 S.Ct. 722, 19 L.Ed.2d 923 (1968) ; Leary v. United States, 395 U.S. 6, 89 S.Ct. 1532, 23 L.Ed.2d 57 (1969) ; Albertson v. Subversive Activities Control Board, 382 U.S. 70, 86 S.Ct. 194, 15 L.Ed.2d 165 (1965)], do not apply to the requirement of filing income tax returns. Those cases dealt with statutes which were designed to elicit information about specific activities from a specific group of individuals who were “inherently suspect of criminal activities,” Albertson, supra, 382 U.S. at 79, 86 S.Ct. 194, such as possessors of unlawful firearms, persons engaged in unlawful wagering activities, communists, and persons dealing in certain unlawful drugs. In each case, the activity required to be reported was “an area permeated with criminal statutes,” Marchetti, supra, 390 U.S. at 47, 88 S.Ct. at 702. Each case distinguished, and asserted the continuing vitality of, Sullivan, supra, on the ground that the questions on an income tax return are not inherently directed at the detection of criminal activity, but are instead directed at the general public and are “neutral on their face.” Albertson, supra, 382 U.S. at 79, 86 S.Ct. 194; Grosso, supra, 390 U.S. at 73, 88 S.Ct. 709 (Brennan, J. concurring). See California v. Byers, 402 U.S. 424, 431, 91 S.Ct. 1535, 29 L.Ed.2d 9 (1971).

However, this does not end the inquiry. It is merely the point of departure, for appellant in this case did not refuse to file an income tax return. Rather, he filed his returns as required by the Internal Revenue Code and, as far as the record shows, disclosed accurately both the amount and source of all his taxable income for the years involved. He revealed the principal source of such income — gambling. This disclosure, the Government insists, may be used to prove an essential element of violation of the federal gambling laws.

The Government relies upon this court’s decision in Stillman v. United States, 177 F.2d 607 (9th Cir. 1949) for the proposition that income tax returns may be used as evidence in non-tax-related criminal proceedings. In that case we rejected the Fifth Amendment objections of the defendant, who was charged with violations of the wartime Emergency Price Control Act, and whose income tax returns were omitted to prove the amounts of income defendant unlawfully earned; relying solely¹ on the reasoning of the Fifth Circuit in Shushan v. United States, 117 F.2d 110 (5th Cir. 1941), cert. denied, 313 U.S. 574, 61 S.Ct. 1085, 85 L.Ed. 1531, reh. denied, 314 U.S. 706, 62 S.Ct. 53, 86 L.Ed. 564, we said:

“The income tax returns were voluntarily executed by appellants under oath. They were not made in compliance with a subpoena or court order, nor were they made under the threat of prosecution or induced by any form of compulsion save that reflected in the duty of every person to report all forms of taxable income in the manner prescribed by our Internal Revenue Laws.

If appellants believed that certain declarations in their tax returns might incriminate them they could have refrained from making the voluntary tax declarations here in evidence. However, they chose to report the illicit income rather than risk possible prosecution for making false or incomplete returns covering such income. The disclosures upon the tax returns must therefore be deemed to have been voluntarily entered upon a public record.” 177 F.2d at 617-618.²

The passage quoted above makes it clear that in Stillman we applied a concept of “implied waiver” to the defendant’s disclosure of self-incriminatory information on his income tax return. But, in view of recent constitutional developments, this concept has no place where the issue involves the assertion of a constitutional right and, consequently, we believe that the Supreme Court has eliminated the doctrinal keystone of the Stillman decision. Marchet-ti v. United States, 390 U.S. 39, 51, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968).

All the decisions involving the question of compelled disclosures to government since Sullivan have consistently noted that there does exist a constitutional privilege to object to the disclosure of information which is self-incriminatory. In California v. Byers, supra, Mr. Justice Harlan carefully distinguished between requiring a person to report information crucial to fulfilling the “noncriminal governmental purpose in securing the information . . .” 402 U.S. at 458, 91 S.Ct. at 1553 (Harlan, J., concurring), and information from which criminal behavior could or would be proved: “I do not minimize the aid given the State of California by virtue of the requirement to stop and identify oneself [at an automobile accident]. But this minimal requirement is essential to the State’s nonprosecutorial goal, and, the stop having been once coerced, virtually all information secured after the stop is likely to be tainted for the purposes of exclusion under the Fifth Amendment in any subsequent prosecution.” 402 U.S. at 458, n. 10, 91 S.Ct. at 1553 (Harlan, J., concurring). In Byers the issue was whether a report of an accident must be made at all, not whether individual responses in a report, if filed, could be used as criminal evidence. While it is true that the California court in Byers had held that such reports could be required only if a use restriction were put on the information contained therein, the Supreme Court’s reversal of the California court was on the basic question of whether the filing of any such report would be self-incriminating. The California court held that filing alone was incriminating under the Marchetti line of cases; the Supreme Court held that it was not, because the primary purpose of requiring the report was not to collect information about inherently criminal behavior. However, under this analysis, the question of the use of compelled disclosures in unrelated criminal proceedings was not at issue. Neither was the question of whether a criminal prosecution could be based upon a refusal, unaccompanied by a claim of privilege, to give inculpatory information.³

