United States v. Haydel
| Decision Date | 27 February 1980 |
| Docket Number | Crim. A. No. 79-46-A. |
| Citation | 486 F. Supp. 109 |
| Parties | UNITED STATES of America v. John M. HAYDEL, Jr., et al. |
| Court | U.S. District Court — Middle District of Louisiana |
C. Michael Hill, Asst. U. S. Atty., Baton Rouge, La., for plaintiff.
Virgil M. Wheeler, Jr., New Orleans, La., for defendants.
OPINION ON MOTION TO SUPPRESS EVIDENCE
Defendant Haydel and others are charged in a multi-count indictment with conspiracy to operate an illegal gambling business (Count I, 18 U.S.C. § 371) and operation of such an illegal gambling business (Count II, 18 U.S.C. § 1955), and Haydel singly is charged with nine counts (III through XI) of filing false wagering tax returns (26 U.S.C. § 72061). Haydel has filed motions to suppress certain evidence upon which the U. S. Magistrate has held an extensive evidentiary hearing and has rendered his Report and Recommendation. On January 23, 1980, the Court entered its minute entry adopting the Magistrate's Report in part and maintaining the motion to suppress in part. This opinion explains that ruling.
In the nearly 200 years since the first ten Amendments of the Constitution were ratified, one would suppose that every question which could be advanced under the compulsory self-incrimination provisions of the Fifth Amendment had long since been raised and decided. We find that this is not so.
This case brings into sharp focus the conflict between society's need for effective law enforcement and the privilege against compelled incrimination protected by the Fifth Amendment. The issue here presented is whether the government can, under a revenue scheme, require an inherently suspect group (gamblers) to prepare and maintain detailed records of their gambling activities, then seize those records under a search warrant and use them to convict the gamblers of conspiracy to commit illegal gambling and commission of illegal gambling.
The records here involved were seized by the Federal Bureau of Investigation under several search warrants executed in different locations and upon the persons of several different people in Baton Rouge, Louisiana. The primary prize among the many seized documents and records is a box found under the bed in a bedroom at the residence of Haydel's father. The box contains numerous betting slips showing the individual wagers of numerous individuals. The government does not dispute that these records were prepared for and used in Haydel's bookmaking operations in Baton Rouge. Haydel has registered with the Internal Revenue Service and paid the special occupational license tax assessed by 26 U.S.C. § 4411, and he regularly files wagering tax returns required by 26 U.S.C. § 4401. From the evidentiary hearing held before the Magistrate it is clear that the records in this box, in particular, are those required to be maintained by registered gamblers under the provisions of 26 U.S.C. § 4403 and the regulations promulgated thereunder which require gamblers to maintain records showing daily gross wagers. The government, using these records, has computed daily, weekly and monthly gross wagers taken in by Haydel's bookmaking operation.
Having seized these wagering tax records, the government now proposes to offer them in evidence to prove that Haydel conspired to and conducted illegal gambling activities in violation of 18 U.S.C. §§ 371 and 1955.
The tax laws (26 U.S.C. § 4424) prohibit use of any tax return or gambling stamp in such a prosecution, but the government correctly argues that the tax laws do not per se forbid the use of records such as these which were independently discovered by the F.B.I. without assistance from the Internal Revenue Service.1 Thus, the issue presented is purely constitutional: Does the self-incrimination privilege of the Fifth Amendment allow the government to compel the bookmaker to prepare and maintain records showing his gross wagers under penalty of prosecution for failure to maintain them and then use the wagering records to convict him of illegal gambling?
The government argues that there is no Fifth Amendment compulsion here because Haydel was not compelled to disclose the existence or location of the records — they were discovered by F.B.I. surveillance and investigation — and that the government will require no assistance from Haydel in verification or identification of the documents or in connecting them to Haydel. In my opinion, the government misapprehends the reach of the Fifth Amendment's protection against compulsory incrimination. The compulsion here occurs, not with the location or verification of the records, but in their creation and maintenance in the first place.
These records are clearly compelled by the government under its statutory revenue scheme, and they are records of criminal activity;2 and when these documents are used in the prosecution of non-tax related crimes, they constitute compelled incrimination which is prohibited by the Fifth Amendment of our Constitution under the jurisprudence construing Congressional taxation of illegal activities such as gambling.
Gambling is an inherently illegal activity. The Supreme Court pointed out in Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 700, 19 L.Ed.2d 889 (1968), that there are many federal and state laws so providing. That situation has not changed since 1968; gamblers are still an inherently suspect group. The Congress has, however, taxed illegal activities for many years, and the jurisprudence has regularly sustained its power to do so. License Tax Cases, 5 Wall. 462, 18 L.Ed. 497 (1867), United States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037 (1927); Garner v. United States, 424 U.S. 648, 96 S.Ct. 1178, 47 L.Ed.2d 370 (1976); Marchetti, supra; Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968).
The first Congressional isolation of gambling activities for taxation was contained in the Revenue Act of 1951 (26 U.S.C. § 3285, et seq.) which levied an occupational license tax on persons engaged in the business of accepting wagers. The statute required registration with the Internal Revenue Service (the famous gambling stamp) and required filing of monthly excise tax returns. These provisions were challenged twice in the Supreme Court, but initially both gamblers lost. 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), the Supreme Court sustained the statutory revenue scheme against Fifth Amendment claims, holding that the privilege extended only to past conduct not to acts that may or may not be committed in the future. The Court further held that registration as a gambler did not admit past illegal activities, that it only placed one in position to engage in the wagering business in the future. The Court reasoned that gamblers who continued in business exercised their "free choice" and had no constitutional complaint that registration and filing gambling tax returns compelled incrimination:
(Lewis v. United States, 75 S.Ct. at 417-418).
In neither Kahriger nor Lewis did the Court discuss the record-keeping requirement or the disclosure provisions which were considered later. In Marchetti v. United States, supra, and Grosso v. United States, supra, the Supreme Court expanded the Fifth Amendment so as to shield gamblers from prosecution for failure to register and failure to file wagering tax returns, because the very act of compliance with the wagering tax laws compelled them to admit to criminal activities. The future-conduct-only reasoning of the Kahriger and Lewis cases was specifically overruled, and the Court substituted the test of "substantial and `real', and not merely trifling or imaginary, hazards of incrimination," specifically noting that ". . . it is not mere time to which the law must look, but the substantiality of the risks of incrimination." (Marchetti, supra, 88 S.Ct. at 705-706).
The Supreme Court also pointed out that gamblers are an inherently suspect group whose activities are almost uniformly unlawful, and the Court carefully reviewed the provisions of the wagering tax laws which required that Internal Revenue Service agents turn over information obtained from registration and filing tax returns to state and federal prosecutors for use in prosecution of gambling activities. These provisions, the Court concluded, constituted "real and appreciable" hazards of self-incrimination and thus gamblers who pleaded the privilege could not be prosecuted for failure to register or pay the excise tax. (Marchetti, supra, at 702) In overruling Kahriger and Lewis, the Court stated that the question was not whether one has the "constitutional right to gamble" in violation of the law, but whether, having done so, he may be compelled to give evidence against himself, specifically noting that the privilege "was intended to shield the guilty and imprudent as well as the innocent and foresighted." (Marchetti, supra, at 704). The Court thus rejected the "free choice" reasoning of Kahriger and Lewis which recognized an implied waiver of the privilege by voluntarily engaging in the unlawful activity:
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