Ingram v. United States

• Citation: 3 L.Ed.2d 1503,360 U.S. 672,79 S.Ct. 1314
• Decision Date: 29 June 1959
• Docket Number: No. 457,457
• Parties: Horace INGRAM, L. E. Smith, Mary Law et al., Petitioners, v. UNITED STATES of America
• Court: United States Supreme Court

360 U.S. 672

79 S.Ct. 1314

3 L.Ed.2d 1503

Horace INGRAM, L. E. Smith, Mary Law et al., Petitioners,

v UNITED STATES of America.

No. 457.

Argued April 30, 1959.

Decided June 29, 1959.

Rehearing Denied Oct. 12, 959 .

See 80 S.Ct. 42.

Mr. Wesley R. Asinof, Atlanta, Ga., for petitioners.

Mr. J. Dwight Evans, Jr., Washington, D.C., for respondent.

Mr. Justice STEWART delivered the opinion of the Court.

The petitioners and twenty-two others were indicted and tried for conspiracy to evade and defeat the payment of the federal taxes imposed on lottery operations. The petitioners and six others were convicted.¹ Their convictions were affirmed by the Court of Appeals. 259 F.2d 886. Certiorari was granted to examine the scope of the conspiracy statute in the context of these provisions of the Internal Revenue Code. 358 U.S. 905, 79 S.Ct. 234, 3 L.Ed.2d 227.

At the trial it was established by overwhelming evidence that the petitioners had engaged with numerous others in a closely organized and large-scale operation of the numbers game in Atlanta, Georgia, during the years 1954 to 1957, the period covered by the indictment.² That activity is a criminal offense under Georgia law.³ The evidence also established in intricate detail that the participants in this large-scale enterprise had, through a variety of carefully planned stratagems, made every effort to conceal its operation.⁴ Finally, the evidence showed that none of the petitioners had paid any of the federal taxes in question. There was no direct evidence to show that any of the petitioners knew of these taxes.

In addition to the conspiracy count, the indictment under which the petitioners were tried also contained two additional counts charging them with the substantive offenses of willful failure to pay the special tax imposed by § 4411 of the Internal Revenue Code,⁵ in violation of § 7203 of the Code, ⁶ and of failure to register as required by § 4412 of the Code,⁷ in violation of § 7272 of the Code.⁸ The trial took place subsequent to the announcement of this Court's decision in United States v. Calamaro, 354 U.S. 351, 77 S.Ct. 1138, 1 L.Ed.2d 1394, and the district judge correctly instructed the jury that conviction of the substantive offenses would be justified only as to any defendants found to be 'writers,' 'bankers,' or to have 'a proprietary interest in such lottery operation.' Two of the petitioners, Ingram an d Jenkins, were found guilty on both substantive counts and do not question these convictions, conceding the sufficiency of the evidence to show that Ingram was the banker and that Jenkins had a proprietary interest in the enterprise. The evidence showed that the other two petitioners, Smith and Law, were relatively minor clerical functionaries at the headquarters of the operation, and they were acquitted on the substantive counts.

In sum, what this record presents then is a picture of a large-scale and profitable gambling business conducted in Atlanta over a period of several years by petitioners Ingram and Jenkins. He business involved many participants, including the petitioners Smith and Law. It was a business made criminal by the laws of Georgia, and everyone in the organization participated in trying to keep its operation secret. Ingram and Jenkins were liable for the federal taxes imposed by §§ 4401 and 4411 of the Internal Revenue Code and willfully failed to pay them. They were required by § 4412 of the Code to register with the official in charge of the Internal Revenue District, and they failed to do so. Smith and Law were not themselves subject to any of the taxes here involved. The question presented is whether this factual foundation is sufficient to support a conviction of the petitioners, or any of them, for conspiracy to attempt to evade or defeat federal taxes 'the gravest of offenses against the revenues.' Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418. We hold that it was sufficient as to Ingram and Jenkins, and insufficient as to Smith and Law.

As to Ingram and Jenkins, the record is clear. They were entrepreneurs in a vast and profitable gambling business. They were clearly liable for the special taxes and registration requirements that the Federal Government has imposed upon the operators of that kind of business. United States v. Kahriger, 345 U.S. 22, 73 S.Ct. 510, 97 L.Ed. 754. Not only did they willfully fail and neglect to pay these taxes, but they conspired to conceal the operation of the business and the source of the income upon which the tax is imposed.

