Silbert v. United States

• Decision Date: 19 March 1968
• Docket Number: Civ. No. 18874,19209,19174,19210.,Misc. No. 564
• Citation: 282 F. Supp. 635
• Parties: Philip SILBERT v. UNITED STATES of America. Philip SILBERT v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, Paul R. Kramer, Assistant United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service. Julius SALSBURY v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, Paul R. Kramer, Assistant United States Attorney, Alan I. Baron, Assistant United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service. Sigmund KASSAP aka John G. Doyle v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service. Jesse BONDROFF v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service.
• Court: U.S. District Court — District of Maryland

282 F. Supp. 635

Philip SILBERT v. UNITED STATES of America.

Philip SILBERT v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, Paul R. Kramer, Assistant United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service.

Julius SALSBURY v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, Paul R. Kramer, Assistant United States Attorney, Alan I. Baron, Assistant United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service.

Sigmund KASSAP aka John G. Doyle v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service.

Jesse BONDROFF v. UNITED STATES of America, Stephen H. Sachs, United States Attorney, and David Eagan, Acting Chief, Intelligence Division, Internal Revenue Service.

Misc. No. 564, Civ. Nos. 18874, 19174, 19209, 19210.

United States District Court D. Maryland.

March 19, 1968.

Norman P. Ramsey, H. Thomas Howell and Maurice T. Siegel, Baltimore, Md., for plaintiffs in Misc. No. 564 and Civ. No. 18874.

A. David Gomborov, David S. Harris and Louis Hoffman, Baltimore, Md., for plaintiff in Civ. No. 19174.

Arnold M. Weiner and Francis S. Brocato, Baltimore, Md., for plaintiffs in Civ. Nos. 19209 and 19210.

Stephen H. Sachs, U. S. Atty., Paul R. Kramer, Asst. U. S. Atty., and Alan I. Baron, Asst. U. S. Atty., for defendants in all cases.

FRANK A. KAUFMAN, District Judge.

These four cases¹ present pre-indictment questions raised by the recent decisions of the Supreme Court in Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (January 29, 1968) and Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (January 29, 1968). A brief review of Marchetti and Grosso is in order.²

Marchetti was convicted in the United States District Court for the District of Connecticut for violations of the federal wagering tax statutes. Specifically, Marchetti was found guilty of conspiring to evade the annual occupational tax imposed by 26 U.S.C. § 4411 and of wilfully failing to register before engaging in the business of accepting wagers as required by 26 U.S.C. § 4412. Marchetti, in his appeal to the Second Circuit, asserted, in part, that the statutory obligations of the federal wagering tax sections, under which he was indicted, violated his Fifth Amendment privilege against self-incrimination. The Second Circuit, 352 F.2d 848 (1965), rejected this contention and affirmed the conviction of Marchetti on the authority of 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).³ The Supreme Court granted certiorari to re-examine the Fifth Amendment questions posed by the "pertinent provisions of the wagering tax statutes," and to consider whether Kahriger and Lewis "still have vitality." 390 U.S. 39, 88 S.Ct. 697, 699, 19 L.Ed.2d 889.

In Marchetti, the Supreme Court reversed the judgment of the Second Circuit. Mr. Justice Harlan, for the majority of the Court, wrote that the federal wagering tax provisions

* * * may not be employed to punish criminally those persons who have defended a failure to comply with their requirements with a proper assertion of the privilege against self-incrimination. 88 S.Ct. at 699.

The Court reviewed the federal wagering tax statutes, of which the provisions challenged by Marchetti are a part. One of such statutes referred to by the Court requires the principal internal revenue offices to maintain lists of those who have paid the occupational tax and to give "certified copies of the listing upon request to any state or local prosecuting officer," 26 U.S.C. § 6107. Another such statute provides that "payment of the wagering tax is not to `exempt any person from any penalty provided by a law of the United States or of any State for engaging' in any taxable activity." 26 U.S.C. § 4422. 88 S.Ct. at 700.

Mr. Justice Harlan, in Marchetti, mentioned the provisions of 18 U.S.C., §§ 1084, 1952, 1301-04, and 1953, which impose federal criminal penalties for certain wagering activities and conduct related thereto. He also summarized the "more comprehensive" state and local wagering enactments and noted:

* * * The laws of every State, except Nevada, include broad prohibitions against gambling, wagering, and associated activities.⁴ 88 S.Ct. at 700 (footnotes omitted).

