Suarez v. U.S., 78-1115

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation582 F.2d 1007
Docket NumberNo. 78-1115,78-1115
Parties78-2 USTC P 16,304 Jose R. SUAREZ, Jr., and Virginia Peters Suarez, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. Summary Calendar. *
Decision Date27 October 1978

Jerome S. Richman, Miami, Fla., for plaintiffs-appellants.

Jack V. Eskenazi, U. S. Atty., Miami, Fla., M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, Acting Chief, Crombie J. D. Garrett, Carleton Powell, John Dudeck, Jr., Attys., Tax Div., U. S. Dept. of Justice, Washington, D. C., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before BROWN, Chief Judge, COLEMAN and VANCE, Circuit Judges.

JOHN R. BROWN, Chief Judge:

Dr. Jose Suarez, Jr. and his wife Virginia P. Suarez brought suit seeking the refund of the wagering occupational tax and that portion they had paid of the wagering excise tax assessed against them for their acceptance of lottery wagers between September 1972 and April 22, 1973. The Government counterclaimed for the total amount of unpaid assessments. After trial to a jury, the District Court entered judgment for the Government on its counterclaim in the amount of $54,444.56, plus interest and penalties. Jose and Virginia Suarez have appealed this judgment, which we affirm.

The sole issue on this appeal is whether the District Court erred in denying the motion of the taxpayers to compel discovery of the identity of a confidential informant, or alternatively, to conduct an In camera proceeding with regard to the confidential informant. Appellant taxpayers claim that disclosure of the confidential informant was essential to a fair determination of their tax liability. We hold that in the circumstances of this case, neither disclosure of the informant's identity nor an In camera proceeding was required under the principles of Roviaro v. United States, 1957, 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639, and its progeny in this Circuit.

Taxing The Wages Of Wagers

On September 12, 1972, Florida police officers received information that lottery tickets were being delivered to Dr. Suarez. The police then placed the appellants under surveillance and on a number of occasions between September 13 and October 28 observed them engaged in activities relating to a lottery operation. For example, on several weeknights on which collecting and tallying of lottery results is commonly conducted in the Dade County, Florida area, appellants were observed to drive to various locations, meet with known gamblers, pick up brown paper bags (the receptacles traditionally used to transmit lottery tickets), 1 and take the bags to their house. For four months after October 28, however, periodic surveillance failed to detect any obvious activity pertaining to a lottery counting house operation. During the same period, inquiries made to confidential informants as to the lottery activities of the Suarezes failed to elicit any conclusive incriminating information.

On March 16, 1973, a confidential informant told a Sergeant Boyd of the Dade County Public Safety Department that, as subsequently recounted by Sergeant Boyd, "Jose Suarez is Again operating a lottery counting house in Dade County, using several different locations to count the lottery" (emphasis added). The confidential informant reportedly had obtained this information by placing lottery wagers and holding conversations with persons involved in the Suarez lottery operation. The police increased their surveillance of appellants and on several occasions between March 24 and April 15 again observed them involved in activities associated with the collection and tallying of lottery wagers.

The police secured search warrants for the Suarez residence and another location which Dr. Suarez had frequented during the April surveillance. Raids of both locations were conducted on April 22, as a result of which the police seized 16 lottery summary sheets showing winning numbers and gross receipts for prior lotteries as well as adding machines, note pads with lottery notations, and other gambling paraphernalia. Shortly after the raid, Dr. Suarez admitted that he was a "banker" in a lottery operation and that his associate was one of the men the police had observed Suarez to meet during their September surveillance.

Upon learning of the raid, the Internal Revenue Service commenced an investigation into appellants' liability for the federal excise tax on wagers. Relying on the lottery summary sheets seized in the raids, which were connected with winning lottery numbers for dates during February, March, and April of 1973, the IRS reconstructed appellants' gross wagers and assessed the appellants for wagering excise taxes going back to September 1972 when surveillance first indicated their operation of a lottery counting house. The appellants admitted some liability for wagering excise taxes for February through April 1973, but denied that they were associated with any lottery operations prior to February 1973.

Appellants paid a portion of the taxes assessed, but then filed claims for refund and brought this action, with the Government counterclaiming for the balance. During pre-trial discovery, appellants took the deposition of Sergeant Boyd who had participated in the surveillance of appellants' lottery activities and whose affidavits formed the basis for the issuance of the search warrants. At this deposition appellants sought the identity of the confidential informant who, on March 16, 1973, had informed Sergeant Boyd that "Jose Suarez is Again operating a lottery counting house" (emphasis added). Sergeant Boyd refused to reveal the identity of the confidential informant, citing as his reason that the informant had supplied information pertaining to numerous illegal lottery operations and that his physical well-being might be endangered by disclosure of his identity. Appellants moved to compel discovery of the informant's identity or, in the alternative, to conduct an In camera hearing to determine whether the informant could provide testimony relevant to the period during which they were engaged in a lottery operation. The District Court denied the motion.

