Pinder v. United States, 20271

• Decision Date: 08 April 1964
• Docket Number: No. 20271,20271
• Parties: Howard G. PINDER, Sr., and Howard G. Pinder, Jr., Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

330 F.2d 119 (1964)

Howard G. PINDER, Sr., and Howard G. Pinder, Jr., Appellants, v. UNITED STATES of America, Appellee.

No. 20271

United States Court of Appeals Fifth Circuit.

April 8, 1964.

M. Terry McNab, A. Broaddus Livingston, of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, Fla., for appellants.

Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, David O. Walter, Burton Berkley, Attys., Tax Div., Dept. of Justice, Washington, D. C., William A. Meadows, Jr., U. S. Atty. of counsel, for appellee.

Before TUTTLE, Chief Judge, and PHILLIPS^* and JONES, Circuit Judges.

ORIE L. PHILLIPS, Circuit Judge:

This appeal involves a joint assessment made on January 27, 1961, for the 10 per cent excise tax on wagers for the period from August 31, 1957, to October 31, 1958, and the $50 wagering occupational stamp tax for that period against Howard G. Pinder, Sr., and Howard G. Pinder, Jr.¹ The assessment totaled $311,503.82, which included a 50 per cent fraud penalty and statutory interest to the date of the assessment. Each of the Pinders paid $50 for the occupational stamp tax and brought this action for a refund of the amounts so paid by each of them. The United States filed a counterclaim for the balance of the assessment, with interest. The case was tried to a jury. It returned a special verdict in which it found:

1. That both taxpayers were engaged in the business of accepting wagers from August 31, 1957, to October 31, 1958;

2. That the Commissioner correctly computed the amount of wagers accepted by the taxpayers during the period and the amount of tax due thereon; and

3. That both taxpayers were liable for the 50 per cent fraud penalty.

Section 4401 of the Internal Revenue Code of 1954, as amended by § 151(a) of the Excise Tax Technical Changes Act of 1958, 72 Stat. 1275, imposes on wagers an excise tax equal to 10 per cent of the amount thereof and provides that each person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax on all wagers placed with him. Section 4411 of the Internal Revenue Code of 1954 imposes a special tax of $50 per year, to be paid by each person who is liable for a tax under § 4401, or who is engaged in receiving wagers for or on behalf of any person so liable.

At the trial Pinder, Sr., admitted he was liable for a tax and for a 50 per cent fraud penalty, but contended that the Commissioner erred in determining the length of time he was engaged in the business of accepting wagers and in computing the amount of his weekly "handle," that is, the amount of wagers accepted weekly by him. Pinder, Jr., denied he was in the business of accepting wagers during the period here involved.

Pinder, Sr., is a professional gambler. He operated a Cuban Lottery from November, 1951, through June, 1953, and by his own admission from July 19, 1958, through October 25, 1958. The Pinders were characterized by this court in Barnhill v. United States, 5 Cir., 279 F.2d 105, 106, c.d. 364 U.S. 824, 81 S.Ct. 60, 5 L.Ed. 2d 53, as "professional gamblers."²

A Cuban Lottery, sometimes called a bolita, is a lottery paying on the basis of 70 to 1 to a bettor who picks the last two digits of the winning number of the Cuban National Lottery, which is operated on each Saturday by the Cuban Government.

In operating the Cuban Lottery, persons known as agents, or "writers," solicit bets from the public. They write the number selected and the amount bet on a sheet of paper in a book, giving the bettor one copy from the pad and retaining the other. Thereafter, the writer seals the book up in an envelope or paper bag, writes his code name on the outside thereof, and gives it to a pickup man, who transmits it to the counting house, where the bets are checked for winning numbers, or "hits." The tickets ordinarily are not retained for more than five days, but in cases where there is a winning number on which many people have bet, called a "hot" number, they are retained eight to ten days, because bettors who may have been missed in checking for "hits" may later make a claim for a win. A person is subject to criminal prosecution for possession of bolita tickets, which perhaps is the reason they are speedily destroyed.

Lottery writers from time to time change from one operator to another and writers working for an operator miss some weeks.

On July 19, 1958, Special Agents of the Internal Revenue Service began surveillance of the premises located at 1642 Northwest 19th Street, Miami, Florida. They watched that location on August 2, 1958, and again on August 16, 1958. During the first surveillance an automobile which Pinder, Sr., drove was observed parked in front of that location. Pinder, Sr., was also observed in and about such premises and on several occasions was seen approaching the premises by a circuitous route through the neighborhood. The Agents also saw a Negro woman enter the rear door at that location with a small brown paper sack.

