Grosso v. United States

PETITIONER:Grosso
RESPONDENT:United States
LOCATION:Red Lion Broadcasting

DOCKET NO.: 12
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 390 US 62 (1968)
ARGUED: Jan 18, 1967
REARGUED: Oct 10, 1967 / Oct 11, 1967
DECIDED: Jan 29, 1968

ADVOCATES:
Charles Alan Wright – argued and reargued for the petitioner
Francis X. Beytagh, Jr. – argued and reargued for the United States, reargued the cause for the United States, pro hac vice

Facts of the case

Question

  • Oral Reargument – October 10, 1967
  • Oral Reargument – October 11, 1967
  • Audio Transcription for Oral Reargument – October 10, 1967 in Grosso v. United States
    Audio Transcription for Oral Reargument – October 11, 1967 in Grosso v. United States

    Audio Transcription for Oral Argument – January 18, 1967 in Grosso v. United States

    Earl Warren:

    Number 181, Anthony M. Grosso versus United States.

    Mr. Wright.

    Charles Alan Wright:

    Mr. Chief Justice, may it please the Court.

    The first of the issue as presented by Number 181 carries on the inquiry the Court has been making yesterday afternoon and today about wagering taxes.

    My client is convicted on 20 counts for involving the occupational tax and wagers and 16 involving the excise tax and wagers.

    He was sentenced by Judge Foley to nine years, the fine of $191,000 for these violations.

    I’d suppose that our case differed from Marchetti and that with regard to the Fifth Amendment point we are attacking only the excise tax counts.

    We’re not attacking here the occupational tax count.

    And in our submission, the excise tax is invalid whatever maybe the disposition of Kahriger and Lewis in the occupational tax because of our reading in Kahriger and Lewis is turning on the fact that the occupational tax looks to future Acts while the excise tax unequivocally looks to the past.

    Potter Stewart:

    Mr. Wright just for curiosity, why aren’t you attacking the — the stamp — the registering tax —

    Charles Alan Wright:

    Because Mr. Justice Stewart, on my record I can’t.

    The record was not made in the trial court at the time this indictment came down before Albertson, before I believe Malloy, there was no reason to think the Court might overrule Kahriger and so the —

    Potter Stewart:

    And so just a motion raised against —

    Charles Alan Wright:

    Yes, sir.

    Potter Stewart:

    — in a timely fashion.

    Charles Alan Wright:

    Whereas it — it had been raised below.

    I assure you sir that we would be attacking it also.

    We think that the perspective nature of the occupational tax was the basis of Kahriger but I understand Mr. Beytagh arguing for the United States a few moments ago, to say that the United States does not rest on that as a justification of Kahriger-Lewis cases and he puts the argument now as — as an understanding on the thought which is voiced primarily in Lewis case of the voluntary nature of the testimony which is required that since the person may get out of the gambling business.

    He is under no compulsion to gamble, therefore under no compulsion to pay tax on gambling.

    Now, this line of argument of course, would apply as much to the excise tax as it does to the occupational tax and I’ve — we’ll get back and — and comment on that in a moment but at the outset, I would like to address myself to a question which the Chief Justice put yesterday afternoon to Mr. Zeldes in which he inquired about a hypothetical federal tax on bucket shops whether that would raise the same problems as are involved here.

    It seems to me that the Chief Justice’s question was susceptible of two readings.

    If the tax, the Chief Justice had in mind was a tax specifically on the occupation of running a bucket shop then my answer would be the same as Mr. Zeldes gave.

    I would find it quiet indistinguishable from the taxes we have here.

    But I think that perhaps what the Chief Justice had in mind was a different kind of tax.

    A Federal Tax, let us say, when every person engaged in the securities business and someone so engaged refuses to pay up because he is in fact running a bucket shop and the form saying that he is in the securities business might be a link in the chain of evidence that would convict him.

    I think that the — if — if that is the question the Chief Justice intended, it raises extremely important and interesting problems as to the basic theory of the privilege against self-incrimination and specifically, what kinds of compelled testimony are incriminating.

    Now, the test announced by this Court in the Hoffman case and that quoted many times since has been linked in a chain.

    But I’m perfectly confident, but the courts never supposed that an important and settled constitutional principle can be expressed in a forcible phrase.

    If one goes back to Hoffman itself, though the link in the chain language is used.

    The Court also speaks of working to the implications of the question, the setting in which it is asked, the background and the peculiarities of the case.

    Charles Alan Wright:

    I cannot believe that the Fifth Amendment extends protection to any statement which might be admissible in evidence in a criminal prosecution.

    I think that, if link in the chain is given with that broad a reading that there is the same difficulty that Professor Henry had observed of the outcome determined of test to guarantee trust that there is no logical stopping place.

    There is virtually nothing that a person could not refuse to answer on the ground that it is incriminating.

    I’m personally aware of the case in the Utah state court, some five years ago in which a person claimed the privilege when he was asked whether he was plaintiff with Erwin N. Griswold.

    And my mind boggles that the notion could be possibly be incriminating to be acquainted with Griswold.

    And I think that here the key is, to look as Hoffman says and I think Albertson now develops the theory further to look at the point at which the inquiry is made, the circumstances in which it is made.

    I think that this is the reason why the government concedes that the Sullivan case does not control here.

    It is true that one reporting income tax conceivably could report something which would be admissible in evidence in a later case.

    Income tax returns have come in and in some kinds of litigation.

    But as we said in — in Albertson, the questions are neutral in there face and they’re directed to the public at large.

    The risk of incrimination is here a minimal risk.

    We go to the other extreme, you have a person who has been subpoenaed to appear before some investigative body and here a question which addressed to the world generally might be neutral and non-incriminating because of the setting takes on a much more sinister cast.

    And in my submission, what the Fifth Amendment really protects is against a person being compelled to give any testimony which will have a substantial effect of accusing himself of the crime.

    Now on that analysis, I return to the bucket shop case which provoked it.

    If the Federal Tax in question whereas I understood the Chief Justice to suggest a general tax then I would say that there would not be a constitutional privilege.

    That the likelihood of incrimination and asking people to say that I am engaged in the securities business is very small and that even for the bucket shop operator, this would be such a very small part of the case against him.

    The government’s case would require much more than that and this I think would really be insignificant.

    I deal in the same way with the example that the United States puts in its brief, can a person refuse to pay real estate taxes because of the property which he owns is being used for purposes of prostitution.

    And as the government points out, if you have a person who is himself being charged with prostitution and he’s asked, “Do you own this property?” Then you have I think a very substantial link in the chain.

    But if you simply ask the whole world to come forward and pay real estate taxes on the property they own, I think that you come again on the language of Albertson, the requirement is neutral on its face and directed at the public at large.

    Earl Warren:

    Well Professor Wright, do you properly concede the purpose of my question and the reason I asked the question was because Mr. Zeldes had said this case is no different from a statute that would require burglars to register.

    And I wanted to differentiate between a burglary statute and one of this kind.

    Now it seems to me that the difference between the two is this, that — and nobody recognizes burglary as being lawful under any circumstances.

    On the other hand, gambling can be legal or it can be illegal.

    In some states, gambling is legal and in some states — one state at least, practically all gambling is legal but others permit the bingo game and other things that the — that the start — start in small campus but eventually developed into a very big gambling industries.

    Some gambling, the United States is interested in because it engages in commerce and as to that has a vital interest.

    So taking it by and large, it seems to me that gambling is one of those — one of those industries that can be legal or can be illegal but its been recognized as a kind of business that where it is made legal even, it can be regulated to the extent of extinction.

    And I think that has been recognized in the law for a long time.

    Now, if that is true and if it can be recognized that the government has great difficulty in collecting taxes from ordinary taxes from the gambling interest because of the surreptitious ways and the way they do business.

    Is there any reason why the government cannot have special statutes directed to an industry of that kind?

    Earl Warren:

    It seems to me that’s a very much the same as the securities business.

    For instance, there are some people who don’t deal in anything legal when they sell security.

    They just set up a bucket shop and a — and a teleformic way of doing business and operate for a while and get out of it.

    There are others of course, that are fairly legal and some people who normally are legal cheat on it.

    And I think in those circumstances, perhaps the government could be entitled to have a registration statute for — for all security dealers and so I just ask a question if there is a similarity between that kind of an industry and the gambling industry?

    Charles Alan Wright:

    Mr. Chief Justice, in my submission, the gambling business is much more like the business of receiving stolen property than it is like the securities business.

    I recognized of course, the point that you make with here —

    Earl Warren:

    Just — just if I may interrupt you just once.

    Charles Alan Wright:

    Yes, sir.

    Earl Warren:

    Does any state recognize the possession as being legal, the possession of stolen property?

    Charles Alan Wright:

    I find it inconceivable than —

    Earl Warren:

    Yes.

    Charles Alan Wright:

    — any state would.

    Earl Warren:

    Yeah.

    Well, that’s — that’s the basis of the distinction I was trying to get at, as to whether this business which can be legal or illegal and is in fact, legal in some places, illegal in others, doesn’t that distinguish it from that kind of a case?

    Charles Alan Wright:

    To me with respect sir, it does not.

    I’ve done — so far as the power of Congress to tax is concerned, we think the Congress has the power to lay an excise tax in any business whatever even if it is as receiving stolen goods illegal in every state.

    In the enforcement of such a tax, I think that the Congress is constitutionally required to observe the privilege against self-incrimination and though, it may have other techniques available for enforcement, it cannot ask the law breaker himself to come forward and confess his sins.