In Spies v. United States this Court had occasion to consider the quantum and type of evidence required to support a conviction for the substantive offense of attempting to defeat or evade federal taxes as contrasted with the lesser proof required to convict of the isd emeanor of willfully failing to file a return or to pay a tax. It was there said:

'Willful but passive neglect of the statutory duty may constitute the lesser offense, but to combine with it a willful and positive attempt to evade tax in any manner or to defeat it by any means lifts the offense to the degree of felony.

'Congress did not define or limit the methods by which a willful attempt to defeat and evade might be accomplished and perhaps did not define lest its effort to do so result in some unexpected limitation. Nor would we by definition constrict the scope of the Congressional provision that it may be accomplished 'in any manner.' By way of illustration, and not by way of limitation, we would think affirmative willful attempt may be inferred from conduct such as keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal. If the tax-evasion motive plays any part in such conduct the offense may be made out even though the conduct may also serve other purposes such as concealment of other crime.' 317 U.S. at page 499, 63 S.Ct. at page 368.

In Spies, the Court was dealing with the substantive offense, not with a conspiracy to commit it. But the evidence of agreement between Ingram and Jenkins to operate this gambling enterprise, which operation made them liable for federal taxes, and to conceal its operation and its income is clear on this record, and is virtually conceded by the petitioners. The evidence was sufficient to support a conclusion that they were engaged not only in a conspiracy to operate and conceal their gambling enterprise, but that they were also parties to an agreement to attempt to defeat or evade the federal taxes imposed upon tne operators of such a business.

As to Smith and Law, the case is quite a different one. While the record clearly supports a finding that Smith and Law were participants in a conspiracy to operate a lottery and to conceal that operation from local law enforcement agencies, we find no warrant for a finding that they were, like Ingram and Jenkins, parties to a conspiracy with a purpose illegal under federal law. Certainly there is nothing in the record to show that Smith and Law knew that Ingram and Jenkins had not paid the taxes, a fact obviously within the knowledge of the latter.

It is fundamental that a conviction for conspiracy under 18 U.S.C. § 371, 18 U.S.C.A. § 371, cannot be sustained unless there is 'proof of an agreement to commit an offense against the United States.' Pereira v. United States, 347 U.S. 1, 12, 74 S.Ct. 358, 364, 98 L.Ed. 435. There need not, of course, be proof that the conspirators were aware of the criminality of their objective, but an essential ingredient of the proof was knowledge on the part of Smith and Law that Ingram and Jenkins were liable for federal taxes by reason of the gambling operation. 'Without the knowledge, the intent cannot exist.' Direct Sales Co. v. United States, 319 U.S. 703, 711, 63 S.Ct. 1265, 1269, 87 L.Ed. 1674.

'(C)onspiracy to commit a particular substantive offense cannot exist without at least the degree of criminal intent necessary for the substantive offense itself.'⁹ The substantive offense which Smith and Law were accused of conspiring to commit was the willful evasion of federal taxes, an offense which, even presuming knowledge of the tax law, obviously cannot be committed in the absence of knowledge of willfulness. Spies v. United States, supra, Cf. United States v. Falcone, 311 U.S. 205, 61 S.Ct. 204, 85 L.Ed. 128.

Indulging, as of course we must, in that view of the evidence most favorable to the Goern ment, we simply cannot discern adequate foundation in the present record for a finding that Smith and Law had such knowledge of Ingram's and Jenkins' wagering tax liability. The record is completely barren of any direct evidence of such knowledge. It was not shown, for example, that any reference had ever been made by any of the petitioners to possible tax liability, or that they had filed a return or paid a tax in previous years. The Government relied instead upon evidence which, it asserts, circumstantially proved the requisite knowledge on the part of Smith and Law. These circumstances were simply the intimate connection of Smith and Law with the operation of the lottery itself their cooperation in conducting it secretly,¹⁰ and their apparent knowledge that it was conducted at a profit. The Government points out that not only would payment of the taxes have decreased the profits to be derived from operation of the lottery, but in addition would have required registration, including the names and addresses of the bankers and writers, with the local internal revenue office and the posting of a wagering tax stamp at the place of business. 26 U.S.C. (Supp. V) §§ 4412, 6806(c), 26 U.S.C.A. §§ 4412, 6806(c). The information contained in the...