Earl Warren: United States of America versus Victor Calamaro. Mr. Sand.
Leonard B. Sand: Mr. Chief Justice, may it please the Court. This case arises on certiorari to the Third Circuit under the federal wagering tax and presents the question whether a numbers pick-up man is subject to the occupational stamp tax which is imposed upon persons who receive wagers for or on behalf of any person who is subject to the excise tax. The Third Circuit has decided that a pick-up man is not subject to such a tax. This decision is in direct conflict with the decision of the Fifth Circuit in Sagonias v. United States, 223 F.2d 146, certiorari denied 350 U.S.840. To resolve this conflict, the Government petitioned for certiorari which this Court granted.Congress in 1951 enacted two new taxes to deal with professional gambling. The first of these taxes was the excise tax which is set forth on page 3 of the Government's brief. This was a 10% excise task and subdivision (d) of Section 3285 provides that each person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax under this subchapter on all wagers placed with him. The legislative history of this Section indicates that it was designed to cover the person who acted in the role of the principal who accepted wagers on his own account and to -- for the risk of profit or loss on such wagers. The Government concedes that the defendant in this case was not such a person and so the excise tax is not the tax with which we are primarily concerned in this case. However, the second tax imposed in subchapter B, the occupational tax was imposed on a broader member of persons. Section 3290 provides, reading from page three of the Government's brief, "A special tax of $50 per year shall be paid by each person who is liable for tax under subchapter A," interpolating that is each person who functions in the role of the -- of the principal, the banker, the man who has the risk of profit or loss or the statute continues, "Who is engaged in receiving wagers for or on behalf of any person so liable." And the question in -- in this case is whether a pick-up man is engaged in receiving wagers for or on behalf of such a person. The penalty provision is contained in Section 3294, cited on page 4 of the Government's brief and provides that any person who does an act which makes him liable for the tax without having paid such tax shall be fined not less than $1000 nor more than $5000. It was for violation of this penalty Section that an information was filed against the defendant in the District Court for the Eastern District of Pennsylvania. At that trial, which was before a jury, evidence was presented by Philadelphia policemen who are experts in the operation of the numbers racket in the City of Philadelphia. The evidence indicated that the practices followed in the numbers game were fairly-well standardized. A person wishing to place a -- a wager in the numbers game would not come in direct contact with the banker or the principal, rather he would come in direct contact with the person known as the writer and would tell the writer the three-digit number on wish -- on which he wish to make a bet and would give the money to the writer. The writer would keep a book which was a triplicate form book and on this book he would indicate the number which was selected by the player and the amount which the -- was to be wagered. The writer would keep for his own records a white copy of this record, would give to the player a tissue carbon copy. There would then remain a third copy which is a yellow copy and which would ultimately be turned over to the pick-up man. The pick-up man's function was to operate as a liaison between the bank, the principal, and the writers. He would daily collect from the writers these yellow pick-up slips and would deliver them to the bank or banker prior to the time towards the end of each day when the winning number would be determined.
Speaker: Does a writer only work for one bank?
Leonard B. Sand: A writer would work for one bank. Yes, sir.
Speaker: And the pick-up man works for one writer and one bank?
Leonard B. Sand: No, Your Honor. The pick-up man would circulate among various writers. The writers would usually be people who would come in contact with the public such as bootblacks or news dealers. The pick-up man, working for one bank or banker, would circulate the various writers who also work for that bank and would deliver the slips, which he collects from the various writers, to the bank.
Speaker: What I meant was the pick-up man doesn't work for banks and writers generally. He works with the two elements of the single operation.
