White v. United States, 18894

• Decision Date: 20 May 1968
• Docket Number: 18897.,No. 18894,18894
• Citation: 395 F.2d 170
• Parties: J. C. WHITE, Appellant, v. UNITED STATES of America, Appellee. Leo KUBIK, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

395 F.2d 170 (1968)

J. C. WHITE, Appellant, v. UNITED STATES of America, Appellee.

Leo KUBIK, Appellant, v. UNITED STATES of America, Appellee.

Nos. 18894, 18897.

United States Court of Appeals Eighth Circuit.

May 20, 1968.

James A. Pratt, Council Bluffs, Iowa, for appellant, J. C. White.

Raymond E. Pogge, Council Bluffs, Iowa, for appellant, Leo Kubik; Thomas L. Root, Council Bluffs, Iowa, on the brief.

Jerry E. Williams, Asst. U. S. Atty., Des Moines, Iowa, for appellee; James P. Rielly, U. S. Atty., and Claude H. Freeman, Asst. U. S. Atty., Des Moines, Iowa, on the brief.

Before MATTHES, MEHAFFY and LAY, Circuit Judges.

MATTHES, Circuit Judge.

These appeals are from the judgments of conviction entered upon jury verdicts finding the appellants guilty of the offenses charged in the indictment. Counts I, II and III of the indictment involve only appellant Kubik. Count I charged that he was a retail dealer in liquors and did not provide and keep in his place of business a record in book form of all distilled spirits received, in violation of 26 U.S.C. §§ 5124, 5603. Count II of the indictment alleged that Kubik, being a person who sold and offered for sale distilled spirits, possessed a liquor bottle in which had been placed distilled spirits other than those contained in the bottle at the time of stamping, in violation of 26 U.S.C. §§ 5301, 5606. Count III charged that Kubik knowingly failed and refused to produce, upon request made by duly authorized officers of the Internal Revenue Service, records showing the source and quantity of all distilled spirits received, in violation of 26 U.S.C. §§ 5124, 5603. Count IV alleged that appellants Kubik and White willfully and knowingly conspired together and with other co-conspirators to carry on the business of a retail liquor dealer without keeping records of receipts and without conforming to other regulations and laws relating to the business of a retail liquor dealer in the purchase of liquor from dealers who had not paid the wholesale liquor dealer tax, in violation of 26 U.S. C. § 5117(a) and 18 U.S.C. § 371.

Kubik was sentenced to a one year term of imprisonment on each count, the sentences to run concurrently, and fined $1,000.00. White was fined $250.00 and sentenced to a term of imprisonment for one year subject to the condition that after he has been confined in a jail-type or treatment institution for ninety days, execution of the remainder of the sentence would be suspended and he would be placed on probation for a period of two years.

The evidence relating to all counts is undisputed. Appellants do not challenge the sufficiency of the evidence except as to Count IV. A summary discussion of the pertinent facts will therefore suffice.

On April 26, 1962 the Carter Lake Fraternal Order of Iowans, Carter Lake, Iowa, was incorporated as a non-profit corporation pursuant to the laws of Iowa. The articles of incorporation stated that the purpose of the corporation was to provide a meeting place for group discussion on political subjects and to promote Carter Lake, Iowa. The latter is a small community in the extreme western part of Iowa, almost adjacent to the city of Omaha, Nebraska.

There is no evidence to indicate that the stated purposes of the corporate franchise were ever accomplished. To the contrary, the record is replete with evidence that appellants used the corporation as a vehicle for the commission of the offenses charged in the indictment.

After its formation the corporation transacted business as a "bottle club" at a new location in Carter Lake under the name "Shangrila Club." Ostensibly, the night club was operated by the corporation, but Kubik was its manager and, for all practical purposes, the owner. Membership cards were freely distributed which entitled members to enter the club and participate in its facilities, which included a bar, pool tables and a swimming pool.

The activities of Kubik came under suspicion in February, 1964. Finally, on August 21, 1964, LaVerne E. Gooder, an agent of the United States Treasury Department, Bureau of Narcotics, in the company of a businessman known to Kubik, gained admittance to the club.¹ After their admittance, agent Gooder and his companion freely purchased drinks containing distilled spirits. The August 21st performance was repeated on numerous occasions by different agents of the Alcohol and Tobacco Tax Division of the Treasury Department. On each visit the agents gained undercover entry for the purpose of ascertaining whether the club's operations conformed to the law. Although Kubik became acquainted with the agents, he was unaware of their official status. These agents ascertained that whiskey was served from unmarked decanters and sold to any and all occupants of the club for $1.00 per drink.