    On the point of voluntariness —

    Byron R. White:

    Both can make a payment?

    Charles Alan Wright:

    Yes, I think so Mr. Justice White.

    I think there are several ways that you could enforce payment of the tax without requiring but Mr. Justice Black, years ago called “the squeezing device”.

    One would be to — for the Congress to enact a genuinely workable immunity provision.

    The Congress in many other instances where it is wanted information has provided for immunity, it could do so here.

    What —

    Byron R. White:

    And what about a federal statute that says that, there is a tax on burglary, there is a tax on, on receiving stolen property, and if you don’t pay it — if you don’t pay it, you can be put in jail?

    That’s all — the only provision there is?

    And the only requirement is to pay the tax.

    If you don’t pay it, it’s a crime?

    Charles Alan Wright:

    I think that would —

    Byron R. White:

    Would you say that — did do you say that the criminal sanction is improper?

    Charles Alan Wright:

    I don’t think the criminal sanction for nonpayment of the tax is improper.

    Provided that there is some way that it can be paid without the taxpayer incriminating himself.

    The government has assumes arguendo in its brief what we have argued specifically with regard to these gambling taxes that it is not possible to pay the tax without identifying yourself as having received wagers in the preceding month.

    But I — I think that there — the immunity statute I proposed is not the only way Congress can enforce such a tax.

    Byron R. White:

    And what immunity statute would — would there be?

    You’re just saying that, no, the – you have to have immunity statute, the criminal sanction for not paying is unenforceable?

    Charles Alan Wright:

    No.

    No, I — I do not think I’m saying that at all.

    Byron R. White:

    Well, you are certainly?

    Charles Alan Wright:

    I’m suggesting sir, that if the Congress gives immunity and provides that the fact of payment may not be used —

    Byron R. White:

    Immunities from what?

    Charles Alan Wright:

    Pardon?

    Byron R. White:

    Immunity from what?

    Charles Alan Wright:

    Immunity either from use as evidence or from use as an investigatory relief, if in other words, it creates an immunity broad enough to meet the test of Counselman v. Hitchcock and all the wager cases, then I think the person who does not pay maybe prosecuted for nonpayment.

    The problem here is that you cannot pay without self-accusation.

    Abe Fortas:

    Now, how would you obtain – provide for immunity from the use as an investigatory relief?

    Charles Alan Wright:

    I suggest that you would do very much what the government has proposed and what this Court did essentially in Murphy, it would put the burden on the prosecution to establish that they had obtained all their evidence free from anything.

    Now, I personally believe —

    Abe Fortas:

    We have here before held that I believe that just getting the information which starts the investigation is in evidentiary tint or is a tint in the sense in which you are using the term?

    Charles Alan Wright:

    I should think that you would have to so hold if you were to invent such an immunity in order for it, to survive constitutional scrutiny.

    Abe Fortas:

    Yes, I’m trying to get at what you’re suggesting when you talked about an immunity from use as a lead to criminal investigation.

    When you talk about that, you talk about something new, aren’t you?

    Charles Alan Wright:

    I thought so.

    I —

    Abe Fortas:

    I can’t see.

    I have that claim —

    Charles Alan Wright:

    If that comes up —

    Abe Fortas:

    I’ve been trying to think of some instance where that’s been done and I haven’t succeeded.

    Charles Alan Wright:

    In Albertson itself, the Court describes the evidence or investigatory lead as the measure of what must be done if immunity is to be constitutional.

    Abe Fortas:

    I know.

    It’s the other side of the point.

    You’re suggesting that I — that I’m having trouble with that.

    I don’t know of any immunity statute or any ruling of this Court that has the effect of insulating the information or the answer, the information filed or the answer from use of insulating that from use as an investigatory relief?

    You are suggesting that that would be necessary here for constitutionality as well as the exclusion of the information in the proofs thereof from evidentiary use.

    Charles Alan Wright:

    Yes, sir.

    I’m suggesting one.

    I of course, do not think it all but it would be right for this Court as the government suggests to invent such a rule.

    I think this would raise the very gravest questions of separations of powers and if this is particularly the kind of question which the Congress is much better equipped to decide than is this Court.

    The Congress can find out the facts as to whether the tax can ever be enforceable, whether the revenues will produce or worth it and I would think —

    Potter Stewart:

    May I ask —

    Charles Alan Wright:

    Yes, sir.

    Potter Stewart:

    — what — what you mean is involves the seperation authority, you mean the recreation of an immunity —

    Charles Alan Wright:

    Yes, sir.

    Potter Stewart:

    — not since we have fashioned in the Murphy Waterfront situation, a prohibition where there is an immunity statute to that report, there was a state immunity statute.

    The use either in evidence of what it disclosed on the strength of the immunity granted or evidence which is obtained from leads, from letters disclosed on the strength of immunity, that’s right.

    Now, you’re not suggesting there was any problem of separation of powers as today?

    Charles Alan Wright:

    I think that’s a very different case because there at the state, those legislative branch had undertaken to provide immunity and the question was how this could be made effective in our dual federalism system.

    And I — I think the Court really had very little recourse there except to do that.

    Byron R. White:

    Well they could have waited perfectly if that was one of the alternatives to wait for Congress to do something about it.

    You just simply ban the compelled testimony until Congress decides whether or not it will grant an immunity in those situations.

    Charles Alan Wright:

    If it was an alternative —

    Byron R. White:

    Well, it didn’t wait.

    The Court said that for federal purposes the information can’t be used on the leads — and the government has the burden of proving when there is a question made that their prosecution did not arise out of these disclosures?

    Or that in the evidence they use in the prosecution did not arise other than disclosures?

    Charles Alan Wright:

    I agree.

    Byron R. White:

    Oh, pardon me.

    Pardon me.

    Charles Alan Wright:

    Excuse me.

    I agree Mr. Justice White.

    Charles Alan Wright:

    The Court could have waited but it seems to me a much less step if the Court took there where at least the state of New Jersey had undertaken so far as it could to give immunity.

    Then it would be here where there is no indication whatever that Congress wanted to provide in the immunity.

    Potter Stewart:

    Well, I may be wrong Mr. Wright but I thought all that the Mr. Beytagh was suggesting that as an alternative, say that disclosure maybe made and still be required on registration in any event.

    And I take it the same would apply to the excise tax.

    But that, neither state not federal court could prosecute on the basis of evidence displayed or on the basis of evidence obtained from leads from exposure.

    I thought that as far as what Mr. Beytagh went.

    Now, I don’t understand is where the separation problems arises?

    Charles Alan Wright:

    It arises in my submission because it is more properly to the branch of the government that makes laws to decide whether it wants to obtain testimony at the price of making various evidence unavailable to federal and state authorities.

    Potter Stewart:

    But why would that had been the same in Murphy and the Waterfront?

    Charles Alan Wright:

    Because there you at least had a legislative branch that had said we want this enough,if we’re going to give as much immunity as we can in order to get it.

    Potter Stewart:

    That they can stay together.

    Charles Alan Wright:

    And that is right.

    And this Court said, we’ll cooperate with the state and keep the evidence out for the federal purposes.

    Byron R. White:

    As I read wholly aside from this separation authority, what do you think in — in Murphy against Waterfront, as I read that case the Court said that — said that protection that was supporting there was — it was — it was what Counselman against Hitchcock required (Inaudible), would you agree with that?

    Charles Alan Wright:

    Yes, sir.

    Earl Warren:

    Well professor, what is the difference between what the government suggests on the one hand, and are exclusionary rules in the search and seizure cases and also the fruit of poison tree rule?

    Charles Alan Wright:

    The difference Mr. Chief Justice, I think is that in the (Inaudible) fashion, the fruit of poison tree, search and seizure, this is the only remedy that can be provided.

    The violation has already taken place and this Court has fashioned, what is now a constitutional rule of exclusion.

    But here we are back a step earlier in the process.

    Here the man has not yet been compelled to say anything and the question is, should he be compelled to speak out?

    And then later we’ll provide some remedy for it.

    Earl Warren:

    Well, there might be a difference in degree there.

    But what I was speaking out was on the question of separation of powers.

    If we could hold judicially that without legislation that such evidence that was wrongfully seized, could not be used in the trial of case and if we held that the fruit of the poison tree doctrine was proper, why wouldn’t the doctrine that the government suggests be proper? In this case, isn’t it very much the same?

    Charles Alan Wright:

    I find it very different.

    In the cases that you speak of sir, these are — the problem is how you administer justice in the federal courts or as — as you have now expand to it and the courts throughout the United States generally.

    What the government is suggesting here however, on the assumption which they make in there alternative argument that the privilege against self-incrimination is here applicable.

    They are saying that you should bail out the Congress that the — you should make the statute enforceable so that the Congress can get a hundred million dollars in 15 years.

    Even though the Congress didn’t do this itself insofar as the Congress showed an intent, the Congress said “We don’t want this kept secret.

    We want the occupational tax list to be public.

    Charles Alan Wright:

    We don’t want any immunity all to be granted.”

    My time is very short and if I may, I would like to speak briefly to the second issue, the case involves.

    But I’m fearful that if I do not get to it, it would seem to suggest that we agree with the unimportance the United States attaches to it.

    Potter Stewart:

    But may I speak to it?

    I think we were told that the registration made by the statute that it was wrote, a matter of public record.

    How about the gross receipts, the excise tax, is that a matter of public interest?

    Charles Alan Wright:

    No.

    It, it is not.