Leonard B. Sand: The -- the general practice is for the pick-up man to work for one bank. The practice in Philadelphia at -- at this time which was in October 1952 was for the payoff to be made if -- if a -- a player had selected a number which came out for that day from the bank directly to the writer and from the writer to the -- to the player. Evidence was also adduced at the trial that the defendant was apprehended on a state charge by Philadelphia policemen and that he had in his position at that time yellow banker slips of the type I have just described representing 1800 separate bets. The defendant admitted that he was engaged in picking up numbers and that he had been so engaged for three months, and said that he was employed at a salary of $40 a week. The defendant was indicted in the local court, the Court of Quarter Sessions in Philadelphia and pled guilty to a charge of maintaining a lottery and was fined. Evidence was also adduced to the effect that he did not have the occupational stamp tax, and with this evidence before the jury rendered a verdict of guilty, the Third Circuit by a divided court reversed. In disagreeing with the Fifth Circuit and holding that a pick-up man does not receive wagers, the Third Circuit took the view that the placing of a wager by the player and the receipt of the wager were two sides of a single coin and that by the time the pick-up man entered the picture, the wager had been placed. And so that rather than receiving a -- a wager, the pick-up man receive merely the record of a wager. The Government respectfully submits that the language, purpose, and administrative interpretation of this statute all lead to a -- or support a contrary result.
Earl Warren: Mr. Sand, in order that I may know exactly what your position is, I suppose this pick-up man delivers these documents regularly to someone who worked for the bank, whether it be the bookkeeper or -- or some other official of the bank. Now, do you consider that the person to whom he delivers those records is also subject to the Act and then to carry it down farther through the secretarial force or -- or is there an end of the liability when the pick-up man gets it down there?
Leonard B. Sand: I think, Mr. Chief Justice, there is an end to the liability depending upon the function which is performed by the individual with respect to the -- to the secretary or bookkeeper who performs no role in channeling the wager from the player to the bank. The Treasury Regulations recognize that the occupational stamp tax would not apply. But one might -- and in fact, there exists situations where there are several intermediaries, all of whom serve to -- to transfer the wager from the player to the -- to the bank to -- to avoid apprehension by local and federal authorities, various schemes have been setup through the use of -- of intermediaries. But if the role performed by the -- by the person working for the bank is one of transmission of the wager from the player to the ultimate source, the bank, then the Government submits such a person is -- receives wagers within the meaning of the statute.
Harold Burton: And if you stand behind the regulations of the Department and go as far as they go against --
Leonard B. Sand: Yes, Mr. Justice Burton.
Earl Warren: But not the people who process these things after they get to the bank. You don't contend that they are in the same positions, the pick-up man?
Leonard B. Sand: No, Mr. Chief Justice.
Earl Warren: All right.
Leonard B. Sand: If --
Earl Warren: That's all I want to know.
Leonard B. Sand: The Government submits that the key error of the Third Circuit is that emphasis was placed by it on the -- on the player, on the better rather than on the banking side of the transaction. But the statue specifically speaks of persons receiving wagers for or on behalf of any person liable to the excise tax, not on receiving wagers from the betters. The difference between this statute and the type of statute which does focus on the better or player is perhaps best demonstrated by reference to the lottery statute. The statute found in 18 U.S.C. Section 1301 which prohibits interstate transportation of lottery tickets. That statute prohibits interstate or foreign commerce in, "Any paper, certificate, or instrument purporting to be or to represent a ticket, chance share, or interest in or dependent upon the event of a lottery.” This Court in Francis against United States in 188 U.S.375 construed that statute and held that the carrying across state lines of slips, which were the equivalent of the yellow pick-up slips in this case, did not violate the statute because they were not purchases documents. They did not stand as the representative of title to the purchases of interest. But in contrast to this statute, the governing factor is not the interest of the purchaser but rather the -- the interest of the banker, the transmission on the banking side of this transaction nor does the statute in speaking of receiving wagers for or on behalf of any person have reference to contract concepts and other provisions in the statute, reference is made to the placing of a wager or the acceptance of a wager. Significantly, with respect to this provision of the occupational tax, the broader term receiving wagers is used. And indeed in the -- in the parlance of the numbers rackets, the slips themselves are said to contain the bets. The Philadelphia policemen, who described the operation of these numbers racket and who apprehended the defendant, themselves said that the numbers contained the bets. And of course the -- the numbers are on the slips which are admittedly received by the -- by the pick-up man.
Speaker: Under your view, I suppose the writer is also subject to this tax as a receiver of a wager?
