Mackey v. United States

• Citation: 411 F.2d 504
• Decision Date: 04 June 1969
• Docket Number: No. 17200.,17200.
• Parties: Fred T. MACKEY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

411 F.2d 504 (1969)

Fred T. MACKEY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 17200.

United States Court of Appeals Seventh Circuit.

June 4, 1969.

William M. Ward, Robert J. Downing, Chicago, Ill., for plaintiff-appellant; Raskin, Downing & Dammann, Chicago, Ill., of counsel.

Mitchell Rogovin, Asst. Atty. Gen., Tax Division, John M. Brant, Joseph M. Howard, Attys., Dept. of Justice, Washington, D. C., Alfred W. Moellering, U. S. Atty., Fort Wayne, Ind., for defendant-appellee; Alfred R. Uzis, Asst. U. S. Atty., of counsel.

Before CUMMINGS and KERNER, Circuit Judges, and HOFFMAN, District Judge.¹

HOFFMAN, District Judge.

The question presented for decision is whether a conviction for income tax evasion should be set aside on collateral attack because the trial court admitted into evidence the defendant's federal gambling tax returns which, the Supreme Court has subsequently held, the defendant could not have been required to file over a timely claim of the privilege against self-incrimination. We conclude that the question must be answered in the negative, and affirm.

Defendant was convicted on March 24, 1964, of five charges of income tax evasion committed by means of false and fraudulent returns for the calendar years 1956 through 1960, in violation of Section 7201, Internal Revenue Code of 1954, 26 U.S.C. Sec. 7201. He was sentenced to concurrent terms of five years imprisonment, and a fine of $10,000, on each count. Upon a prior appeal, this Court affirmed the conviction, 345 F.2d 499 (1965), and the United States Supreme Court denied certiorari, 382 U.S. 824, 86 S.Ct. 54, 15 L.Ed.2d 69.

The prosecution proceeded upon a net worth theory, predicated upon a showing that defendant's total assets had increased during the period in question by an amount which could not be accounted for by his reported income. In such a prosecution, "proof of a likely source, from which the jury could reasonably find that the net worth increase sprang," is an essential element of the case. Holland v. United States, 348 U.S. 121, 138, 75 S.Ct. 127, 99 L.Ed. 150 (1954). As stated upon the prior appeal, "Government's theory was that the source of defendant's excessive net worth increases was a policy wheel operation which defendant admitted conducting and that the excess of $4000 per week * * * was from profits earned by defendant on this operation." 345 F.2d, at 501. This theory was borne out by the proof. "Defendant concedes that he was a policy wheel operator during the years in question. There was no direct evidence that any of defendant's alleged unreported income was obtained from his policy wheel operation. Direct evidence is not required." 345 F.2d, at 506-507.

One type of proof establishing this likely source of unreported income was a series of sixty monthly federal gambling excise tax returns filed by defendant during the years in question. These returns, on Form 730, were required to accompany the payment of the ten per cent excise tax on wagering receipts imposed by Section 4401 of the Internal Revenue Code, 26 U.S.C. Sec. 4401; Treas.Reg. Sec. 44.4011(a)-1(a). At the trial, defendant objected to the introduction of these returns on the ground that they were cumulative, since their contents were disclosed by Schedule C to the income tax returns already in evidence, and were prejudicial and inflammatory. The District Court overruled this objection, and this Court affirmed, without specific discussion, finding "no prejudicial error." 345 F.2d, at 507. In neither court did the defendant claim that the return infringed his constitutional privilege against self-incrimination. With the denial of certiorari, the judgment became final and defendant began serving his sentence in December, 1965.

On January 29, 1968, the United States Supreme Court handed down its decisions in Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889, and Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906, holding that the federal wagering tax laws violated the privilege against self-incrimination, and that a claim of that privilege bars a prosecution for failure to register, report, or pay the taxes imposed by those laws. Immediately thereafter, defendant filed his motion under Section 2255 of the Judicial Code, 28 U.S.C. Sec. 2255, to set aside the judgment of conviction on the authority of these decisions. Defendant has appealed to this Court from the District Court's denial of this motion.

I.