    But as the United States is conceded in its brief, they are made available to state prosecuting authorities and people have been convicted on the basis of this evidence.

    Potter Stewart:

    On request?

    Charles Alan Wright:

    This I, I know but the United States says in its brief Mr. Justice Stewart.

    Potter Stewart:

    Well, let’s say then there’s no such secrecy provision applicable with these returns as I understand.

    They’re supposed to be applicable generally to our personal income tax?

    Charles Alan Wright:

    There’s no secrecy provision on the statute to the regulations with regard to them.

    There’s no provision expressly requiring the disclosure as there is with the occupational tax.

    Potter Stewart:

    Well yeah, I see.

    Hugo L. Black:

    Suppose we said, there the word furnished that would be prima facie evidence so to speak.

    Charles Alan Wright:

    I’m sorry Mr. Justice Black.

    Hugo L. Black:

    Suppose you were to say that there were furnished then if the state requires to them the burden of proof as the connotation and if it construed to you and the evidence will probably make it speaking —

    Charles Alan Wright:

    I think that it —

    Hugo L. Black:

    (Inaudible)

    Charles Alan Wright:

    I remain persuaded Mr. Justice Black that these questions of secrecy or disclosure are congressional questions and not judicial questions, I don’t regard that issue as essential to my case because it seems to me even if the Court were to do what United States suggests that it would be unthinkable that this conviction could be affirmed that this taxpayer could be expected to have anticipated in 1961 to the 1967, the Court will provide some form of protection so that what he said would not incriminate.

    And so I would think the reversal on this case would be required in any event and that is of course all that I entitled to argue for here.

    Earl Warren:

    Professor Wright, we’ve taken so much of your time and any questions that I’m going to give you until adjournment time at 12 o’clock.

    Charles Alan Wright:

    Thank you very much, Mr. Chief Justice.

    With a bit of extra time then before I turn to the second issue in the case, let me say a word of voluntariness since the government has argued that with such vigor, I would have thought that Albertson was enough as a matter of precedent to refute the voluntariness argument because Albertson was under no more compulsion to be a member of the Communist Party when my client is to be a gambler.

    He had a free choice.

    Nevertheless, the Court said that the registration provision would violate the privileges against him.

    And if the argument be put not on precedent but on principle, the Government’s argument, I submit would be destructive of the privilege against self-incrimination.

    It is hard to think of any incriminating testimony about which it could not be said well, if you didn’t have to commit that crime.

    Charles Alan Wright:

    You voluntarily chose to violate the man act to commit a burglary or whatever it is you did.

    Therefore since you did it voluntarily we’re not compelling you now to be a witness against yourself, your own acts what’s got you into it.

    I think that the voluntariness concept would truly put a man to the Fifth Amendment as we’ve known it throughout our history.

    On the second issue in the case, the facts very briefly that while the jury was out deliberating, it send a note to the judge in the absence of petitioner and his counsel.

    The judge then sent an oral instruction through the bailiff in the absence of petitioner and his counsel to the jury.

    This was recognized by the Court of Appeals to be obvious error.

    An obvious error it is under the line of decisions here which go back to 1894 but nothing is to be done in the criminal case in the absence of the defendant.

    Potter Stewart:

    Prior the day or night when this is filed, why wasn’t the counsel there?

    Charles Alan Wright:

    It wasn’t — I believe at 11:30 in the morning, Mr. Justice Stewart.

    Potter Stewart:

    The first communication?

    Charles Alan Wright:

    Yes, sir.

    Potter Stewart:

    Alright.

    And is there, there — is there any indications the record show where the counsel was?

    Charles Alan Wright:

    The record does not show sir.

    Potter Stewart:

    How long had the jury had been deliberating at that time?

    Charles Alan Wright:

    That the jury had gone out on Wednesday afternoon and —

    Potter Stewart:

    This was Thursday morning?

    Charles Alan Wright:

    This was Thursday morning.

    But the question is what do you do when on an error of this kind happens, plainly in our judgment, it would be insisting on form to say that every time a judge makes a mistake at this kind, you must set aside a criminal conviction.

    To do that would be to — to exalt form — over any form, over any substance in the enforcement of the criminal law.

    And so our submission is that if it appears and clearly be established that no prejudice to the defendant occurred but then this is harmless error or lots of things in the law even involving constitutional rights that are harmless error, and I think the concept is application here.

    But as with the harmless error doctrine generally especially in a criminal case, we submit that the burden is on the government to establish that no prejudice occurred.

    And that if the record is in such form that no one can say and I think this is what our record is whether the communication in the absence of the defendant prejudice to the defendant that in a criminal case if a new trial must be required.

    In civil litigation, Civil Rule 61 has been thought to be a — a great liberal advance disregarding (Inaudible).

    But in criminal litigation, this Court is always been true to another canon of construction that we do not disregard errors unless we are sure that the defendant has not suffered some prejudice.

    And here, I submit, no one can possibly be sure that the petitioner was not prejudiced.

    We do not know what the note to the judge said.

    The note unlike the thousands of other pages and paper in this record, the note was not kept.

    It was not made a matter of record.

    It is readily possible to conceive of things that that note might have been said which would have been prejudicial to my client.

    Charles Alan Wright:

    The mostly likely possibility is that the note indicates the division of the jury.

    I have no way and no one has any ways so far as I know of ascertaining whether it did.

    If the note had indicated that in the action of the Court in keeping the jury locked out for a day-and-a-half, while they could not deliberate because the juror was ill and then sending the jury back to deliberate with the juror whose health was still not well, would take in a very different color than it did.

    We do not know what the bailiff told the jury in response to the note.

    We know what the judge told him to say, tell him to keep deliberating but the tone and fashion in which even a federal judge in open court advices jury to keep deliberating has become a very controversial matter in the Courts of Appeals off late and the risks, I submit are very grave if this is to be done by a bailiff in the absence of defendant in counsel and with no record as to what happened.

    The United States, I suggest with difference reads Shields v. United States in a fashion different than it appears to us.

    They put the Shields case, a unanimous opinion of this Court with Mr. Chief Justice Taft to one side.

    Because they say that in the Shields’ case the instruction which the judge sent out by a note, it was a matter of record was legally erroneous.

    But that is a question which the United States is apparently deciding though this Court expressly refused to decide it.

    One of the assignments of error in Shields was that the note that the judge had sent back was legally erroneous.

    The Court in expressed words refuses to come to that issue and instead chooses to reverse simply because of the fact the judge sent the note back.

    I think the Shields case perhaps maybe read as going farther than the rule which, which we have suggested to you, the rule that you must reverse unless there is a clear showing if no prejudice that the rule that we put forward here is the one which has been adopted by virtually all of the circuits except the Second Circuit and now in this case, the Third Circuit ignoring I should say, several of its earlier decisions.

    Hugo L. Black:

    Is that a clear showing of no prejudice?

    Charles Alan Wright:

    Yes sir, with the burden upon the United States, Mr. Justice Black.

    Hugo L. Black:

    Yes.

    But —

    Charles Alan Wright:

    The —

    Hugo L. Black:

    What – what’s a clear showing mean? What that’s going to be?

    Charles Alan Wright:

    I suppose that that means that the trial court in the first instance and the appellate court and perhaps this Court are satisfied that no harm occurred.

    It is that the language this Court has used in good many different contexts, going all the way back to Louis v. United States in the United States, I believe (Inaudible).

    Hugo L. Black:

    Wouldn’t be beyond —

    Charles Alan Wright:

    I wouldn’t think so, no.

    That this is not an issue you’re submitting to juries.

    This is an issue that the Courts are deciding themselves.

    Hugo L. Black:

    I just wanted to (Inaudible)

    Charles Alan Wright:

    Oh, I think it would make sense to say that the government must prove criminal culpability to a jury beyond a reasonable doubt but that we may use a different standard where the question is whether or not that there’s been any harm from some lateral error which took place during the proceedings.

    I did not read the brief of the Solicitor General’s office as taking much issue with the propositions of law I have suggested thus far on this point.

    Instead, the Solicitor General seems to rely almost exclusively on the absence of timely objection by counsel to what happened and this also was the — a ground greatly relied on by the Court of Appeals.

    In our submission, it is not a tenable ground under the circumstances of this case.

    I do not doubt that if counsel and the defendant are sitting in the courtroom and they see the judge someone who jurored over and talked privately to the juror, that is essential of the facts of United States v. Woodner, Second Circuit decision that there is an obligation on the counsel immediately to object.

    Charles Alan Wright:

    They know what is going on.

    It can quickly be remedied to face that you can’t talk to the juror without our being present.

    But here, neither petitioner nor his counsel were present when these communications took place by the time they learned of it.

    The United States attorney called 45 minutes later and advised counsel of the fact, the harm was done if the judge by at that time knew what the division of the jury was, he knew and it could hardy be eradicated.

    Whatever the bailiff said to the jury had been said.

    And although, the United States suggests that you could recall the jury and inquire what goes on, what went on, I think that the better perception is that of Judge Friendly, verdict of the Second Circuit in the Girsh case when he says, the last thing in the world that you should do is recall a jury when it is in the process of its deliberations and interrogate the jurors on some collateral point.

    I think that this would have been — and far too heroic a cure for what occurred.

    And so, in answer to the government’s argument, that there is no objection, I submit, there is no rule that requires objection under these circumstances.

    It is true that Criminal Rule 51, requires objections ordinarily that Criminal Rule 51 is very clear that no objection is required if you had no opportunity to object at the time, the ruling or action of the Court took place.

