United States v. Walden

• Decision Date: 10 June 1969
• Docket Number: No. 12849.,12849.
• Citation: 411 F.2d 1109
• Parties: UNITED STATES of America, Appellee, v. Elbert Roscoe WALDEN and Raeford Thomas Walden, Appellants.
• Court: U.S. Court of Appeals — Fourth Circuit

411 F.2d 1109 (1969)

UNITED STATES of America, Appellee, v. Elbert Roscoe WALDEN and Raeford Thomas Walden, Appellants.

No. 12849.

United States Court of Appeals Fourth Circuit.

Argued March 4, 1969.

Decided June 10, 1969.

John Randolph Ingram, Asheboro, N. C., (Court-appointed counsel), for appellants.

H. Marshall Simpson, Asst. U. S. Atty. (William H. Murdock, U. S. Atty., on the brief), for appellee.

Before HAYNSWORTH, Chief Judge, and CRAVEN and BUTZNER, Circuit Judges.

CRAVEN, Circuit Judge:

Appellants Walden and Walden (no kin) were indicted on two counts in a North Carolina district court for violations of provisions of the Internal Revenue Code requiring the bonding of a distillery and designation of the place of manufacture. After an unsuccessful motion to dismiss the indictment on the ground that furnishing the required information and providing a bond would have incriminated them, the Waldens were convicted on September 23, 1968. In seeking reversal, they rely on Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968), Grosso v. United States, 390 U.S. 62, 88 S.Ct. 716, 19 L.Ed.2d 906 (1968), and Haynes v. United States, 390 U.S. 85, 88 S.Ct. 722, 19 L.Ed.2d 923 (1968). We must therefore decide whether those cases extend the protection of the Fifth Amendment privilege against self-incrimination as a defense to charges of violating certain provisions of the distilled spirits taxing statutes. Deciding the question against appellants, we hold that the Marchetti-Grosso-Haynes rationale is not applicable to invalidate enforcement of these statutes, and affirm.

The indictment charged the Waldens in count one with violating 26 U.S.C. §§ 5173 and 5601(a) (4) by carrying on the business of distillers without having given bond, and in count two with violating 26 U.S.C. §§ 5222 and 5601(a) (7) by making and fermenting mash on premises other than those lawfully designated. In their motion to dismiss the indictment, the defendants urged that the statutes were unconstitutional as an abridgment of the privilege against self-incrimination. The possibility of incrimination was said to spring from North Carolina's total prohibition of the manufacture of liquor within the state, its proscription of keeping liquor for sale "except as otherwise authorized by law," and its statutory presumption from possession of a federal license¹ to manufacture spirituous liquors that violation of the state laws is occurring. N.C.G.S. §§ 18-28, 18-32, 18-35. Therefore, claim appellants here, registration² of their distillery and the giving of the bond required by the federal statutes would have incriminated them under North Carolina law "for the reason that they would have been furnishing evidence which would have been available to authorities of the State of North Carolina to be used as evidence against them in the Criminal Courts of that state."

Appellants contend for the broad proposition that "the true question is whether the statute inflicts punishment upon an individual for his failure to incriminate himself." We find such a test too broad. There is no constitutional guarantee against being required to provide information from which it might be determined that some legal violation has occurred. See Marchetti v. United States, 390 U.S. 39, 44, 88 S.Ct. 697, 19 L.Ed.2d 889, citing License Tax Cases, 5 Wall. 462, 18 L.Ed. 497. The privilege against self-incrimination assures, rather, that one may not be compelled to provide information which would provide a "`real and appreciable'" and not merely "`imaginary and unsubstantial'" hazard that a significant "`link in a chain'" of evidence would be established to prove guilt. Marchetti, supra at 48, 88 S.Ct. 697. Where there is no real danger, there is no privilege. Ullmann v. United States, 350 U.S. 422, 76 S.Ct. 497, 100 L.Ed. 511 (1956).