Leonard B. Sand: Yes, Mr. Justice Harlan. And --
Speaker: And then the -- you say the pick-up man is, but you say the clerk of the bank who receives the slip from the pick-up man and puts it down on a ledger or whatever record they keep would not be liable for receiving the wagers.
Leonard B. Sand: Yes, Mr. Justice Harlan. If --
Speaker: That's your theory?
Leonard B. Sand: -- if the slip were physically at the bank, so that the only service performed by the particular agent of the -- of the bank were -- were -- was a clerical function then there would be no liability. And that -- that is the -- the interpretation which is placed on the statute by the -- by the Treasury Regulation which is set forth in respondent's brief at -- at page 4. The hypothetical there is as follows. Example one, a person is engaged in the business of accepting horse bets or horse race bets. He employs 10 persons to receive, on his behalf, wagers which are transmitted by telephone. He also employs a secretary and a bookkeeper. (a) in each of the 10 persons who receive wagers by telephone are liable for the special tax. The secretary and bookkeeper are not liable unless they also receive wagers for him. In the second example which is given in the Treasury Regulation, the situation of the pick-up man is clearly covered. There, the example is as follows, (b) operates a numbers games. He has an arrangement with 10 persons who are employed in various capacities, such as bootblacks, elevator operators, news dealers, et cetera -- et cetera to receive wagers from the public on his behalf.(b) also employs a person to collect from his agents the wagers received on his behalf. (b) his 10 agents, and the employee who collects the wagers received on his behalf are each liable for the special tax. This regulation went into effect on November 1, 1951, which was the effective date of the statute. And Congress in 1954 has reenacted the statute and reenacted this particular provision verbatim.
Harold Burton: Mr. Sand, they don't have the situation here or this operated in the suburbs and the central city you might have a relay of these receivers and might be two or three have to pay this tax, is that right?
Leonard B. Sand: That -- that is correct, Mr. Justice Burton. And the -- the situation of the relay of the several intermediaries was considered by Congress, and the -- the report of the Committee on this bill is significant in that respect. The occupational tax was enacted as a -- an enforcement device for the more important excise tax. And the Committee Report in making reference to the occupational tax in language, which appears in page 18 of the Government's brief, stated that the -- the Committee consists of the occupational tax as an integral part of any plan for the taxation of wagers and is essential to the collection and enforcement of such a tax. Enforcement of a tax on wagers frequently will necessitate the tracing of transactions to complex business relationships, thus requiring the identification of the various steps involved. For this reason, the Committee Report continues, the bill provides that a person who pays the occupational tax must, as part of his registration, identify those persons who are engaged in receiving wagers for or on his behalf. And in addition, identify the person whose -- on whose behalf he is engaged in receiving wagers. The Section 3291 of Title 26 contains the registration provision which is a part of the structure of the occupational stamp tax, and this requires that every person who is subject to the excise tax register the name and place of residence of each person who is engaged in receiving wagers for him or on his behalf. And if he is engaged in receiving wagers for or on behalf of any person liable for the tax, the excise tax, then he too must register. In other words, the consequence of a -- of a holding that a pick-up man does not receive wagers is to remove the pick-up man from the scope of the registration provisions. And therefore, defeat the congressional purpose of enabling the tracing of the various transactions in the professional gambling activity so that the excise tax might be enforced.
Speaker: You're really more interested in registration than tax, isn't that the plain truth to it?
Leonard B. Sand: Well, the plain -- the plain truth of -- of it, Mr. Justice Harlan, is as -- as the Committee stated that the purpose of the occupational tax was to enforce the excise tax. The question whether the -- whether the tax is a means of regulating professional gambling or it's a revenue measure was of course treated by this Court in Kahriger and Lewis, and the constitutionality of these provisions was sustained. The -- the pick-up man is not as the Third Circuit thought a minor functionary. He is of course the direct emissary of the -- of the banker, a man from a headquarters, Judge McLaughlin called him in -- in dissenting. And we think that the language of the statute, legislative history that the purpose of the statute all support the conclusion that a pick-up man is a person receiving wagers. A contrary result as Mr. -- as Judge McLaughlin pointed out in dissent would make it a relatively easy matter for somebody apprehended with gambling paraphernalia to immediately invoke the alibi that -- that his role was merely that of a -- of a pick-up man. The Government submits that the decision below is erroneous and should be reversed.