    And it seems — in my submission, the government is now seeking to affirm a judgment in which there was an error that I believe be of constitutional dimension because of counsel’s failure to that which no rule set down by this Court required him to do.

    In fact, even if an objection were required specifically by rule.

    I, I think that if the error is truly constitutional that such recent cases as Fay v. Noia and Henry v. Mississippi would require a very searching analysis of what function the objection was thought to preserve and whether there had been a deliberate bypassing on the part of petitioner himself rather than the record so far as I recall does not show whether petitioner ever learned of the telephone call from the United States Attorney to counsel.

    But I don’t think the Court need get into that here because here in my submission, trial counsel did everything that he was required to do by any rule.

    And I think that the issue then is, is properly before the Court and surely cannot be disposed off on the basis, the Third Circuit suggested that since the evidence of petitioner’s guilt was overwhelming, he could not have been prejudiced by anything that happened between the judge and the jury.

    The jury twice reported that it was deadlock, it did not find evidence of guilt overwhelming and that in our submission is a question for the jury to decide and not for an appellate court to decide for the reasons, I suggest that we submit that the case should be reversed with dismissal of the indictment on the excise tax accounts and a new trial order on the wagering tax accounts.

    Earl Warren:

    Professor, do you — do you recall from the record how many days it took to try this case?

    Charles Alan Wright:

    It was about six weeks I believe.

    Earl Warren:

    Six weeks, it was a long case.

    Charles Alan Wright:

    Mr. Chief Justice, it was a long case.

    Yes.

    Earl Warren:

    Well, we recess now.

    Mr. McLaughlin, you may proceed.

    James E. McLaughlin:

    Mr. Chief Justice, may it please the Court.

    Let me commence by pointing out the difference between this case and the previous case which the Court heard because I think there is a very relevant difference.

    There are at least four federal crimes connected with the tax area.

    There is first of all, failure to register and that’s not applicable in the income tax area but it is of course applicable with many excise taxes including the tax here in question.

    There are three other crimes which apply I believe equally to the income tax area and virtually all Federal taxes.

    They are willful failure to file a return, willful failure to disclose required information on that return, and finally, a third discreet crime, willful failure to pay the tax.

    Now, the only question in this case is the third of those three crimes, willful failure to pay the tax.

    In other words, this Court need not decide in this case whether petitioner could have been convicted for willfully failing to file a 730 return.

    James E. McLaughlin:

    A copy of which is in the record that is a return that states on the top gambling excise tax.

    This Court need not decide whether if he had filed either that return or some other return, whether he could be convicted for a willfully failing to disclose required information on that return.

    The only question involved here, is willful failure to pay the tax.

    It —

    Byron R. White:

    If the Court decides that the third issue to get through and it would also be willful failure to pay the tax?

    James E. McLaughlin:

    Yes.

    In other words, if the Court holds that he doesn’t have to pay the tax and I should assume he doesn’t have to –

    Writ for certiorari —

    James E. McLaughlin:

    In order to reach that you’ve found that he doesn’t have to get this.

    What I’m saying is that to reach the third question, you don’t have to reach the first two.

    Now —

    Abe Fortas:

    Mr. McLaughlin, excuse me.

    It’s not entirely pertinent to your case.

    Are there other statutes in which registration is required mixed with excise taxes?

    James E. McLaughlin:

    Yes.

    There are a large number of other statutes, many of them described in our brief in the introductory portion of our briefs in these two cases.

    They include for example, one — one example is the liquor area.

    If you want to go into the distilling business, you must register.

    All the big distillers of course register.

    If you want to become a wholesaler of liquor, you must register.

    And there are taxes then imposed on the distillation of liquor that raise substantial sums of money and many other federal excise taxes are administered the same way.

    This is not an unusual aspect.

    But I’m not here dealing of course, as Justice Fortas has pointed out with the registration provision.

    This Court could, could hold for the petitioner in the Marchetti case.

    I don’t — I urge you not to but this Court could hold for the petitioner in the Marchetti case and yet hold that a person is not excused from paying a tax because his business is illegal.

    And that same question is applicable, I think, not merely to the gambling tax but to a host of other taxes.

    And I would like to take just a moment to point that out.

    There are of course two principal Federal Taxes.

    There are the excise taxes and there is the income statement gift tax group.

    Now, the excise tax doesn’t consist of one tax, a gambling tax.

    James E. McLaughlin:

    There were until recently with an excise tax reduction over a year ago.

    Hundreds of excise taxes all going to make up a single package.

    There were excise taxes imposed on a very large number and are traditionally held then some of them dating back into the Nineteenth Century and many of them dating from at least the 1930s and early 40s and a very large number of luxury or non-essential goods.

    But — just examples would be radios, television sets, jewelry, furs, liquors, cigarettes, sporting goods, cameras, cabaret taxes, private club dues, safe deposit boxes, playing cards, bowling alleys, pool tables, the gambling tax is not at all unusual in that regard.

    When congress considered the gambling tax, they discussed this aspect of it.

    And how did the legislative history reads something like this, commercialized gambling holds the unique position of being a multibillion dollar nationwide business that is remained comparatively free from taxation by either state or federal governments. This relative immunity from taxation has persisted in spite of the fact that wagering has many characteristics which make it particularly suitable as a subject for taxation.

    Your committee is convinced that this is inconsistent with the present need for increased revenue. This was the Korean War days.

    Especially, at a time when many consumer items of a semi-necessary nature are being called upon to bear new or additional tax burdens.

    At the same time, the rates on things —

    Hugo L. Black:

    What time was it?

    When was that?

    James E. McLaughlin:

    1951, Your Honor.

    Hugo L. Black:

    1951.

    James E. McLaughlin:

    At the same period, taxes ranged as high as 30% of the gross sales price on many items.

    Subsequently reduced to 20% and now many of the taxes have been repealed.

    We don’t know whether temporarily or permanently in light of new revenue needs.

    But taxes range as high as 20% and 30% on the gross sales price of items such as jewelry, furs, liquor and other items.

    And as I say, this is not just physical hard goods but its services too, like gambling.

    Services like the rental of safety deposit boxes, cabaret and theater tickets, club dues, telephone calls, all have been called upon to bear substantial taxes.

    Potter Stewart:

    This is a tax of 10% on the gross amounts received by the taxpayers as wagers, is that it?

    James E. McLaughlin:

    That’s right, Your Honor.

    Potter Stewart:

    Including layoffs from other gambler?

    James E. McLaughlin:

    The gambler who ultimately bears the risk of the bet is the one who pays the tax.

    Potter Stewart:

    Right.

    James E. McLaughlin:

    So if gambler one takes a bet and lays it off to gambler two, gambler one —

    Potter Stewart:

    Two — two is then taxed.

    James E. McLaughlin:

    — is excused and two was taken —

    Potter Stewart:

    As 10% on the gross of the —

    James E. McLaughlin:

    That’s right.

    And the statutes specifically —

    Potter Stewart:

    And let me ask you again, how does it fits in with the ordinary income tax which of course its not involved here and in which is recognized that a gambler like anybody else pays, he’s obligated to pay tax on its taxable income?

    James E. McLaughlin:

    That’s right.

    Just as a dealer in retail jewelry had to add a 20 or even sometimes as high as 30% tax to the gross sales price of the jewelry.

    Potter Stewart:

    Which he passed on to the customer.

    James E. McLaughlin:

    And pass it on to the consumer.

    Potter Stewart:

    Right.

    James E. McLaughlin:

    And this tax is set up in the same way.

    There are specific sections in this tax which state that the professional gambler and the statute says, “The man in the business of gambling can pass this on to the consumer.”

    You come in to place a two-dollar bet with the professional booking —

    Potter Stewart:

    That’s if you fight, is that it?

    James E. McLaughlin:

    — you can — he can charge it to 20 —

    Potter Stewart:

    Twenty dollars plus tax, is that right?

    James E. McLaughlin:

    That’s right.

    And there’s no reason that this tax couldn’t be employed in exactly the same manner as these other taxes.

    The Congress said that the discussion on the Florida House was something like this.

    The tax will result in a further increase in the betting odds which are already stacked against the individual better.

    However, if as there probably will be a substantial number of people who are not convinced that they should stop betting then, “The committees’ bill will exact a Federal Tax for their folly.”

    It’s the same thing as the tax on furs, on jewelry —

    Potter Stewart:

    Or on the pari-mutuel.

    James E. McLaughlin:

    — sporting goods —

    Potter Stewart:

    Or On a pari-mutuel estate tax on a pari-mutuel risk.

    James E. McLaughlin:

    Precisely, precisely.

    Hugo L. Black:

    Was there any other of those taxes that you refer had to pass to the knowledge that was considerable doubt if — it is whether they see them leave?.

    James E. McLaughlin:

    Well, I think that many taxes are passed or —

    Hugo L. Black:

    I was just asking if there —

    James E. McLaughlin:

    No.

    I don’t think there’s any other tax — well, let me take that back.

    There are other taxes of course, the liquor tax is a very substantial tax and it has been since I think almost the First Congress, on the distillation and sale of liquor, a very substantial tax.

    Hugo L. Black:

    Is there any doubt about how they will be paid?

    James E. McLaughlin:

    No.

    James E. McLaughlin:

    I don’t think so, I hope not.

    Hugo L. Black:

    Why not, it’s in the question?

    James E. McLaughlin:

    I don’t think Congress had any doubt that this tax would pay its way either.

