United States v. Lewis, 71-1422.

• Decision Date: 27 February 1973
• Docket Number: No. 71-1422.,71-1422.
• Citation: 475 F.2d 571
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Jack L. LEWIS and Edward E. Lane, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

475 F.2d 571 (1972)

UNITED STATES of America, Plaintiff-Appellee, v. Jack L. LEWIS and Edward E. Lane, Defendants-Appellants.

No. 71-1422.

United States Court of Appeals, Fifth Circuit.

September 7, 1972.

Rehearing and Rehearing Denied February 27, 1973.

Virgil M. Wheeler, Jr., Albert B. Koorie, New Orleans, La., for defendants-appellants.

Gerald J. Gallinghouse, U. S. Atty., Mary Williams Cazalas, Asst. U. S. Atty., New Orleans, La., for plaintiff-appellee.

Before WISDOM, GODBOLD and RONEY, Circuit Judges.

Rehearing and Rehearing En Banc Denied February 27, 1973.

RONEY, Circuit Judge:

Jack L. Lewis and Edward E. Lane were engaged in the business of accepting wagers. They were each convicted on two counts of criminal violations which resulted from their filing tax returns pursuant to the Federal wagering excise tax laws. Under Marchetti¹ and Grosso² they could not now be punished if they had not filed the returns at all, but having filed the returns they were indicted (1) in separate counts for willfully and knowingly making and subscribing false returns in that they did not correctly show their business addresses, and (2) in a single count against both for attempting to evade the excise tax by filing returns understating their gross wagers. As to the first, we find that our decision in Kolaski v. United States, 362 F.2d 847 (5th Cir. 1966), requires reversal, and as to the second, Marchetti and Grosso effectively bar prosecution. We therefore reverse the convictions of both defendants.

I.

In separate counts it was charged that each defendant did willfully and knowingly make and subscribe a Special Tax Return and Application for Registry-Wagering, Form 11-C, for the fiscal period ending June 30, 1967, which he did not believe to be true and correct in that the return incorrectly showed his business address to be the same as his residence address. It was proved that both were engaged in wagering at a different address, which the government charged should have been listed as their business address. The Internal Revenue Code, 26 U.S.C. § 7206(1) makes it a felony for any person to willfully make and subscribe any return under penalties of perjury which he does not believe to be true and correct as to every material matter. Form 11-C is the return required to be filed by one who is subject to the annual occupational tax of $50 imposed by 26 U.S.C. § 4411³ on any person who is engaged in receiving wagers, or who is liable for the 10% excise tax imposed on wagers under 26 U.S.C. § 4401.⁴

Lewis filed his return on June 28, 1966, for the period commencing July 1, 1966. Lane filed his return on June 29 for the same period. This was consistent with the registration sections of the wagering tax statutes and the regulations, which are prospective in nature and apply before any wagering has taken place. 26 C.F.R. § 44:6071-1(b).

This case falls squarely within the perimeters of the decision of this Circuit in Kolaski v. United States, supra, which involved this same occupational tax registration form. Kolaski was charged with filing a Form 11-C in which he stated that between the dates of October 26, 1964 and June 30, 1965, he had no agents or employees engaged in taking wagers, when in fact he had such employees. The Form 11-C itself was filed on October 26, 1964. He pled guilty to an indictment charging that he willfully and knowingly made the return which he did not believe was true and correct in this regard. He thereafter sought relief under § 2255. We set aside his judgment of conviction and sentence on the ground that the false statement, being prospective, was nothing more than a statement of intent. He was not charged with a false statement of intent.

We said:

"The statute here involved is a perjury statute. As in the general statute on perjury, 18 U.S.C.A. § 1621, the gist of the offense is a false statement, willfully made, of a material matter. The statement must be with respect to a fact or facts. United States v. Debrow, 346 U.S. 374, 74 S. Ct. 113, 98 L.Ed. 92. See Williams v. United States, 5th Cir. 1957, 239 F.2d 748. The statement must be such that the truth or falsity of it is susceptible of proof. United States v. Slutzky, 3rd Cir. 1935, 79 F.2d 504. The truth or falsity of the statement is to be related to the time the statement is made. Smith v. United States, 6th Cir. 1948, 169 F.2d 118.