Earl Warren: Mr. Bradley.
Raymond J. Bradley: Mr. Chief Justice, may it please the Court. The Government, I think, has outlined very faithfully the factual situation as developed in the record from the court below and in the trial court. The Government's position seems to be that since the respondent, a pick-up man, is a part of the gambling operation and performs a vital function in that operation that he must therefore fall within the terms of Section 3290 because Congress intended the statute to apply to anyone engaged in any vital phase of the gambling operation. I think this attempts to make the statute do more than what it was passed to do because essentially it is a position that -- that Congress in enacting this statute sought to make it coextensive with the various state statutes which was -- which regulate and punish gambling, and that under this statute, anyone who would be liable for criminal penalties for violation of state gambling statutes would also be liable for the tax. I was somewhat interested in the answer which counsel for the Government gave to the question put by the Court as to where he would cutoff this liability for in reading his brief at page 11, it seemed to me that the position taken there was that this tax would apply to anyone who had a part in the gambling operation regardless of what that part was. If the Government, however, now seeks to limit the application then I think we must be faced with the question of whether or not the limitation, which it now concedes, makes any sense. Now, first of all, I think we must consider just what it was that the respondent here did and what part he does perform in this gambling operation. He has no contact whatsoever with the numbers player, the person who makes the bet. He doesn't carry any money either from the writer to the bank or from the bank back to the writer and eventually to the numbers player. All he does is handle the slips, the records which are made of the gambling transaction. And in doing so his function is that of a messenger. He circulates between the bank and the writer and brings records which concededly are necessary in the operation of this lottery but which, we submit, have nothing to do with the wager as such. And I think that in analysis of the statute makes this clear. In the first place, we must notice that under Section 3285 (a) which deals with the excise tax. This is a tax imposed -- the excise tax is a tax imposed on wagers. Obviously, it makes the bet the important thing. In discussing the liability for the excise tax, it's again the liability of anyone who accepts wagers and wagers is again the central word which determines liability for the excise tax. In determining credits against the excise tax, again it refers to the laying off of wagers by one person who accepts them initially with another person. Finally, it defines a wager as any wager placed in a lottery conducted for profit, focusing therefore on the transaction which gives rise to the bet. The transaction by means of which the numbers player on the one hand and the bank on the other hand become committed, and the agency by which this transaction is consummated is not the pick-up man, it is the writer. It is in this sense, we submit, that when the statute talks of receiving wagers on behalf of a banker that the term is used. The person who receives the wager is the person through whose agency the wagering transaction is consummated. From that point on, the wager is completed and from that point on, any dealings with whatever results is not a dealing with the wager. What you're doing from that point on is conducting a bookkeeping function insofar as the bank and its operations are concerned. Now, when Congress passed Section 3290, it carefully chose its words. Had it desired to make the liability for the occupational tax extend beyond the person who has the contact with the better, beyond the numbers writer who admittedly is subject to the occupational tax, it would not have used the word "receiving wagers." He could have accomplished this by saying any employee of the banker or any agent of the banker. And essentially, what the Government argues is that because the pick-up man is an agent of the bank and performs as, that agent, a vital function then he must be subject to the Act because Congress wanted to get that anyone who performed a vital function in this operation. But we submit as the Third Circuit held that in considering the interpretation of the phrase "receiving wagers," we must consider that we cannot just isolate the word "receive" and say as the Government does receive has many, many meanings. We must focus upon what it is that has been received and the statute very explicitly says it's the wager. And then by reference to the definition of wager which consists of the placing of the wager in the lottery pool, we see that the receiving of the wager and the placing of the wager are, as the court below put it, two sides of the same coin and when the wager has been placed, the receipt of it has been accomplished. And from then on we are not any longer dealing with a receipt of wager. Now, the Government says that to do this, we give it this interpretation, would defeat the congressional purpose. And in the Sagonias case, the case which arose in the Fifth Circuit, where they held that the pick-up man was liable for the occupational tax, the same argument was made. But a reading of the Fifth Circuit case would indicate that that Court had difficulty coming to its conclusion because as I read it they admitted that the express wording of the statute didn't cover the pick-up man. It clearly covered the numbers writer, but not the pick-up man.