    The legislative history shows that they estimated collections would be as high as $400 million a year.

    The revenue produced has been —

    Potter Stewart:

    Has — has it ever been?

    James E. McLaughlin:

    — has been somewhat — has been considerably less.

    But Congress has declined sometimes of course, for economy measures to appropriate the money for additional agents to enforce many of these taxes.

    The revenue has been disappointing.

    Hugo L. Black:

    Except one, that they’ve done it on this one?

    James E. McLaughlin:

    They haven’t — they haven’t supplied an adequate staff to enforce this tax.

    Hugo L. Black:

    How much does it cost?

    James E. McLaughlin:

    How much has it —

    Hugo L. Black:

    You say they haven’t supplied an adequate staff, how much — how did they supplied?

    James E. McLaughlin:

    Oh, I don’t know, whether the number of people.

    I think there’s a good deal of overlapping functions within the internal revenue service and many people enforced different taxes.

    I should think that when a group of agents conduct an investigation of a gambling operation that they’re seeking not merely to collect this federal excise tax but to make sure that the gamblers are paying their federal income taxes.

    We don’t know to what extent gamblers have declined to fully comply with the federal income taxes either.

    That’s a continuing operation.

    And I think many of the costs that are incurred in enforcing this tax are precisely overlapping with the —

    Hugo L. Black:

    Is there any way to get those cost without too much problem?

    James E. McLaughlin:

    I think it would probably be very difficult because as I say the agents enforce a variety of taxes.

    And I don’t know and I will if — if Your — Your Honor would like me to, I’ll try to find out whether there any separate agents —

    Hugo L. Black:

    If it’s two men — two offenders test, I didn’t want to suggest it.

    James E. McLaughlin:

    I’ll, I’ll — I’ll look into the matter if you’d like me to —

    Abe Fortas:

    What do you mean then by saying Congress has refused to supply additional agents for this purpose?

    You know the Congress didn’t — does the bureau allocate — does the service allocate agents to the enforcement of this tax or it doesn’t?

    James E. McLaughlin:

    Well, I think that when the Commissioner comes in and presents his budget requests each year, he breaks it down to a certain extent, and when they don’t supply all the money requested, agents have to be allocated as the Commissioner thinks proper.

    I don’t know that Congress has ever prohibited them from adding people to this area.

    What I’m saying is that when new taxes are added of course new agents must be supplied to enforce them.

    James E. McLaughlin:

    There is this overlap.

    But the numbers of agents who have enforced this tax have never been as great as would be required for full enforcement.

    I would add one —

    Potter Stewart:

    And how much gross revenue has this produced?

    Did I hear a $100 million for 15 years?

    James E. McLaughlin:

    A $100 million which I should think is — is a substantial amount.

    Moreover —

    Potter Stewart:

    A $100 million over 15-year period?

    James E. McLaughlin:

    I think over something more like a 12 or 13-year period.

    Potter Stewart:

    12-year period.

    James E. McLaughlin:

    That’s right Your Honor.

    I would add one other factor.

    It maybe that if this Court decides this case as we are asking them to and eliminates the doubt as to whether gamblers have to pay this tax, if there’s ever been any — any such doubt that we will have a great deal more of voluntary compliance.

    Does the Court recognize this and has recognized during the arguments in this case.

    It hasn’t been easy to get gamblers to comply.

    I think a clear ruling is going to make it easier to get people to comply.

    But I would —

    Earl Warren:

    Mr. McLaughlin I imagine during probation days, we have an excise tax on the manufacturer of liquor, didn’t we?

    James E. McLaughlin:

    That’s right.

    Earl Warren:

    And over very little liquor manufactured except by the — the moonshiners was there?

    James E. McLaughlin:

    So far as I know.

    Earl Warren:

    And I don’t think many of them paid the tax, did they?

    James E. McLaughlin:

    Oh, well, I, I can’t tell you how much was collected but the government tried hard.

    Earl Warren:

    Yes.

    Oh! Yes, — I doubted very many of them paid, paid the tax.

    James E. McLaughlin:

    But, but that didn’t make it unconstitutional.

    So it does —

    Earl Warren:

    I have — no, no.

    No, no, I’m not suggesting.

    I’m suggesting —

    James E. McLaughlin:

    That’s right.

    Earl Warren:

    — that this is comparable to this situation on whether the government takes in a lot of money or not.

    James E. McLaughlin:

    Yes, sir.

    Earl Warren:

    Because if it would do it in that area and not make much money on it for tax purposes, I would think that you do the same thing here.

    James E. McLaughlin:

    And I, —

    Hugo L. Black:

    I have an idea that you’d look it up, you’d find that there were a great many rules all over the nation, had a federal license.

    James E. McLaughlin:

    I —

    Hugo L. Black:

    I know that hit in Alabama.

    James E. McLaughlin:

    I, I wouldn’t — I wouldn’t call it a federal license Your Honor.

    Hugo L. Black:

    But one of those things just stuck up at your place of business to show that you at least – if not licensed, running against the law for them to sell whisky.

    James E. McLaughlin:

    This Court considered that question many years ago in the license tax cases and held that when Congress charges a person a tax to operate even though his business is illegal, and that was exactly the same question people were selling liquor and other items which were legal in some states and illegal in others.

    This Court said Congress is not giving the man a license to operate.

    Congress is merely charging him a tax which Congress is perfectly privileged to do and that if the state wants to enforce its laws against them, passed laws legalizing or prohibiting these activities, that’s up to the states.

    But we give them no license to operate that the statutes are quite clear.

    We don’t in anyway say to them what you are doing is permissible.

    Hugo L. Black:

    Just gave them the right to justify the federal government is concerned.

    James E. McLaughlin:

    We’re not going to come after them if they pay their taxes.

    And the same thing is true, I would like to emphasize very strongly on a large number of other excise taxes.

    This isn’t the only tax where this Court is going to have the problem here in question.

    There has traditionally been as a tax as I say on jewelry and furs running as high as 30% gross.

    Take a man who is engaged primarily in selling, hot jewelry and furs, is he exempted from this tax?

    Because if he paid the tax, he would be admitting that he was selling jewelry and furs.

    Don’t forget he was indicted under state law.

    His primary defense would be I never sold jewelry and furs.

    That’s — that’s a very likely defense.

    Same thing is true of, of Bucket Shops as Your Honors pointed out or boiler rooms or any other security operations —

    Abe Fortas:

    Where and when?

    James E. McLaughlin:

    — because there’s a Federal Tax — there’s a Federal tax on the transfer of securities.

    If —

    Abe Fortas:

    Suppose there were an excise tax on receiving stolen property, profits from this — the business overseeing stolen property and that the tax were precisely the same as this in terms of its administration.

    James E. McLaughlin:

    Well, certain —

    Abe Fortas:

    And that they constitute it?

    James E. McLaughlin:

    Well, certainly I have a lot more difficulty if I was up here defending a tax on illegal gambling or on illegal transfers of securities or the illegal sale of jewelry and furs, I am not and I can’t really answer definitively that question.

    Abe Fortas:

    But why — why would you have more difficulty?

    James E. McLaughlin:

    Well —

    Abe Fortas:

    I mean, the fact that you have more difficulty some of which I supervise and —

    James E. McLaughlin:

    For one reason I have more difficulty —

    Abe Fortas:

    — what’s difference in theory?

    James E. McLaughlin:

    One reason I have more difficulty is this Court once considered it in the Constantine case and held that a tax of a thousand dollars on people selling, I think it was liquor in that case, in violation of state law was unconstitutional.

    They upheld at the same time in the same case a lesser tax, $25.00 upon sale of liquor.

    And they said, you got to pay that whether you’re an illegal operator or a legal one which you don’t have —

    Abe Fortas:

    And how many —

    James E. McLaughlin:

    — you can’t penalize at this other penalty and this is not a — a penalty.

    This is a revenue measure.

    Abe Fortas:

    Oh —

    James E. McLaughlin:

    Its part of panoply of revenue measures.

    Abe Fortas:

    I know, I know — that always bothers me when you and your colleague said that.

    But – in on how many states is some form of wagering covered by the statute lawful?

    Do you have that?

    James E. McLaughlin:

    No I don’t.

    Nevada has been mentioned to many times for me to go deeply into that.

    I don’t know whether other states —

    Abe Fortas:

    In New Hampshire’s, in New Hamsphire —

    James E. McLaughlin:

    New Hampshire has a lottery tax.

    Abe Fortas:

    Is that wagering?

    James E. McLaughlin:

    I think that a specific exception was passed in the federal statute to exempt state lotteries of various kinds.

    On the concept which has been, I think, contained in most of our revenue measures that the federal government shouldn’t impose a tax on the revenues of the state —

    Abe Fortas:

    So far as you can — so far as you can tell us now, there is only one state that has in which wagering of the sort to which a statute applies in which the activity is lawful.

    James E. McLaughlin:

    That’s right.

    Abe Fortas:

    Just one state?

    James E. McLaughlin:

    Yes (Voice Overlap) there is at least one other state and that allow —

    Abe Fortas:

    Unless there’s a key part —

    James E. McLaughlin:

    — that — that allows some, yes.

    Abe Fortas:

    — and this is the key part of your case right now or — and

    James E. McLaughlin:

    Well —

    Abe Fortas:

    — and that’s part of your argument anyway.

    You’re telling us that this causes your last pain and agony to the Constantine tax case —

    James E. McLaughlin:

    The State of Washington — the State of Washington has — has for long periods of time legalized certain forms of gambling including perhaps limited to punchboards.

