501 F.2d 228 (9th Cir. 1972), 71-1219, Garner v. United States

Docket Nº:71-1219.
Citation:501 F.2d 228
Party Name:Roy D. GARNER, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
Case Date:June 05, 1972
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 228

501 F.2d 228 (9th Cir. 1972)

Roy D. GARNER, Plaintiff-Appellant,

v.

UNITED STATES of America, Defendant-Appellee.

No. 71-1219.

United States Court of Appeals, Ninth Circuit.

June 5, 1972

Rehearing Denied Sept. 11, 1972.

On Rehearing En Banc April 11,1974.

Page 229

Burton Marks (argued), of Marks, Sherman & Schwartz, Beverly Hills, Cal., for plaintiff-appellant.

Page 230

Gregory C. Glynn, John W. Hornbeck, Asst. U.S. Attys. (argued), Gerald F. Uelman, David R. Nissen, Asst. U.S. Attys., Robert L. Meyer, U.S. Atty., Los Angeles, Cal., for defendant-appellee.

Before KOELSCH and HUFSTEDLER, Circuit Judges, and WALLACE, [*] District Judge.

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, 'most of the items (on the return) warranted no complaint.' 274 U.S. at 263, 47 S.Ct. at 607.

What Sullivan 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. 914, 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).

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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 solely 1 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. Marchetti v. United States, 390 U.S. 39, 51, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968) .

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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 in 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 his 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

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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...

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