Speaker: Do you claim that the banker is or is not subject to the receiving tax?
Raymond J. Bradley: The banker is because the statute specifically makes him liable, sir. Because in Section 3290, the statute says that the occupational tax shall be paid by everyone who is liable for the excise tax, which is the banker, and anyone who receives wagers on his behalf. And I think there again it's indicative of what the meaning of the term “receiving wagers” is concerned. Because to get the banker in, they specifically said he is in because he is one who is liable to the excise tax, and then they say also those receiving wagers on his behalf. If they weren't using receiving wagers in the restricted sense that I have used it, they could have said and that anybody who receives wagers that would then if -- if their intent was to include the banker under those words, then you might say that receiving wagers has the interpretation which the Government seeks to give it. But Congress used these words “accepting” and “receiving” I believe in a very restricted sense as the wording of this Act indicates. And as the Fifth Circuit in the Sagonias case, I believe, was forced to admit. And then faced with the -- the -- their own interpretation that the express wording did not cover the pick-up man then they had reference to some broad general policy which they said was inherent in this Act and said that unless we included the pick-up man, then we would defeat this broad general purpose. Now, on -- in his argument, counsel for the Government says that when the pick-up man comes to the bank and delivers these slips, which he has, to some other functionary of the gambling operation that that second functionary is not liable for this tax. He gets the very same thing that the writer got, he gets the slips. And with them, he performs certain functions necessary to the operation. Now, they said the pick-up man who has only the slips is liable, but the person to whom he delivers the very same things which make him liable is not liable. Now, the Treasury takes that position too in its regulations. We submit that that distinction cannot be justified. How you can say that one who handles the slips must pay the tax and another who handles the very same thing need not pay the tax is something which is difficult to understand and appreciate. The Government, I think, is relying basically on the dictum which occurred in the case Daley versus -- versus the United States, a decision in the First Circuit in 231 F.2d 123. There, the Court said that in approving a charge which was directed not at this question but at another issue in the case, the Court said that anyone who has anything to do with the numbers operation is engaged in the business and in conducting a lottery. Now, if that interpretation were taken, it would make the pick-up man not only liable for the occupational tax but liable also for the excise tax. Now, the Government concedes that he is not liable for the excise tax but they would like to use that same theory, which they say is wrong, to impose liability for the occupational tax which is involved here.
William J. Brennan, Jr.: How about the payoff man? That is the individual who distributes the winnings to the few people who, I understand, sometimes win in this game?
Raymond J. Bradley: Under the evidence in this case, sir, the record shows that it is the writer who delivers the winnings.
William J. Brennan, Jr.: Well, who brings the winnings to the writer?
Raymond J. Bradley: The record in this case indicates that he gets that directly from the banker.
William J. Brennan, Jr.: Well, suppose he didn't? Suppose he had an intermediary like this pick-up man? Is that intermediary who brought to the bank the proceeds, deliver to the writers, deliver to the winners would -- may be subject?
Raymond J. Bradley: I don't believe so. No, sir. Because I don't think there that he is receiving a wager. What he is doing is distributing winnings.
William J. Brennan, Jr.: Well, I suppose he would on the theory that anyone who participates --
Raymond J. Bradley: He would -- he would if you took the very broad theory that anyone who has any function to perform in this operation at all is liable. But then I think that Congress would not have used those very careful words “receiving wagers”. It would have said any employee of one liable for the excise tax or any agent of one liable for the excise tax. And basically, that's what the Government comes down to saying that since he's an agent, he must be liable because the banker is liable and the writer is liable and this fellow just an agent which -- who operates between them.
William J. Brennan, Jr.: I think as a chap is, I gathered in some States, both the chap who distributed and the chap who the pick-up man would be a bookmaker for the purposes of bookmaking statute, wouldn't it?