    That’s covered by this statute.

    Abe Fortas:

    Alright, that is the —

    James E. McLaughlin:

    Other states may legalize punchboards or they may legalize slot machines or other things.

    This of course is a federal tax on — on slot machines, a separate tax.

    But I didn’t mention it’s another excise tax.

    Some states I’m sure have legalized slot machines or it is not?

    Abe Fortas:

    Now, I — I think — I think it’s very important for us now to have answer to this question.

    Earl Warren:

    How about bookmaking on the tax?

    James E. McLaughlin:

    A bookmaking is covered by this statute.

    Nevada for example, doesn’t legalize — I know, Nevada does legalized bookmaking and it’s covered by the statute.

    Earl Warren:

    And it’s not the only state that does it.

    James E. McLaughlin:

    I think there are other states that did legalize it but I don’t have the — I don’t have the score.

    I can’t tell you how many other States.

    We — I haven’t made a complete review of the State Clause.

    Congress quite clearly when it passed the statutes said that it was taxing these forms of gambling whether illegal or legal.

    It recognized that in some jurisdictions they were legal, Washington punchboards, Nevada large numbers — large types of gambling.

    Congress wasn’t concerned with that at that time, just as Congress wasn’t concerned when it passed the cabaret tax with whether a man was operating without a state license or not.

    Could a man who is operating in New York without a state cabaret license declined to pay the federal cabaret tax on the ground that that would be a link in the chain incriminating.

    Hugo L. Black:

    Is there any state which outlaw’s cabaret?

    James E. McLaughlin:

    I just suppose it depends on how you define cabarets.

    If cabaret is mean the serving of liquor —

    Hugo L. Black:

    Is that — is that what you were talking?

    James E. McLaughlin:

    Many states outlaw all cabarets which serve liquor by the drink.

    They probably allow other cabarets if anybody can figure out a way to be in business and make money without liquor by the drink.

    Hugo L. Black:

    Yes.

    James E. McLaughlin:

    I, don’t know of — of any of hand.

    The Federal Cabaret Tax doesn’t depend on the serving of liquor.

    These things operate on different, on different points.

    The Federal Tax applies where it is entertainment.

    The State tax — the state may outlaw serving of liquor by the drink and that may really outlaw any cabaret with entertainment because there’s no economic way to run one.

    All States of course, make it illegal to sell certain kinds of securities or unapproved securities.

    Yet, the federal tax supplies equally, stamp transfer tax on a sale of any security legal or illegal.

    The sale of theater tickets is until recently for many years have been taxed by Congress and yet, if a man is a scalper of tickets without a license in the State of New York where you got be licensed to be a scalper.

    He can’t say I don’t — I won’t, I’m exempted from the federal tax, I submit.

    He doesn’t get an exemption from the payment of the tax.

    Just how much information, he must report whether he must register, if there’s a registration provision.

    How much detail he must give whether he has filed a return that says, this is X or Y kind of tax.

    He’s not involved in this case.

    The income tax problem is really not all the different, all completely different from this.

    I submit that accepting the provisions of the arguments made by the petitioners in this case would raise serious questions with the income tax.

    If a man is a bank employee and has for many years earned $5000 a year which is reported to him on his W2 return.

    He staples that on his return and he files it every year.

    Then one year he embezzles $500,000 from his bank.

    He might well say, do I have to put this down on my return?

    Abe Fortas:

    Well suppose —

    James E. McLaughlin:

    Even as miscellaneous income of $500,000, if he’s — if he is indicted for embezzlement.

    If he’s indicted for embezzlement and this return is introduced against him.

    It’s one link in the evidence.

    He’s the only of the 40 employees in the bank that had $500,000 worth of miscellaneous income, the same year that the bank showed up missing $500,000.

    Abe Fortas:

    Then why do you have to say, I, I embezzle this?

    James E. McLaughlin:

    No.

    Well —

    Abe Fortas:

    Well allow me to —

    James E. McLaughlin:

    — that’s a very —

    Abe Fortas:

    But suppose that a man in the District of Columbia or some other state or some state where wagering is illegal, suppose you file an income tax and suppose special agent went around or you were ask in Court whether he obtained any of his income from unlawful wagering or from engaging in wagering.

    Would he be able to say or refuse to answer the question?

    James E. McLaughlin:

    Was that set it in Court?

    Abe Fortas:

    In Court or to a special agent or you name it?

    James E. McLaughlin:

    Well, let me try to answer at that way.

    You can answer that question, “Yes, he’s entitled to invoke the Fifth Amendment and not answer that question.”

    We can answer — we could both assume arguendo for this case that he could decline that information —

    Abe Fortas:

    Well, I don’t assume arguendo –

    James E. McLaughlin:

    — without deciding this case.

    Abe Fortas:

    Well, he — he could claim the Fifth Amendment, couldn’t he?

    James E. McLaughlin:

    Well, I am not sure if it’s my place to concede that he could.

    I’ve got pretty good personal ideas to whether he could or not.

    But let me put it this way, if I may and I’m going to try to answer your question to the best of my ability.

    The Federal Internal Revenue Code does require you to state on your income tax return the source of your income.

    It does say?

    James E. McLaughlin:

    It doesn’t say in a general way.

    It’s pretty clear, the source of your income.

    I think you — it further requires that if you’re in the business of gambling.

    In the business of gambling that you file a Schedule C which is a long schedule state the nature of your business, state the gross income, identify each expense, that’s required by the Internal Revenue Code.

    As I read it and I think — I think as anyone would read it, it’s required.

    And there is a crime, willful failure to supply adequate information or required information on the return.

    Now, if a gambler filed a return and all he put on was miscellaneous income, $300,000 and he declined to supply any of this other information.

    And he was indicted for failure to supply necessary information which I state again is a separate crime.

    Not failure to pay but failure to supply information.

    He’d reported all his income but he didn’t tell where it came from, as he’s required by law to —

    Abe Fortas:

    And then what are you —

    James E. McLaughlin:

    — then he could say the Fifth Amendment excuses me from supplying all this information but it doesn’t excuse me from paying.

    And if that was this case then I would be here arguing about whether he has to supply the information, but I’m not.

    Potter Stewart:

    I think the point was made though was it not?

    That on — with respect to the income tax filed that there is a requirement that you put down the source of the income.

    Nonetheless, if I reported the next day from 15 accurately my wages but put down my employers to the United States’ Government as Argentina —

    James E. McLaughlin:

    And you did it intentionally, willfully.

    Potter Stewart:

    — Argentina, but I have made a full and complete and accurate disclosure of my gross and that income and computed it all very accurately and send it in.

    I wouldn’t be guilty of any criminal offense.

    James E. McLaughlin:

    I must speak —

    Potter Stewart:

    I thought that was the point it was made.

    I’m not sure —

    James E. McLaughlin:

    I must respectfully disagree.

    You would be guilty of —

    Byron R. White:

    (Inaudible)

    James E. McLaughlin:

    When this Court has the question —

    Byron R. White:

    When there’s a failure to supply and then it will be a willful of failure to pay.

    James E. McLaughlin:

    You could and it wouldn’t be willful failure file because he filed a return under the hypothetical Mr. Justice Stewart has said.

    And it wouldn’t be will — willful failure to pay, it would only be willful failure to supply required information or willful misstatement of required information which is about the same thing.

    Hugo L. Black:

    And that gets down does it not to the question of whether, or wants to get rid of tax or for some other reason, the thing that they can find the answer is are you guilty of violating the gambling or is your failure, that’s what it gets to in the final analysis, doesn’t it?

    James E. McLaughlin:

    Well, I’m not sure it gets to that in the final analysis.

    Hugo L. Black:

    Well, if it gets this far?

    That’s the question.

    James E. McLaughlin:

    It’s not the question in this case.

    Hugo L. Black:

    Well, I, I say you — had you were talking then about the others too?

    James E. McLaughlin:

    Yes.

    Hugo L. Black:

    When it finally gets down.

    The issue is for us to return rather an order to collect any kind of tax.

    The government has power to make a man confess to a crime.

    James E. McLaughlin:

    Well, all I can say is —

    Hugo L. Black:

    Is that not right?

    James E. McLaughlin:

    That’s not the question in this case.

    Hugo L. Black:

    Well, I understand you —

    James E. McLaughlin:

    And in this —

    Hugo L. Black:

    — but is that — that the final question involved with reference to the inquiry?

    James E. McLaughlin:

    If pressed to answer, how I would — what I would say if I had willful failure to supply necessary information in this case.

    I would answer, no, its different.

    It’s not — it’s not simple.

    It’s not that simple.

    Hugo L. Black:

    Well, aren’t they interested in making him confess whether he is engaged in as a gambler.

    Isn’t that the issue of fact?

    James E. McLaughlin:

    No.

    Hugo L. Black:

    On which it depends?

    James E. McLaughlin:

    No.

    I don’t think so.

    Hugo L. Black:

    Well, what is it?

    James E. McLaughlin:

    The reason that the —

    Hugo L. Black:

    Not that the reason.

    What is the issue of fact between the government and one that wants to pay taxes for gambling when it wants to ask, where did you get your money?

    What is the issue if not that this was gambling?

    James E. McLaughlin:

    I don’t think the government very often indicts a person for willful failure to supply information when he says, the reason I didn’t supplied it was because I’ve have a Fifth Amendment right.

    I paid my tax and now I’m not going to tell you where I got the money.