It may be noted that the information does not charge a false statement of an intent to have employees in the future engaged in gambling. It charges that, on October 26, 1964, he stated that he had no employees engaged in gambling for the period October 26, 1964, to June 30, 1965, and that he then and there well knew that he did in fact have employees engaged in gambling for the period of October 26, 1964, to June 30, 1965. Since it would have been impossible for the appellant, on October 26, 1964, to have then and there, in fact, had employees for a more than eight months period then beginning, the statement made in the information could not be true and the truth of such statement was not susceptible of proof. The information does not state an offense." (362 F.2d at p. 848)

After Marchetti and Grosso the defendants could not be charged with failing to file a complete return. Assuming that wagering at different addresses would constitute separate offenses under state law, see LSA-R.S. 14:90, the rationale of Marchetti and Grosso would prevent criminal proceedings against defendants for failure to register any address where they were conducting wagering operations, even though they may have waived their right against self-incrimination as to other addresses by registration.

Prior to Marchetti and Grosso, the government would normally have proceeded against persons in defendants' position by prosecution for failure to file a return or an amended return showing the address where wagering was known to have been conducted. However, Marchetti and Grosso now foreclose such a course of action.

The government would have us follow the holding of the Sixth Circuit in United States v. Carabbia, 381 F.2d 133 (6th Cir. 1967) and the reasoning of the dissenting opinion in Kolaski. However, a panel of this Court cannot overrule a prior decision of the Circuit, en banc consideration being required. See F.R. A.P. Rule 35. In any event, Carabbia, like Kolaski, involved a listing of employees and would not dictate the same result in a case involving addresses of places of business subsequent to Marchetti and Grosso.

II.

The second charge upon which Lewis and Lane were convicted alleged that they jointly attempted to evade the 10% excise tax imposed against the gross amount of wagers. The exact charge is important to their argument that it failed to allege facts constituting an offense under 26 U.S.C. § 7201 which provides:

"Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall . . . be guilty of a felony . . .."

The indictment charged that Lewis and Lane were jointly engaged in the wagering business and that they attempted to evade the wagering excise tax by filing separate returns, Form 730, which, when combined, understated their gross partnership wagers.⁵

When no wagering excise tax return has been filed, an individual cannot be criminally prosecuted under 26 U.S.C. § 7201 for willfully attempting to evade or defeat the tax imposed by the provisions of 26 U.S.C. § 4401 notwithstanding the fact that wagering excise taxes may be due and owing. Marchetti v. United States, supra, and Grosso v. United States, supra.

The government contended that during the month of February, 1967, the partnership had accepted wagers of $41,329.00. No partnership return was filed. The two partners filed individual returns which reported wagers totaling $33,447.00. They did this, the government charged, as an attempt to evade a portion of the partnership tax. This count did not charge the defendants with failure to file a partnership return, nor did it accuse them of filing false individual returns. It charged evasion of the partnership tax.

Lewis and Lane argue that this charge does nothing more than indirectly attempt to punish them for failure to file a partnership return, when Marchetti and Grosso forbid direct punishment for such failure. We agree.

Implicit in this charge is the assumption that defendants can operate a partnership and the government will approve a discharge of their partnership tax liability if they file and pay on individual returns reporting the partnership wagers. If this were not so then understatement of one's personal return could not constitute an attempt to evade partnership taxes. Yet nothing in the statute or regulations indicates that an individual must report partnership wagers on his personal return, or that he can fulfill the partnership's duty to report wagers by filing as an individual. The wagering tax laws recognize a partnership as a distinct entity. It is issued but one tax stamp regardless of the number of partners it has. See 26 C.F. R. § 44:4902, Liability of Partners. ("Any number of persons doing business in co-partnership at any one place shall be required to pay but one special tax.").

Prior to Marchetti and Grosso it would be possible, in a case such as this one, to consider that the filing of an individual return was merely an attempt to mask, or cover up, the taxpayer's true partnership liability which would have been disclosed on a proper partnership return. In United States v. Shaffer, 291 F.2d 689 (7th Cir. 1961), six persons were indicted for conspiracy to evade wagering taxes. The six operated a gambling business as partners, but filed no partnership return. Only one defendant, named Wyatt, filed an individual return, and this return substantially understated the amount of tax due from the partnership. The court held that the jury could properly conclude that the six defendants conspired to use Wyatt's...