Because Connecticut was the state in which Marchetti allegedly conducted his activities, Mr. Justice Harlan focused on Connecticut's penal scheme against gambling and wagering, and wrote:

* * * By any standard, in Connecticut and throughout the United States, wagering is "an area permeated with criminal statutes," and those engaged in wagering are a group "inherently suspect of criminal activities." 88 S. Ct. at 702.

Analyzing the relationship of the federal wagering tax scheme to federal and state prohibitions directed at gambling and wagering activities, the Justice stated:

Information obtained as a consequence of the federal wagering tax laws is readily available to assist the efforts of state and federal authorities to enforce these penalties. * * * Evidence of the possession of a federal wagering tax stamp, or of payment of the wagering taxes, has often been admitted at trial in state and federal prosecutions for gambling offenses; such evidence has doubtless proved useful even more frequently to lead prosecuting authorities to other evidence upon which convictions have subsequently been obtained. 88 S.Ct. at 702 (footnotes omitted).

Discussing the effect of this relationship on Marchetti, the opinion states:

In these circumstances, it can scarcely be denied that the obligations to register and to pay the occupational tax created for petitioner "real and appreciable," and not merely "imaginary and unsubstantial," hazards of self-incrimination. * * * Petitioner was confronted by a comprehensive system of federal and state prohibitions against wagering activities; he was required, on pain of criminal prosecution, to provide information which he might reasonably suppose would be available to prosecuting authorities, and which would surely provide a significant "link in the chain" of evidence tending to establish his guilt. Unlike the income tax return in question in United States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037, every portion of these requirements had the direct and unmistakable consequence of incriminating petitioner; * * * 88 S.Ct. at 702 (footnotes omitted).

With regard to Kahriger and Lewis, the Court concluded

that nothing in the Court's opinions in Kahriger and Lewis now suffices to preclude petitioner's assertion of the constitutional privilege as a defense to the indictments under which he was convicted. To this extent Kahriger and Lewis are overruled. 88 S.Ct. at 706 (Emphasis supplied).

The Court also found that the "required records" doctrine, as stated in Shapiro v. United States, 335 U.S. 1, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948), was inapplicable to the Marchetti case. In addition, the Court refused

to permit continued enforcement of the registration and occupational tax provisions, * * * by shielding the privilege's claimants through the imposition of restrictions upon the use by federal and state authorities of information obtained as a consequence of compliance with the wagering tax requirements. It is suggested that these restrictions might be similar to those imposed by the Court in Murphy v. Waterfront Commission, 378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678.

* * * We do not, as we have said, doubt Congress' power to tax activities which are, wholly or in part, unlawful. Nor can it be doubted that the privilege against self-incrimination may not properly be asserted if other protection is granted which "is so broad as to have the same extent in scope and effect" as the privilege itself. Counselman v. Hitchcock, 142 U.S. 547, 585, 12 S.Ct. 195, 35 L.Ed. 1110. The Government's suggestion is thus in principle an attractive and apparently practical resolution of the difficult problem before us. * * * Nonetheless, we think that it would be entirely inappropriate in the circumstances here for the Court to impose such restrictions.

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. We must therefore assume that the imposition of use-restrictions would directly preclude effectuation of a significant element of Congress' purposes in adopting the wagering taxes. Moreover, the imposition of such restrictions would necessarily oblige state prosecuting authorities to establish in each case that their evidence was untainted by any connection with information obtained as a consequence of the wagering taxes; the federal requirements would thus be protected only at the cost of hampering, perhaps seriously, enforcement of state prohibitions against gambling. We cannot know how Congress would assess the competing demands of the federal treasury and of state gambling prohibitions; we are, however, entirely certain that the Constitution has entrusted to Congress, and not to this Court, the task of striking an appropriate balance among such values. We therefore must decide that it would be improper for the Court to impose restrictions of the kind urged by the United States. 88 S.Ct. at 707 (footnotes omitted).

The Court concluded that Marchetti

* * * properly asserted the privilege against self-incrimination, and that his assertion should have provided a complete defense to this prosecution. This defense should have reached both the substantive counts for failure to register and to pay the occupational tax, and the count for conspiracy

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