    I don’t know of any cases involving that questions being indicted.

    Hugo L. Black:

    Well then, then you’re saying — then you’re saying, if there is a difference in the kind of information they asked a man to give.

    James E. McLaughlin:

    There’s very clearly a difference in requiring a man to pay a tax —

    Hugo L. Black:

    And you’re saying — you’re saying if they can — the man that he pays his tax that they must stop the time when they seek to make him incriminate himself, are you not?

    James E. McLaughlin:

    I’m not saying they must stop.

    Hugo L. Black:

    You’re not saying.

    But you have —

    James E. McLaughlin:

    — I don’t have any answer whether they must stop in this case.

    Hugo L. Black:

    — but you’re saying that’s not the issue?

    James E. McLaughlin:

    I think this is a very important case because this is the question —

    Hugo L. Black:

    So do I.

    James E. McLaughlin:

    — whether a man must pay a tax.

    Not file a return —

    Hugo L. Black:

    It’s – it’s a —

    James E. McLaughlin:

    — not supply all the information —

    Hugo L. Black:

    You say that whether a man shall be compelled to admit that he has committed a crime in order to pay his tax.

    James E. McLaughlin:

    In —

    Hugo L. Black:

    Basically, that’s the issue.

    James E. McLaughlin:

    I —

    Hugo L. Black:

    Maybe the government tried and it can make him violate because of the Fifth Amendment.

    But that’s if —

    James E. McLaughlin:

    That would be the issue in that case.

    It’s, it’s the only way I can answer that Your Honor.

    Hugo L. Black:

    Yes.

    James E. McLaughlin:

    I submit that when this Court spent close to a hundred pages of its decisions, a hundred pages of its reports within recent years in writing, the James and the Rutkin cases involving the taxability of income from extortion and embezzlement.

    And those were hard fought cases and when this Court finally decided that that income was taxable, I submit that this Court wasn’t engaging in an exercise in futility as it would be if a man didn’t have to report illegal income because that information might be used against him.

    Mr. McLaughlin, is there a government factor — with the right to investigate that this petitioner had then failed to tax.

    Would the, the facts of this case have been enclosed within state law?

    James E. McLaughlin:

    If he had paid the tax and filed the 730 return which says, payment of excise tax on gambling —

    Well, I understand —

    James E. McLaughlin:

    — they would disclose the 730.

    If he had sent in a check which and said along with it.

    This is in payment of an excise tax and I’m not going to tell you which one but its an excise tax of some kind of which there are hundreds or he had — instead of filling the 730, the gambling excise tax return, he had filed a general excise tax return which has all sorts of boxes to check and he didn’t check any.

    They wouldn’t have been —

    The filing of 730, now what’s the authority of the government sending under this to the state authority?

    James E. McLaughlin:

    There’s nothing in the statutes on that.

    Why would the Government do it?

    James E. McLaughlin:

    There’s nothing in the statutes which prohibits the Government from making any such information available to the states.

    There’s nothing in the statute which authorize it.

    William J. Brennan, Jr.:

    But why does the government do it?

    James E. McLaughlin:

    Well, I think the answer is obvious as we both recognize that once the Government has collected its income and there has been disclosed to the government a violation of a state law.

    James E. McLaughlin:

    The Federal Government doesn’t consider that it must unless Congress or this Court tells it to keep that information secret.

    But what I am saying is —

    William J. Brennan, Jr.:

    But you don’t like how the government — It feels whatever reason (Inaudible)

    James E. McLaughlin:

    It’s well recognized.

    It’s just a certain degree of cooperation which I think we — many people laud between –

    Hugo L. Black:

    That is belief.

    James E. McLaughlin:

    — state and federal law enforcement.

    Hugo L. Black:

    That is belief.

    James E. McLaughlin:

    Oh, they don’t —

    Hugo L. Black:

    — they just started to (Inaudible)

    James E. McLaughlin:

    I think it had certainly a substantial reason.

    I do —

    Hugo L. Black:

    It’s a substantial reason —

    James E. McLaughlin:

    Well, I could make — I could think of many other reasons perhaps this state has a tax on the income — an income tax anyone had checked his gross income.

    Hugo L. Black:

    (Inaudible)

    James E. McLaughlin:

    I can think of no other reason.

    Now, what I have said here is, this man cannot excuse his failure to pay the tax because he wants to excuse his failure to file a return.

    If he’d been indicted and tried and convicted in appeal to this Court that he had a constitutional right not to file a form 730.

    I would probably come in here and defend the Government on that point.

    But this Court might reach a very much different result.

    I can’t predict what would happen in that case.

    The question is whether he has to pay the tax?

    And he could have paid it by filing a general excise tax return or by sending a letter saying, this is for excise taxes.

    By doing that he would have violated apparently the requirements of the statutes.

    But he had to have a very solid defense, Fifth Amendment for that.

    Just as gamblers have for many years and virtually everyone who engages in illegal activities have for many years known that they could report under income tax return, miscellaneous income.

    The statute requires them to file extensive forms Schedule C which is a very extensive form if you’re engaged in a trade or business and make many disclosures about your trade or business, but they don’t.

    William J. Brennan, Jr.:

    As applied generally any trade or business —

    James E. McLaughlin:

    Yes.

    Any trade or business including gambling or — or operating a bucket shop or anything else.

    James E. McLaughlin:

    But they don’t do that if its illegal income.

    They put it down as miscellaneous and they say if the Federal Government says, where is your Schedule C?

    They say, Fifth Amendment.

    And I think this case goes well beyond all those other cases.

    This is the failure to pay case.

    Earl Warren:

    You may continue until a quarter after.

    I —

    James E. McLaughlin:

    Thank you.

    Earl Warren:

    — thank you counsel.

    A little more time, you may have some to —

    James E. McLaughlin:

    Thank you very much.

    I submit that the Federal Government does not have a constitutional obligation to excuse a person from paying a tax because he’s engaged in an illegal business.

    Be it an excise —

    Abe Fortas:

    Well, that the real question is, is this the kind of tax that is permissible it seems to me in light of the Fifth Amendment.

    For example, suppose again the Federal Government levied an excise tax on the illegal — on receiving a stolen goods in that business.

    Now, that’s your — what would be your position on this?

    James E. McLaughlin:

    I’d like to answer that into two steps.

    The first of which you will not consider a complete answer but I’ll move to what I think is a complete answer.

    The first step is that Federal Government does impart.

    It imposes a tax on the sale of jewelry, furs and many other items and that’s whether they’re legal or illegal.

    And I, I submit —

    Abe Fortas:

    I don’t take that.

    James E. McLaughlin:

    Alright.

    My second answer is even if this was a tax on nearly the sale of stolen jewelry and furs and nothing more.

    Then, I would come in here and defend that tax in the same way.

    Whether you’d reach the same result or not that I don’t know as you will in this case.

    But what I would answer is if that was one of 200 excise taxes, he could send in a check for payment and say, this is for an excise tax and I have a constitutional right not to tell you which one.

    And he will —

    Abe Fortas:

    But he can’t — he’s not allowed to do that here?

    James E. McLaughlin:

    I don’t see why he isn’t.

    James E. McLaughlin:

    Why not?

    If he were indicted for a failure to file the proper return and he had appealed to this Court from that, he would have a much different argument, and he might well have a proper Fifth Amendment argument that he didn’t have to file the return.

    And that conviction would be overturned.

    Possibly, I don’t concede it here.

    I don’t have to.

    But what I say is this is failure to pay and there is not great difference, I don’t think, between a tax on gambling, and jewelry, and furs, and radios, and television sets, and liquor — liquor from an illegal distiller that might have been under that tax.

    Abe Fortas:

    Well, tell me — tell me a bit more about these intensive facts of this case.

    The petitioner did not file a return in which complied with the statute, did it?

    James E. McLaughlin:

    That’s correct, Your Honor.

    Abe Fortas:

    But the government discovered throughout the means claimed that your decision without the means that he had engaged in the business of wagering and that he should have paid an excise tax.

    James E. McLaughlin:

    That’s correct.

    Abe Fortas:

    So what you did was to that failure to pay?

    James E. McLaughlin:

    As, as I submit, the government had a perfect right to do.

    We did indict him for failure to file a return.

    And I submit that if after today, he continues to engage or someone continues to engage in the business of gambling, let him pay his tax.

    Abe Fortas:

    Well, how would he pay his tax, just by —

    James E. McLaughlin:

    Take a check and put it in an envelop and put in a letter perhaps that said, this is in payment of an excise tax.

    Or possibly he could file a return instead of a 730, file a return like this.

    A 720 which says, excise tax as in general, as you can see it’s close to the payment for excise taxes.

    And here where it says, which one?

    And check the right box.

    He says, I have a Fifth Amendment right not to check the correct box.

    But to exempt him from the payment of this excise tax, what it seems to me goes substantially beyond just as simple gambling tax.

    Difficult I think to distinguish between that and the payment of income taxes.

    Counsel for both petitioners here have said, “Oh, we concede our people have to pay income taxes on their gambling business.”

    Well, I don’t really see the distinction if they’re indicted for gambling in a state and somebody puts in an income tax returns as miscellaneous, $800,000 income last year and then the state introduced its evidence which tends to show that they had no other — no gainful occupation of any kind except their connection with various bookmakers, et cetera.

    I think that that would certainly be a link in the chain and I want to read you just one sentence.

    One sentence out of the petitioner’s brief in the Grosso case.