At the threshold, we are met by the Government's argument that proceedings under Section 2255 are not a substitute for a direct appeal, and are not ordinarily available to set aside a final conviction on the ground that evidence was erroneously introduced and admitted. That argument, supported by a number of decisions in other Circuits, has been put to rest by the Supreme Court's decision in Kaufman v. United States, 394 U.S. 217, 89 S.Ct. 1068, 22 L.Ed.2d 227 (March 24, 1969). Sustaining a motion under Section 2255 based on the admission of evidence produced by unlawful search and seizure in violation of the Fourth Amendment, the Court concluded broadly that, in enacting the Section, "Congress has determined that the full protection of their constitutional rights requires the availability of a mechanism for collateral attack." 394 U.S., at 228, 89 S.Ct., at 1075. Since defendant's claim is premised on the Constitution, his remedy is not foreclosed.

Defendant's motion under Section 2255 rests wholly upon his claim that the reception into evidence of the Form 730 wagering excise tax returns infringed his privilege against self-incrimination conferred by the Fifth Amendment. He did not, however, decline to file the returns, nor did he, when filing them, raise any protest upon that ground. No claim of the privilege was made at the trial, to support his objection to the admissibility of the exhibits, and no question of self-incrimination was presented to this Court in the course of the prior appeal. These failures to invoke the privilege do not work a waiver, in defendant's view, since his silence resulted from reliance upon the Supreme Court's decisions in 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), holding that the wagering taxes did not violate the privilege against self-incrimination. Until these decisions were overruled, after his conviction had become final, by the subsequent decisions in Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697 (1968), and Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709 (1968), the defendant reasons, he had no support for a claim of privilege, and his failure to make the claim must be excused.

As the District Court demonstrates in its closely reasoned opinion, a careful reading of the authorities casts doubt on this attempted justification. The prior decisions in Kahriger and Lewis involved a different tax from the tax here involved: they held only that the wagering occupation tax (26 U.S.C. Sec. 4411), as distinguished from the excise tax here in issue (26 U.S.C. Sec. 4401), did not violate the privilege against self-incrimination, in part upon the rationale that the occupation tax, to be paid annually in advance, did not involve any possible incrimination for past crimes. See United States v. Kahriger, 345 U.S. 22, 3233, 73 S.Ct. 510 (1953). The excise tax, imposed upon wagering receipts after the fact, would not necessarily survive under this rationale, and the defendant in Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709 (1968), recognized this distinction by raising a plea of self-incrimination to the charge of failure to pay the excise tax here involved, but not to the charge of failure to pay the occupation tax considered in Kahriger and Lewis, where the plea would have been futile. Moreover, as the District Court points out, all four of the Supreme Court decisions involved a failure to file the required returns; none directly adjudicated the admissibility of returns already filed by the defendant without objection.

II.

There is, however, a more fundamental flaw in defendant's motion. To avoid the consequence of waiver from his failure to claim the privilege, he asserts that the Marchetti and Grosso decisions worked a marked change in the law. That assertion inevitably presents the question whether those decisions should be applied retroactively, as the standard for review of judgments already final when the new principles were declared, or whether the commands should be confined to prospective application. In a line of cases tracing back to Linkletter v. Walker, 381 U.S. 618, 85 S.C. 1731, 14 L.Ed.2d 601 (1965), the Supreme Court has made it plain that decisions establishing new principles of constitutionality in criminal litigation do not necessarily or automatically apply to cases already closed. The "Court may in the interest of justice make the rule prospective * * * where the exigencies of the situation require such an application." 381 U.S., at 628, 85 S.Ct. at 1737.

Whether the principles of Marchetti and Grosso are to be retroactively applied has yet to be answered directly by the Supreme Court. The criteria which control the question are nonetheless clearly delineated. The retroactivity or nonretroactivity of the decisions is a function of three considerations: "(a) the purpose to be served by the new standards, (b) the extent of the reliance by law enforcement authorities on the old standards, and (c) the effect on the administration of justice of a retroactive application of the new standards." Desist v. United States, 394 U.S. 244, 89 S.Ct. 1030, 1033, 22 L.Ed.2d 248 (March 24, 1969); Stovall v. Denno, 388 U.S. 293, 297 (1967); Johnson v. New Jersey, 384 U.S. 719, 727, 86 S.Ct. 1772, 16 L. Ed.2d 882 (1966).

Foremost among these factors is the purpose to be served by the new constitutional rule. Falling on one...