It is our opinion, then, that the admissibility of appellant’s disclosures here must be determined by an examination of the context in which they were made. First is the question of whether the disclosures were compelled. We are clear that the answer is yes. 26 U.S.C. § 7203 makes it a crime to fail to file any return, pay any tax, or supply any information. 26 U.S.C. § 7206 likewise makes it a crime for a person to make and subscribe any return “which he does not believe to be true and correct in every material matter. . ”⁴ For the Internal Revenue Service to correctly evaluate a taxpayer’s claim of particular expenses, deductions, and losses, the Service must of course be provided with information showing whether or not the taxpayer qualifies. This is especially true where the taxpayer’s occupation brings into play special provisions of the tax laws and regulations. For example, a person whose income is derived from wagering may deduct his wagering losses only to the extent of his winnings from wagering, 26 U.S.C. § 165(d). Gambling losses may not be carried back or carried over [See 5 Mertens, Law of Federal Income Taxation § 28.85], and a gambler whose losses offset his winnings must nevertheless report all winnings as gross income and losses as deductions. McClanahan v. United States, 292 F.2d 630, 631 (5th Cir. 1961), cert. denied, 368 U.S. 913, 82 S.Ct. 193, 7 L.Ed.2d 130. Disclosure in the tax return of a gambler’s source of income is thus essential. If a gambler fails to provide this information, he subjects himself to a criminal prosecution for tax evasion or perjury; his “choice” to disclose is thus a Hob-son’s choice.

Nor can we automatically conclude that submitting to the statutory compulsion constitutes waiver of the right to object to the use of the incriminatory disclosure. The “ ‘courts indulge every reasonable presumption against waiver’ of fundamental constitutional rights, and ... we ‘do not presume acquiescence in the loss of fundamental rights’.” Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938); Carnley v. Cochran, 369 U.S. 506, 516, 82 S.Ct. 884, 8 L.Ed.2d 70 at 1023 (1962). It would be “artificial, if not disingenuous, ’ Byers, supra, 402 U.S. at 442, 91 S.Ct. 1535 (Harlan, J., concurring), to distinguish this principle by assuming a waiver of appellant’s Fifth Amendment rights in this case merely because he disclosed the source of his income truthfully under the statutory compulsion to truthfully state all material tax information on his return. It is one thing to say that government can compel a person to make disclosures which are deemed necessary for government to adequately administer a program such as the revenue collection system.⁵ It is entirely another matter, however, to then disregard the fact that the disclosure was forced and to say that, since the original purpose of compelling disclosure was not inherently hazardous to an individual’s rights, any subsequent use of that compelled information is the use of “volunteered” information and therefore constitutionally inoffensive.⁶ Such a formulation makes the government’s need for the information, rather than the individual’s relinquishment of a known right, the controlling factor in the waiver determination, and would allow comprehensive schemes of self-reporting in non-criminal areas to become data banks containing numerous “admissions” of criminal activity, available without limitation to prosecuting authorities. To consider information supplied to the government under such circumstances as voluntarily supplied would . . ultimately license widespread erosion of the privilege through ‘ingeniously drawn legislation’.” Marchetti, supra, 390 U.S. at 51, 88 S.Ct. at 704.

Although the reporting of incriminatory information on income tax returns would not perhaps have the direct and immediate effect of incriminating a taxpayer, as did the reporting of such information on returns required only of those engaged in criminal activities, we are not persuaded that such information must be the first “link in the chain” of incriminatory evidence to be objectionable. Nor are we persuaded that appellant’s right to object to making this disclosure in the first instance —recognized ever since Sullivan, supra —was lost by appellant’s submitting to the statutory requirement of reporting. We cannot sanction waivers of constitutional rights “without the most deliberate examination of the circumstances surrounding them . . . ” Marchetti, supra, 390 U.S. at 51, 88 S.Ct. at 704.⁷ This record contains no fact tending to establish that appellant was aware of his right to object and thus the conclusion is impermissible that his declarations were “voluntarily entered upon a public record.” Stillman, supra. The admission of the returns was thus error and, obviously, the information in them was highly prejudicial.

None of appellant’s remaining contentions has merit or is of sufficient substance to warrant discussion.