Marchetti-Grosso-Haynes held that a Fifth Amendment defense may successfully be raised where statutes are directed at a small number of people who are inherently suspect of illegal activities, where the activities required to be reported on are almost certain to be illegal because the general area of activity is permeated with criminal statutes. The distilled spirits taxing statutes, however, apply not to a select few persons, but to many persons,³ who engage in activities from production to retail sale of distilled spirits. Furthermore, the activities required to be reported on are not almost certain to be illegal, but are most often legal as the sale of liquor in some form is permitted in all 50 states and the District of Columbia, and production of distilled spirits is permitted in all but a few states. In contrast, wagering, the tax on which was challenged in Marchetti and Grosso, is legal only in Nevada, and even there not all forms of gambling are legal. The characteristics of the statutes condemned in Marchetti-Grosso-Haynes seem to us quite different from those of the statutes here under attack. Cf. United States v. Buie, 407 F.2d 905 (2d Cir., March 12, 1969) (conviction affirmed for sale of marihuana without a federally required written order form); Heligman v. United States, 407 F.2d 448 (8th Cir., March 5, 1969) (conviction affirmed for failure to file corporate income tax return); United States v. Minor, 398 F.2d 511, 516 (2d Cir., 1968) (conviction affirmed for sale of narcotics without a federally required written order form). These liquor taxing statutes fall within the ambit of "regulatory programs of general application" which the Court specifically recognized as immune from this form of Fifth Amendment challenge. Haynes, supra, 390 U.S. at 98, 88 S.Ct. 722.

In United States v. Ulrici, 111 U.S. 38, 40, 4 S.Ct. 288, 289, 28 L.Ed. 344 (1884), the Court stated:

"It is clear, even upon a cursory reading, that the well considered and minute provisions of the Revised Statutes found in chapter 4, entitled * * `Internal Revenue,\' were adopted with one purpose only, namely, to secure the payment of the tax imposed by law upon distilled spirits.

"All the regulations for the manufacture and storage, the marking, branding, numbering, and stamping with tax stamps of distilled spirits, and all the penalties, forfeitures, fines, and imprisonments prescribed by the chapter mentioned, have that end only in view."

In 1966, the taxes on distilled spirits produced $3.7 billion in internal revenue. The wagering tax scrutinized in Marchetti produced "in the past several years" only $115 million.⁴ 390 U.S. at 82, 88 S.Ct. at 721.

We think the failure of these defendants to designate place of manufacture and to post a distillery bond is due to their wish to avoid the federal tax of $10.50 per gallon on distilled spirits. The evasion of tax alone provides the enormous margin of profit in the white whiskey business and accounts for the delinquency here. It lies well within the power of Congress to exercise a regulatory function to enforce the collection of such lawfully due taxes.

For us the dispositive consideration on the inapplicability of the Marchetti rationale to this case is that the Supreme Court's decisions in those cases were undoubtedly responsive to what was felt to be the oppressiveness of the statutes and their application. As the Court said in Marchetti, "the terms of the wagering tax system make quite plain that Congress intended information obtained as a consequence of registration and payment of the occupational tax to be provided to interested prosecuting authorities. * * * This has evidently been the consistent practice of the Revenue Service." 390 U.S. at 58-59, 88 S.Ct. at 708. This contemplated transfer of information thus apparently convinced the Court that there existed a substantial hazard that a "link in a chain" of evidence establishing guilt would be forged by compliance.

Here the "chain" of evidence is not so readily discernable and it is not established in this case that it exists.⁵ We note that this liquor case was "made" by Randolph County, North Carolina, officers who then brought in agents of the Alcohol and Tobacco Tax Unit of the United States Treasury Department who made a federal case of it. Such state-federal cooperation is not infrequent. The usual result is a single prosecution in the federal court with no prosecution proceeding in the state court. The practice is so well established that whenever over-zealous officers may occasionally press dual prosecutions the judges of both state and federal courts in North Carolina are alert to prevent it, and as a matter of comity, one court ordinarily will defer to the other to assure that there is not double punishment.

But concededly, had the Waldens' still been discovered because of their compliance with federal statutes, and had its existence and location been brought to the attention of state officers by federal officers, state prosecution would presumably have resulted. However, unlike the situation in Marchetti, the record does not suggest a practice nor a congressional purpose of making available to state officers the information obtained. Doubtless the Waldens failed below to establish any such practice for the reason that distilleries in North Carolina are simply never registered with the Internal Revenue Service. Absent proof of such a practice, or at the very least, proof of purpose of federal agents to report still registrations to state prosecuting authority, appellants Walden fail to establish that they would have been substantially endangered by compliance with the federal statutes. That alone distinguishes Marchetti-Grosso-Haynes.

In Marchetti, 390 U.S. at 59, 88 S.Ct. 697, and Grosso, 390 U.S. at 66, 88 S.Ct. 716, Mr. Justice Harlan noted that those under a statutory duty to report their activities might reasonably expect that both federal and state prosecuting authorities would be proffered the information. In his concurring opinion in Marchetti and Grosso, Mr. Justice Brennan suggested that it was the statutory...