    I think it’s a little bit different than, than what the counsel said on oral argument.

    He said this, “It is petitioner’s position that he is protected as fully by the privilege against self-incrimination when the Government seeks the information connection with collection of a tax as if the Government would seek the information by asking him the question before a grand jury.”

    James E. McLaughlin:

    Can you imagine putting a gambler on the stand and saying to him, how much income did you have last year from sources other than interest, dividends, salary, annuities, pension plans, et cetera, the various items on the return?

    Now that, how much miscellaneous income did you have last year?

    He’d say, he takes the Fifth Amendment.

    He doesn’t have to testify to that before a grand jury.

    I’m sure.

    So that if what counsel is arguing for is that — that the grand jury standard applies to the payment of a tax.

    I think this is a very sweeping doctrine and one that gives me substantial cause.

    Since, since my time is up, I would like to say just two things very briefly.

    If this Court for any reason which I can’t conceive of, rejects my principal argument and holds that a man doesn’t have to pay a tax —

    Abe Fortas:

    Well, are you suggesting that he would have to in the case you put relating only to an income tax that a professional gambler would have to respond to that question before the grand jury?

    James E. McLaughlin:

    I say, I don’t think he would.

    Abe Fortas:

    But why would he have to respond to that here then?

    James E. McLaughlin:

    Because he have to pay an income tax on his miscellaneous income or can he exclude all of his income from gambling because he have to pay a tax on that.

    Potter Stewart:

    You’re talking now about the income tax not the excise tax?

    James E. McLaughlin:

    The income tax, that’s right.

    The income tax on gambling, but petitioners here say, we don’t — we concede that we have to pay our income tax.

    I think that wholly inconsistent with their position.

    If they’ve got to pay an income tax, they’ve got to pay an excise tax.

    They don’t have to.

    I think they will probably have a constitutional right and again, I say, I don’t concede these points for the Government.

    But it seems to me that may well have a constitutional right on their income tax return not to file a Schedule C that says we’re in the business of gambling.

    But to put down one figure, miscellaneous income, $200,000, and I submit that they can do the same thing with the excise tax, enclose a check in an envelop with a general excise tax return or even with a letter that says, this is for excise taxes.

    Are you going — you’re going to say a word about Professor Wright’s other point?

    James E. McLaughlin:

    Yes, Your Honor.

    I will say one word first though, if for any reason you were to reject the argument and find that you don’t have to pay a tax.

    Well, then I agree with the use of restriction argument enunciated by my colleague here.

    The same thing is true here that the result would be what the government collects the tax but to restrict to use on a jury trial point.

    I would say that it’s quite clear what happened here after approximately one day of deliberation, the judge received a note.

    The record clearly shows that the note said, although the note was note reserved, the note said, “We are unable to agree what should we do?”

    Now, the judge testified to that, the judge explained that a short time later.

    James E. McLaughlin:

    The judge then said to the bailiff, “Tell them to continue deliberating.”

    The record also has the judge’s statement that that’s why I told the bailiff to tell them.

    Within 45 minutes after that communication to the jury, the defense counsel learned about the incident.

    He did not at that time say, let’s preserve the note.

    I’m sure the note was still in existence within 45 minutes.

    He did not at that time say, let’s put the bailiff understand and ask him, bring the bailiff in.

    Put him under oath and ask him, what did you tell the jury?

    He didn’t suggest any of those procedures.

    What he did is he waited, and two days later, while the jury was still deliberating.

    The jury deliberations having been interrupted for a day-and-a-half because of the illness of a juror but when the jury got back to deliberate and again, they send exactly the same note to the judge, said, “We are enable to agree, what should we do?”

    And the judge looked at and said, “This is about the same note that I got the first time substantially exactly the same.”

    And then he turned to the bailiff, this was in the presence of both the defendant and his counsel and he turned to the bailiff and he said, “Tell them to continue deliberating.”

    The same thing he told them the first time.

    The bailiff turned around and he walked out, and the defense counsel didn’t say nor the defendant jump up and say, wait a minute, bring the jury in and let’s do it all in an open court.

    He had no objection at that time neither the defendant nor his counsel to the bailiff going out and saying, telling the jury to continue deliberating.

    The bailiff had spent something like three-and-a-half days with this jury shepherding him from hotel, to Court, to lunch, and so forth.

    He had plenty of time to talk to the jury if he wanted to about this case and to prejudice their deliberations and certainly, the fact that we was told — go in and tell them to continue deliberating, didn’t give him any great opportunity to step in there and do anything.

    Moreover, one more point, during the course of this jury deliberation which took place after approximately a six-week trial, a doctor was called to minister to one of the jurors who would become ill.

    The defense attorney said, “Oh, no wait a minute, what went on here?

    How long was this one juror was separate from the other jurors and is he in shape to testify and so forth.”

    And the judge at the time called in at least three people who were in contact with the jury.

    He called in his clerk, he called in the Chief Marshall, and he called in the Deputy Marshall, and they were put there and examined on what it happened here.

    Now, I submit that if the defense counsel had wanted to ask the bailiff who had been told, go tell the jury to continue deliberating.

    Did you tell them anything else what did you say?

    The bailiff was in and out of this room.

    The record shows that the bailiff was in and out of the room where counsel and the judge were present a number of times at least ones or twice.

    And he could have at anytime said, put the bailiff on the stand.

    Just like you did with the clerk, the Chief Marshall, and the Deputy Chief Marshall, he didn’t it.

    Nor did he object to the second time this incident was repeated.

    Note followed by an oral discussion, an oral instruction to go tell the jury to continue to deliberating.

    James E. McLaughlin:

    What happened was?

    He waited until the jury brought in the verdict.

    And then for the first time he said, “Where’s the note?”

    Where’s the note?

    He said, well, I don’t know what happened to the note, it’s five days ago.

    He said, “Well, how do I know what the bailiff said?”

    This, this all happened five days later.

    I submit that if this Court reverses in this — for this error that petitioner will probably have the best odds he’s ever had in his life because what will happen is he could have sat there quietly and if the jury brought in a verdict of not guilty, he was off for good.

    And if the verdict — if they brought in a verdict of guilty —

    Hugo L. Black:

    I just want to ask you this question about the six weeks, how did it happen to take six weeks to — if you tell me just lay it briefly.

    Why did it take six weeks to try this thing?

    James E. McLaughlin:

    No, I can’t Your Honor.

    I think that I can’t give you a capsule answer.

    There was a great deal of testimony put in because this case concerned failure to pay — oh, I can’t answer that question.

    Let me do this.

    The case concerned failure to pay the gambling tax over a very long period something like three years.

    Now, the record does contain evidence that in a one week period in February of 1959, I believe it was.

    This gambling operation that defendant was convicted of — the petitioner was convicted of being a part off, took in a gross amount of $250,000 in a one week period.

    Now, the scope and size of that operation as indicated by that evidence, I think might account for the fact that he was indicted for failure to pay his tax over a three-year period that the government had to bring in a large amount of testimony —

    Hugo L. Black:

    What amount of testimony?

    James E. McLaughlin:

    I know the defendant took the stand and testified extensively.

    He testified a great of —

    Hugo L. Black:

    What kind of testimony did the government offer?

    James E. McLaughlin:

    I think they offered testimony from agents who had been engaged in a raid on his operations, people who had been connected with his operations, and the usual type of testimony that comes in and would permit to an income tax of a —

    Hugo L. Black:

    Had it that been true, I don’t see, how could it take them six weeks?

    Did they summon all the people are supposed to be gambling there and people who had been gambling there?

    James E. McLaughlin:

    Well —

    Hugo L. Black:

    Did they try out his guilt of being a gambler?

    James E. McLaughlin:

    Well, I think there’s no doubt but that the question of whether engaged in gambling came into it.

    His defense incidentally Your Honor was, I was a gambler until 1951.

    James E. McLaughlin:

    Then I learned about this federal tax and so then I give the whole operation to my brother and I think this is associated with it ever since then.

    I’m not connected with the operation.

    And you can imagine that there would be a large number of witnesses about his — about his activities.

    He testified himself that he was not in a business of being a gambler but he gambled.

    This federal tax don’t forget —

    Hugo L. Black:

    How long did he testify, do you know?

    James E. McLaughlin:

    No, I don’t know.

    He testified —

    Hugo L. Black:

    You just know — you just don’t know enough to give me the real facts about that thing?

    James E. McLaughlin:

    Well, it’s a very long record Your Honor —

    Hugo L. Black:

    Yes, I — I know —

    James E. McLaughlin:

    — and we haven’t reproduce the whole thing —

    Hugo L. Black:

    Maybe it’s not relevant but I — I’m just curious to know.

    James E. McLaughlin:

    Well, certainly we can make the entire record available, if it isn’t already.

    I’m sure it is in the clerk’s office.

    That there was a great deal of testimony in addition on his own gambling activities.

    He testified, he made $50,000 a year net from nine business gambling.

    In other words, friendly card games, race tracks, et cetera but his defense was, he wasn’t in the business of gambling.

    He didn’t run an organized gambling operation and the federal tax didn’t applied to that.

    And virtually all of the people who were not privileged and who were not also codefendants or co-indictees were called to the stand —

    Hugo L. Black:

    How many defendants — how many co-indictees were there—

    James E. McLaughlin:

    I think there were two or three others who indicted with him.

    Two or three others were indicted with him but — and it was —

    Earl Warren:

    Alright, very well.

    James E. McLaughlin:

    Thank you sir.

    Sorry it takes much time.