The judgment is reversed.

1 . We noted a number of opinions in which appellate courts had approved the admission of such evidence, but acknowledged that in none was there “any discussion by the courts regarding the constitutional privilege.” 177 F.2d at 617.

2 . In Grimes v. United States, 379 F.2d 791 (5th Cir. 1967) cert. denied, 389 U.S. 846, 88 S.Ct. 104, 19 L.Ed.2d 113, the Fifth Circuit continued to follow this approach. The court there ..said: “Assuming, without deciding, that the law required Grimes to truthfully state his occupation on the [tax] return, that a false statement would subject him to criminal penalty, and that he was thus forced to report as he did, he nevertheless had the right to claim self-incrimination at that time. Not claiming it then, his statement amounted to a voluntary admission which we hold could be used in this [gambling] prosecution.” 379 F.2d at 796. Cf. United States v. Zizzo, 338 F.2d 577 (7th Cir. 1964), cert. denied, 381 U.S. 915, 85 S.Ct. 1530, 14 L.Ed.2d 435, reh. denied, 384 U.S. 982, 86 S.Ct. 1856, 16 L.Ed.2d 693, relied upon by the Grimes court. Zizzo relied on the Supreme Court’s statement in Lewis v. United States, 348 U.S. 419, 422, 75 S.Ct. 415, 99 L.Ed. 475 (1955) that: “If petitioner desires to engage in an unlawful business, he does so only on his own volition. The fact that he may elect to pay the [wagering] tax and make the disclosures required by the Act is a matter of his choice. There is nothing compulsory about it, and consequently, there is nothing violative of the Fifth Amendment.” In Marchetti, supra, the Court overruled Lewis on this point, leaving Grimes and Zizzo as dubious authority on the waiver question.

3 . On this point, Mr. Justice Brennan remarked, “[Olertainly I would expect this Court to hesitate before affirming the conviction of a fugitive from justice for filing a tax return which omitted his address.” California v. Byers, supra, 402 U.S. at 472, 91 S.Ct. at 1560 (Brennan, J., dissenting). In Marchetti v. United States, supra, the Court overruled United States v. Kahriger, 345 U.S. 22, 73 S.Ct. 510, 97 L.Ed. 754 (1953) and Lewis v. United States, 348 U.S. 419, 75 S.Ct. 415, 99 L.Ed. 475 (1955), which had held that a gambler’s failure to raise his Fifth Amendment objection at the time filing of the wagering tax form was required constituted a waiver of his right to assert the privilege. 390 U.S. at 51-52, 88 S.Ct. 697.

4 . In United States v. Knox, 396 U.S. 77, 90 S.Ct. 363, 24 L.Ed.2d 275 (1969) the Court recognized that the filing and truthful filing requirements of the Internal Revenue laws might constitute compulsion, but that this compulsion would not constitute a defense to a prosecution for the falsification of the information required to be reported.

5 . It was on this basis that the Court in California v. Byers, supra, held that a person could be compelled to disclose his presence at the scene of an automobile accident.

6 . “[Different considerations apply when the question is not whether information may be compelled but rather to what uses compelled information may be put. Once the return has been filed, prosecution under state [or federal, it would follow] gambling laws can take place only if the State can demonstrate that its evidence is not tainted by information derived from the incriminatory aspects of the return. Since disclosure once made may never be completely undone, this burden must be borne by the State regardless of what additional restrictions are imposed upon use of the return. Accordingly, the considerations that led us to decline the imposition of use restrictions for the future in Marohetti and Gh'osso are not compelling in situations where the incriminating information has already been disclosed.” Mackey v. United States, 401 U.S. 667, 712-713, 91 S.Ct. 1160, 1170, 28 L.Ed.2d 404 (1971) (Brennan, J., concurring).

Mr. Justice Brennan’s discussion of the “taint” on compelled disclosures would not appear to be restricted to those disclosures made under a reporting requirement directed solely at illegal activities. And in California v. Byers, supra, Mr. Justice Harlan made the same observation about the taint on disclosures compelled under a scheme which the Court held was not directed solely at criminal behavior. 402 U.S. at 458, n. 10, 91 S.Ct. 1535, 29 L.Ed.2d 9 (Harlan J., concurring).

7 . See, e. g., United States v. Cerone, 452 F.2d 274 (7th Cir. 1971). In that case, the Seventh Circuit held admissible in a criminal proceeding the defendant’s testimony in an earlier lawsuit. The court found that since defendant had been advised in the earlier proceeding of his Fifth Amendment privilege and had nonetheless agreed to testify, he had waived his Fifth Amendment privilege with respect to the subsequent use of his testimony. 452 F.2d at 291.