At 3:00 A.M. on February 6, 1965 agent David O. Finney, a special investigator for the Alcohol and Tobacco Tax Division, accompanied by investigator John Daley of the same Unit, gained admission to the Shangrila Club. After being served drinks, they approached Kubik, identified themselves as agents of the Internal Revenue Service and asked to see his retail liquor dealer records. Kubik responded that he had no records of liquor purchases, but subsequently gave the agents a slip of paper, which was a signed retail order form for three bottles of liquor. The agents' inspection of the premises disclosed three bottles of liquor behind the bar.

Upon inquiry as to whether he kept any other distilled spirits on the premises, Kubik replied that he had more liquor in his car. He then voluntarily opened the trunk of his Cadillac convertible and permitted the agents to inspect its contents. Inside were twenty-nine bottles of distilled spirits. After they had observed the contraband, the agents then arrested Kubik and seized the liquor.

Neither of the appellants testified in his own behalf. Their only witness, a former member of the Carter Lake, Iowa police force, testified that he frequented the Shangrila Club nightly, but that he never saw liquor in the club nor observed Kubik selling liquor.

The primary contention advanced by Kubik is that evidence was admitted "in violation of the Fourth, Fifth and Sixth Amendments to the United States Constitution." Pinpointing this broad contention, Kubik argues that the failure of the investigating agents to warn or advise him of his rights as enunciated in Escobedo v. State of Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (1964) and Miranda v. State of Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), rendered his statements to the investigating agents inadmissible at trial.

The issue as to the admissibility of Kubik's statements was timely raised in a motion to suppress all statements made during the course of the investigation and the liquor seized after the arrest. The district court, Honorable Roy L. Stephenson, conducted a plenary hearing on the motion. In denying it he stated:

"A suspect\'s Fifth Amendment privilege against self-incrimination, and his Sixth Amendment right to the assistance of counsel to protect that privilege come into play as soon as law enforcement officers take him into custody or otherwise restrict his freedom of action in any significant way. The requirements of a warning of constitutional rights are confined to situations involving custodial interrogation. Miranda v. State of Arizona, 384 U.S. 436, 444, 478-479, 86 S. Ct. 1602, 16 L.Ed.2d 694 (1966); Escobedo v. State of Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (1964)."

Judge Stephenson proceeded to find as a fact that Kubik's statements were made prior to his arrest, and before he had been deprived of his freedom of action in any significant way. The court also declined to suppress the twenty-nine bottles of liquor seized from Kubik's car immediately after his arrest on the ground that he had voluntarily consented to the search.

We fully agree with the district court's findings of fact and conclusions of law and hold that Judge Stephenson properly denied the motion to suppress.

The Miranda warnings have not been extended to a pre-custody Internal Revenue inquiry. We so held in Frohmann v. United States, 380 F.2d 832, 835-836 (8th Cir. 1967), cert. denied, 389 U.S. 976, 88 S.Ct. 478, 19 L.Ed.2d 469 (1967), where Judge Blackmun cited, as supporting authority, a number of court of appeals and district court opinions. See, e.g., United States v. Maius, 378 F.2d 716, 718-719 (6th Cir.1967), cert. denied, 389 U.S. 905, 88 S.Ct. 216, 19 L.Ed.2d 219 (1967); United States v. Mancuso, 378 F.2d 612, 619 (4th Cir. 1967), cert. denied, 390 U.S. 955, 88 S.Ct. 1051, 19 L.Ed.2d 1149 (1968); Kohatsu v. United States, 351 F.2d 898, 902 (9th Cir. 1965), cert. denied, 384 U. S. 1011, 86 S.Ct. 1915, 16 L.Ed.2d 1017 (1966). Accord, Spinney v. United States, 385 F.2d 908, 910 (1st Cir.1967), cert. denied, 390 U.S. 921, 88 S.Ct. 854, 19 L.Ed.2d 981 (1968). The same rule has been applied to a pre-custody investigation conducted by agents of the Alcohol and Tobacco Tax Division of the Internal Revenue Service. United States v. Agy, 374 F.2d 94, 95 (6th Cir. 1967), cert. denied 389 U.S. 881, 88 S.Ct. 123, 19 L.Ed.2d 175 (1967).

We are cognizant of Mathis v. United States, 391 U.S. 1, 88 S.Ct. 1503, 20 L. Ed.2d 381, decided by the Supreme Court on May 6, 1968. This decision extends the Miranda precepts to the area of civil tax investigations and holds that under appropriate circumstances the warnings must be given prior to interrogation by the investigating agents.

In Mathis the defendant's conviction rested partially on incriminating statements and documents obtained from him during a tax investigation conducted in a state prison. The Internal Revenue agents had failed to give the Miranda warnings. In reversing Mathis' conviction of knowingly filing false claims for tax refunds against the government, the Supreme Court rejected the government's argument that Miran...