U.S. v. Jeffers, No. 79-5507

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: Before BROWN, AINSWORTH and FRANK M. JOHNSON, Jr.; FRANK M. JOHNSON, Jr.
• Citation: 621 F.2d 221
• Parties: 80-2 USTC P 16,345 UNITED STATES of America, Plaintiff-Appellee, v. Harry M. JEFFERS, Jr., a/k/a Hal Jeffers, Defendant-Appellant.
• Docket Number: No. 79-5507
• Decision Date: 11 July 1980

Page 221

621 F.2d 221 80-2 USTC P 16,345 UNITED STATES of America, Plaintiff-Appellee,
v.
Harry M. JEFFERS, Jr., a/k/a Hal Jeffers, Defendant-Appellant. No. 79-5507. United States Court of Appeals,
Fifth Circuit. July 11, 1980.

Page 223

Melvyn Carson Bruder, Dallas, Tex., for defendant-appellant.

Shirley Baccus-Lobel, Rebecca Gregory, Asst. U. S. Attys., Dallas, Tex., for the U. S.

Appeal from the United States District Court for the Northern District of Texas.

Before BROWN, AINSWORTH and FRANK M. JOHNSON, Jr., Circuit Judges.

FRANK M. JOHNSON, Jr., Circuit Judge:

Harry M. Jeffers, Jr., was indicted on two counts of failing to comply with the federal wagering tax laws, 26 U.S.C. § 4401 et seq. After a bench trial, he was convicted on both counts. Defendant appeals his conviction, claiming that the disclosure and reporting requirements of the federal wagering tax laws violate his Fifth Amendment privilege against self-incrimination, that there was no probable cause to issue warrants authorizing the police to search his person, his apartment and his automobile, and that he was entitled to disclosure of the unnamed Government informant. We affirm.

On September 8, 1978, IRS agent Murphy was introduced to an informant by a fellow IRS agent. The informant told Murphy that he had been placing wagers on sporting events with a person named Hal Jeffers at telephone number 350-7185. After a five week surveillance, Murphy executed an affidavit in support of three warrants authorizing the search of Harry Jeffers, his apartment and his automobile. The affidavits stated (1) that Murphy had received a tip by an unnamed informant that the defendant had engaged in gambling activities with the informant via a telephone with the number 350-7185; (2) that telephone number 350-7185 is an unlisted number for a phone located at an address where Jeffers' name appeared on the mailbox; (3) that Murphy's surveillance established that Jeffers spent a great deal of time in three certain lounges in Dallas, that the informant claimed he had contacted Jeffers at two of those lounges, and that Jeffers had no "visual means of support"; (4) that Jeffers owned and drove a certain car; (5) that "(t)he confidential informant . . . has been furnishing information to the Internal Revenue Service for the past several months. The information has related to wagering as well as to other tax matters and in each instance when corroborated has proven to be accurate, reliable and has been the basis for other investigations"; and (6) that Jeffers had been arrested the previous year and charged with gambling promotion.

The execution of these warrants resulted in the seizure of numerous pieces of gambling paraphernalia such as sport scheduling booklets, betting sheets, adding machine tapes, settlement sheets, and notebooks recording net wins and losses. During the search, the IRS agent answered approximately 42 phone calls from people wishing to place bets with "Hal." Jeffers was charged under Count 1 with engaging in wagering and failing to register and file a special tax return in violation of 26 U.S.C. § 7203, and under Count 2 with failing to pay a special wagering occupational tax, in violation of 26 U.S.C. § 7262. After defendant was found guilty of these charges, he received one year's probation for Count 1 and a $1,000 fine for Count 2.

On appeal, Jeffers argues that the disclosure and reporting requirements of the federal wagering tax laws violate his Fifth Amendment privilege against compulsory self-incrimination. Specifically, he asserts that under Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968), both charges of the indictment are unconstitutional as applied to him.

The tax scheme in question imposes special tax record keeping and reporting obligations on persons engaged in the business of bookmaking. Section 4412 requires each person liable for the occupational tax to file a registration form with the IRS listing his name, place of residence, the names of his employees, and all addresses where his wagering

Page 224

business is transacted. ¹ After the bookmaker has registered and paid the occupational tax, he is issued a special tax stamp. Prior to 1968, Section 6806(c) required the registrant to display conspicuously his stamp at his place of business or carry it on his person if he had no place of business and to exhibit it upon demand to any Treasury Department personnel. Section 6107 required each principal internal revenue office to keep a public record of all those who had paid the special tax and to provide upon request certified copies of the record to any state or local prosecuting officer.

In 1968, the Supreme Court found that the wagering tax provisions then existing violated the defendant's Fifth Amendment privilege against self-incrimination in the companion cases of Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968), and Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968). In Marchetti, the defendant was convicted of a willful failure to pay the annual occupational tax imposed by 26 U.S.C. § 4411, and of a willful failure to register, as required by 26 U.S.C. § 4412. The Court reaffirmed the power of Congress to tax illegal activities, see Marchetti, supra at 44, 88 S.Ct. at 700; License Tax Cases, 72 U.S. 462, 5 Wall. 462, 18 L.Ed. 497 (1866), but it found three factors in the taxing scheme that gave rise to constitutional problems. First, Section 6107 required the principal internal revenue offices to provide to prosecuting officers a list of those who paid the occupational tax. Second, Section 6806(c) required taxpayers to display conspicuously the revenue stamp and to produce it on demand. Third, the Court took notice that the IRS was in full cooperation with law enforcement agencies in suppressing organized gambling. Marchetti, supra 390 U.S. at 47-48, 88 S.Ct. at 702. Under these circumstances, the Court found that the obligations to register and pay the occupational tax created "real and appreciable" and not merely "imaginary and unsubstantial" hazards of self-incrimination. Id. at 48, 88 S.Ct. at 702. The Court made clear, however, that these statutes were only unconstitutional as applied, and "(i)f, in different circumstances, a taxpayer is not confronted by substantial hazards of self-incrimination, or if he is otherwise outside the privilege's protection, nothing we decide today would shield him from the various penalties prescribed by the wagering tax statutes." Id. at 61, 88 S.Ct. at 709.

In Grosso, the Court examined the monthly requirement of reporting wagering operations for the month connected to the excise tax imposed by 26 U.S.C. § 4411. See 26 U.S.C. § 6001; 26 C.F.R. § 44.6011(a)-1. The Court noted that, although the IRS was not statutorily required to provide prosecutors with the information thus obtained, it was not statutorily restricted from doing so. In practice, the IRS was making the information available to prosecutors and when the taxpayer supplied the required information to the IRS, he might reasonably expect that this exchange would occur. Therefore, this practice also

Page 225

constituted a "real and appreciable" hazard of self-incrimination. Id. at 67, 88 S.Ct. at 713.

In both cases, the Court declined the Government's invitation to...