After a two-day trial, the jury returned a special verdict, finding that Jose and Virginia Suarez had engaged in the business of accepting wagers for the entire period of September 1, 1972, through January 30, 1973. In accordance with the verdict, the District Court entered judgment for the Government for the entire amount of its counterclaim. 2

No, Virginia (and Jose), There Is No Loophole

As it existed in 1972, § 4401(a) of the Internal Revenue Code of 1954,26 U.S.C. § 4401(a), imposed a 10% Excise tax on wagers. Under §§ 4401(c) and 4403, every person engaged in the business of accepting wagers is liable for the tax on all wagers placed with him and is required to keep a daily record showing the gross amount of such wagers. If, as in this case, a person fails to keep the record required by statute, the Commissioner of Internal Revenue is authorized to estimate the amount of wagers placed with that person by any reasonable method in order to compute his tax liability. See United States v. Firtel, 5 Cir., 1971, 446 F.2d 1005. Where the taxpayer pays a portion of the taxes as reconstructed and assessed by the IRS and then sues for a refund, the taxpayer must establish not only that the Commissioner's assessment of taxes is in error, but also what the correct amount of his tax liability is. See United States v. Janis, 1976, 428 U.S. 433, 440-41, 96 S.Ct. 3021, 49 L.Ed.2d 1046; Heyman v. United States, 5 Cir., 1974, 497 F.2d 121. On the other hand, where the Government attempts to collect a tax by way of counterclaim in a refund suit, the taxpayer bears only the burden of proving the assessment erroneous. See Carson v. United States, 5 Cir., 1977, 560 F.2d 693, 696; Bar L Ranch, Inc. v. Phinney, 5 Cir., 1970, 426 F.2d 995, 998-99. 3

Appellants argue that knowledge of the identity of the confidential informant was essential for them to meet this burden of proof. They claim that based on the informant's statement in March 1973 that they were Again operating a lottery, the informant might have been able to testify that they were not engaged in any lottery operations between September 1972 and February 1973. Therefore, they argue, it was error for the District Court to deny their motion to compel discovery.

For this argument they rely primarily on the Supreme Court's decision in Roviaro v. United States, supra, the leading case on the scope of the informer's privilege in the federal courts. 4 The Court stated that "(w) here disclosure of an informer's identity, or of the contents of his communication, is relevant and helpful to the defense of an accused, or is essential to a fair determination of a cause, the privilege must give way." 353 U.S. at 60-61, 77 S.Ct. at 628. But the Court explicitly declined to establish any "fixed rule" governing disclosure.

The problem is one that calls for balancing the public interest in protecting the flow of information against the individual's right to prepare his defense. Whether a proper balance renders nondisclosure erroneous must depend on the particular circumstances of each case, taking into consideration the crime charged, the possible defenses, the possible significance of the informer's testimony, and other relevant factors.

Id. at 62, 77 S.Ct. at 628.

Numerous decisions of this Circuit have elaborated upon the balancing called for by Roviaro. 5 From these decisions, three categories of cases can be distilled. See United States v. Fischer, 5 Cir., 1976, 531 F.2d 783, 787. At one extreme are those cases such as Roviaro itself, in which the informant played an active and crucial role in the events underlying a defendant's or litigant's potential criminal or civil liability. In these cases, disclosure and production of the informant is in all likelihood...

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  • U.S. v. Diaz, 80-5239
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • September 8, 1981
    ...Page 588 of the extent of the confidential informant's participation in the criminal activity. See, Suarez v. United States, 582 F.2d 1007, 1011 (5th Cir. 1978); United States v. Fischer, 531 F.2d 783, 787 (5th Cir. 1976). As this court noted in United States v. Ayala, supra, "(t)he more ac......
  • U.S. v. Stonehill, s. CA
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • April 8, 1983
    ...(9th Cir.1979); United States v. Janis, 428 U.S. 433, 441-42, 96 S.Ct. 3021, 3025-26, 49 L.Ed.2d 1046 (1976); Suarez v. United States, 582 F.2d 1007, 1010 n. 3 (5th Cir.1978); Carson v. United States, 560 F.2d 693, 696-98 (5th Cir.1977); Gerardo v. Commissioner, 552 F.2d 549, 552 (3d Cir.19......
  • U.S. v. Varella, 81-5295
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • December 6, 1982
    ...confidential informant's participation in the criminal activity." United States v. Diaz, 655 F.2d at 588, citing Suarez v. United States, 582 F.2d 1007, 1011 (5th Cir.1978); United States v. Fischer, 531 F.2d 783, 787 (5th Cir.1976). As this Court noted in United States v. Ayala, "the more ......
  • U.S. v. Arrington, 79-5327
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • June 12, 1980
    ...other relevant factors." Id. at 62, 77 S.Ct. at 629. This court developed the balancing analysis even further in Suarez v. United States, 582 F.2d 1007 (5th Cir. 1976). That case mandates disclosure if the informant's role was crucial to the defendant's criminal conduct, excuses disclosure ......
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