Raymond J. Bradley: What -- you mean for the --
William J. Brennan, Jr.: In States.
Raymond J. Bradley: In the state statute?
William J. Brennan, Jr.: Yes.
Raymond J. Bradley: I believe, Justice Brennan, and this -- this individual here was of course liable and had pleaded guilty to a violation of the Pennsylvania lottery statutes. But those statutes are quite broad and cover anyone concerned in the operation of a lottery and what the Government seeks to do is make this statute coextensive with those. Now, this statute was upheld as a taxing measure, not as a measure regulating gambling. And in the Kahriger case, the Court alluded to the difficulties of constitutionality which might arise by attempting to make this statute coextensive with the gambling tax -- with the gambling statutes of the States. Now, I think that that was one of the concerns of Congress that it did not go too far in this thing so as to bring the -- what was conceived off as a taxing measure into the realm of the regulation of gambling and therefore raised serious doubts as to its constitutionality.
Felix Frankfurter: For real -- really, a very unreal way of looking at it, wouldn't it?
Raymond J. Bradley: Sir?
Felix Frankfurter: This is really an unreal way of looking at it whatever may have been said there. This wasn't one of Secretary Humphrey's means of balancing the budget, was it?
Raymond J. Bradley: No, sir.
Felix Frankfurter: All right. Now, you talk about (Inaudible)
Raymond J. Bradley: Now, the legislative --
William J. Brennan, Jr.: Now, by that -- the -- the very fact that it was not one of the Secretary's means of balancing the budget indicates that Congress had a broader purpose on the -- just the excise operation. And why wouldn't it be submersed in the proposition that they wanted everybody registered when they could put their fingers on, connected with this?
Raymond J. Bradley: Correct sir, I think they would have used the words which would have clearly indicated that agents or employees were concerned in.
William J. Brennan, Jr.: Sometimes Congress doesn't use the precise language, perhaps the --
Raymond J. Bradley: Well, it knew what it was dealing with here. This came up after -- after a long investigation of gambling and if -- they wanted to make clear that this extended to every phase of gambling, I think they would have used words which made that abundantly clear and not words which were limited to wagers. And if you look at the legislative history, I think the most significant part of the legislative history is what occurs in the Committee Report in discussing this operation, where they say that --
William J. Brennan, Jr.: Where are you reading from?
Raymond J. Bradley: I'm reading now from page 17 and 18 of my brief, sir. “The principals in such transactions are commonly referred to as bookmakers, although it is not intended that any technical definition of bookmakers such as the maintenance of a handbook or other device for the recording of wagers be required.” And now comes this language, “It is intended that a wager be considered as placed with a principal when it has been placed with other persons acting for him. Persons who receive bets for principals are sometimes known as bookmakers, agents, or runners.”
William J. Brennan, Jr.: Well, as realistically though, is it actually placed with the banker until he has it in his hands for recording?
Raymond J. Bradley: Well, according to the statute it is, because the statute specifically --
William J. Brennan, Jr.: No, I'm speaking now to this reference in the --
Raymond J. Bradley: Oh, I think there, they --
William J. Brennan, Jr.: -- is that the report?
Raymond J. Bradley: This is in the -- in the -- well, it appears both in the House and Senate report on the bill, the same -- same language in both places.
William J. Brennan, Jr.: But until the banker gets it in his hands, how is that placed?