On August 16, 1958, Pinder, Sr., saw and recognized Agent Sparacino, one of the surveilling Agents, and thereupon moved the operation to Bernard Pinder's house at 1321 Northwest 25th Street. Thereupon, the Agents took up surveillance at the Bernard Pinder house and continued it for several weeks. At that location from time to time they observed Pinder, Sr., and Pinder, Jr. They also saw Benjamin Adams there. Adams helped to check bolita slips for wins on Saturdays. The Agents also observed Adelaide Boston, a writer, drive up to the Bernard Pinder house. They also saw numerous cars parked at the Bernard Pinder house. Thereafter, the lottery was moved to a new location at 62nd Street and 27th Avenue. Some of the persons seen at the former location were also observed there. However, the lottery was carried on at that location only one week. It was thereafter moved to 10517 Northwest 32nd Place and was in operation there on November 1, 1958.

On August 11, Agent Hilker, who was the Agent in charge of the surveillance, by special arrangement with the Waste Department of the City of Miami, obtained the garbage removed from the garbage can at 1642 Northwest 19th Street. The garbage was obtained by the Agents immediately after it was removed from the can and was not mixed with any other garbage. The Agents examined the garbage and found therein lottery slips, numerous 5" × 7½" envelopes with code names and numbers of about 50 writers or agents written thereon and notations thereon of the total amount of bets. The envelopes bore the brand "Supreme" of the Knight Brothers Paper Company. They also found adding machine tapes totaling approximately $100,000. Hilker, having duly qualified as an expert on lottery apparatus, testified that the bags, envelopes, and tapes were typical paraphernalia employed in the operation of Cuban Lotteries and that the brown paper sacks were known as hallmarks of the calling and were used by writers and agents to conceal the bolita slips, coin envelopes, and the larger envelopes.

On November 1, 1958, Special Agents of the Internal Revenue Service, armed with a search warrant for the premises at 10517 Northwest 32nd Place, Miami, Florida, the last place to which the lottery operations had been moved, searched the premises at that location. They interrogated Pinder, Sr. He told them that he had been in business for only one month and was the sole operator of the lottery. He refused to estimate the gross amount of the wagers accepted by him or disclose the location of his records. A search of his person produced a large amount of currency, a betting slip, and a collection sheet showing the code names of various writers and the current balance between each writer and the operator. Settlements are made weekly between the operator and the writer.

Pinder, Jr., was interrogated and he refused to furnish any information. A search of his person produced currency, part of a manila envelope on which was written "69 Alapata," with other numbers totaling $837.66, an adding machine tape, and a collection sheet similar to that taken from Pinder, Sr., with code names and numbers and statement of balances due and owing, but for a different week than the Pinder, Sr., sheet.

On search of the premises, the Agents found and seized four adding machines, one calculator, manila envelopes with pads ordinarily used in the lottery business, used bolita tickets, boxes of envelopes and ledger sheets with entries thereon, a laundry basket which had been used to convey some of the bags into the premises, and manila envelopes containing lottery tickets and currency. The envelopes found in the raid bore the brand "Supreme" of the Knight Brothers Paper Company. The material seized in the raid showed there were about 154 writers, with different code names or numbers. Thirty-five of them were identical with the code names or numbers found in the garbage.

As hereinbefore stated, paper bags, coin envelopes, clasp envelopes — usually 5" × 7½" — and paper pads are used in conducting a Cuban Lottery.

At all times herein material, Pinder, Sr., owned an apartment house located at 2474 Northwest 58th Street, Miami, Florida, and the Pinder Fish Market, also located in Miami. Pinder, Jr., managed the apartment house.

An employee of Knight Brothers Paper Company, who had custody and control of the records, testified to sales of large numbers of coin envelopes and 5" × 7½" clasp envelopes made during the period from November 23, 1956, to August 26, 1958, which were billed to the Pinder Fish Market, the Pinder Apartments, or were call orders picked up by Pinder, Jr. There were four of such pickup orders. The orders, other than call orders, were orders billed to and delivered to the Pinder Fish Market or to the Pinder Apartments.³ A witness who worked at the Fish Market in 1957 and 1958 and for many years prior thereto testified that such envelopes were never used at the Fish Market. No sales were made by Knight Brothers Paper Company after ...