Raymond J. Bradley: The liability of the banker becomes fixed at the moment the bet is placed with the writer according to both the terms of the statute and the terms of the Treasury Regulations. And that's why I say that we're dealing here with words used in a restricted sense. We're not dealing here with words which were just used quite broadly and without giving any fact to them. They were being used in -- in the sense in which the statute was drawn and were keyed into all of the provisions of the statute dealing with liability. Now, all that the Government points to is a -- an ambiguous reference to the fact that you've got a lot of subagents which occurs in two of the speeches that were made. One of which by Senator Kefauver, which was a speech in opposition to this bill and the other by Representative Reed, which contains merely a passing reference to the gambling tax and of course it's a very long speech which dealt with the whole Revenue Act of 1951. And then they say, but if you look at the registration provisions and they say that the occupational tax was designed to key in with the registration provisions, then you say -- you must say that everybody who has a -- takes one step in this whole transaction is covered by the tax. But as the evidence here indicates, what happens is the writer takes the bet. Now, the writer registered and -- and tells the bankers for whom he operates. The banker registers and tells the writers who operate for him and we've got the whole transaction in that -- those two registrations and the tracing of this thing is therefore complete. The interposition of the pick-up man between the writer and the banker happens to be, perhaps, a convenient way for these people to operate, it is by no means and essential to the basic transaction of wagering and is by no means necessary to the tracing of the transaction.
William J. Brennan, Jr.: Well, it -- certainly, it does this much, doesn't it? It interposes the wall, really, between the writer and the actual banker?Though as to make more difficult the detection of the banker, doesn't it?
Raymond J. Bradley: Well, but --
William J. Brennan, Jr.: Is that a -- is that a convenient way, the fellow who stock -- the one with the slips on him and he's merely a pick-up man, unless not required to take out this title, this license on it, makes it rather an easy way doesn't it to defeat the whole intention of the statute?
Raymond J. Bradley: No, sir. I don't think so, because the writer has to register.
William J. Brennan, Jr.: Well, he may but --
Raymond J. Bradley: And the banker has to register and then (Voice Overlap) --
William J. Brennan, Jr.: But the transaction disappears, doesn't it, as soon as he turns the slips over to the pick-up man?
Raymond J. Bradley: What you're saying then is because the writer may not register or because the banker may not register or reveal all of his writers, then we have to put in this pick-up man.
William J. Brennan, Jr.: I don't know that I'm trying to say anything. I'm just suggesting if --
Raymond J. Bradley: Well, (Voice Overlap) --
William J. Brennan, Jr.: -- it makes it an easy way, doesn't it, to -- to do the very thing that the statute was aimed at accomplishing which was that make it easy to find out who it was within this business.
Raymond J. Bradley: Oh, I don't think so, sir. I think that in any event you -- you have to face the question that if -- if people do not register, you're going to have difficulty of enforcing this. Now, if it's the writer who does not register, that makes it a little bit difficult. If it's the banker who does not register, that increases the difficulties. But just to say that therefore if we make the pick-up man register, you can reduce those difficulties. I don't think that follows because you've got the same problem, he might not register either. And certainly if you had every single person that had anything to do with this register, that decreases the possibilities of avoidance even more. But as the Government now concede --
William J. Brennan, Jr.: Well, that's -- that's the argument, isn't it, for the position that everybody connected would be ought to be required to register?
Raymond J. Bradley: But then you've got your face with the fact that under the regulation they don't push it that far. The Government now does not seek to push it that far and they're just limiting it to this three -- three different type -- categories of individuals.
Speaker: This is somewhat ought to being but I was just interested. Do any of these people register?
Raymond J. Bradley: I -- that's rather difficult to say, sir. I don't think --
Speaker: Perhaps, the Government?
Raymond J. Bradley: -- there have been many registrations.
Speaker: In both --
Raymond J. Bradley: I've made no search of that. One of the Kahriger cases involved a registration where the man went in and said, “I'll register, but I won't answer all these questions you want me to ask.” They wouldn't take his registration under those circumstances and then he was prosecuted.But my guess is that there are not too many registrations and the revenue expectations of this Act, I believe, have fallen much below the $400 million which was bandied about in the congressional report.
Felix Frankfurter: How much was that? You happen to know how much has been collected under this statute?
Raymond J. Bradley: No, sir. I can't that.
Felix Frankfurter: It's just inquiry of curiosity.
Raymond J. Bradley: I -- I can't answer, but I -- I remember at one time seeing some figure which, if my recollection is correct, was somewhere in the $4 or $5 million but that's just a hazy recollection.
Speaker: What do you do if Senator Kefauver's statement, who is somewhat of an expert on this subject at that time. The Government quotes page 19 in their brief.He says that under these proposals, bookmakers, the numbers operators, their agents and runners would register with the Internal Revenue?
Raymond J. Bradley: Well, I think what he was referring to was the writer. He's -- he's the -- he's the agent or runner and if it's in that sense, if you'll notice the -- the reference --
Speaker: The runner means the writer, does it?
Raymond J. Bradley: Yes, sir. The -- the writer is the runner.
Speaker: I thought he was a stationary, probably just -- is there to receive bet?
Raymond J. Bradley: Oh, no, sir. The writer circulate all around as the evidence indicates the meeting which results in the bet. They come about in many ways, the writer may come to the -- the better may come to the writer or the writer may circulate through the neighborhood. He sometimes has steady customers and he knows that if he calls upon them all, he may well receive a bet for that day.
Felix Frankfurter: That's not -- that's an illustration of he who runs may write?
Raymond J. Bradley: That's -- I think so, sir.
William J. Brennan, Jr.: But I thought -- I thought in the legitimate stock exchange business, a runner is not what you said a writer, isn't it? When he run -- the chapel runs around from brokerage house --
Raymond J. Bradley: (Voice Overlap) to brokerage house --
William J. Brennan, Jr.: -- to brokerage house.
Raymond J. Bradley: -- to brokerage house. He's the one referred to as a runner because --
William J. Brennan, Jr.: He's a runner but he's a pick-up man and that -- that runner have a different connotation in this bank than it does in the stock exchange?
Raymond J. Bradley: Oh, I'm not -- I'm not saying that you can't refer to the pick-up man as a runner.
William J. Brennan, Jr.: No, but you just did. I thought you just answered Mr. Justice Harlan that in this game a runner is a writer?
Raymond J. Bradley: Well, I -- no, I didn't mean to convey that. What I meant to say is that the term runner includes writer, it also includes pick-up man (Voice Overlap) --
William J. Brennan, Jr.: Well, I -- I would've suppose that Senator Kefauver was using runner in the sense that they used runner in the stock exchange game, which is a pick-up man.
Raymond J. Bradley: Well, it's pretty difficult to say what he -- what sense he was using it in. And I think you must remember that this was a speech made in our position to this bill. It was not made in an attempt to delineate what the bill was covering and Senator Kefauver sought to have this bill defeated. I think that trying to take whatever he may have meant and read that into the Act just can't be done under those circumstances.
Felix Frankfurter: Yes. A rather liberal attitude towards the legislative history, isn't it, to find out what was in Senator Kefauver's mind and put that in the Act?
Raymond J. Bradley: Yes. And then --
Felix Frankfurter: (Inaudible) isn't it?
Raymond J. Bradley: Yes, sir. Especially, in view of the fact that Kefauver was attempting to get the measure defeated. And therefore, was saying everything he possibly could to indicate all of the difficulties that might be encountered in the --
Felix Frankfurter: And also considering he wanted to defeat gambling too, didn't he?
Raymond J. Bradley: He did. He wanted to defeat gambling. Yes, sir. But we submit, sir, that even when you take a look at the Treasury Regulations, although the example which was cited in the Government's brief and also which is set forth on page 4 of our brief, covers the pick-up man. It does so, it seems to me, by just pulling itself up by its own bootstraps and assuming that what he gets is the receipt of the wager and that's the very question that we have involved. Now, if you look at other sections of the Act -- of the regulations, particularly the Section 325.24, which is set forth in our brief on page 2 and 3. I believe that the Treasury there accepts our proposition that the receipt and placing of wagers are two sides of the same coin. Now, I believe also that in the first example given in Section 325.41 of the regulation which says -- which excludes the bookkeeper as a receiver of wagers, even though the bookkeeper gets the very same thing which the -- the pick-up man gets is an inconsistency which just can't be explained and which, it seems to me, indicates that the Treasury Regulation is a force attempt to read into the statute more than was there and more than what Congress intended to be there. And therefore, what we -- and the fact that the statute was reenacted in the substantially the same language throws little light on this. Although it has sometimes been said that reenactment of a statute following the promulgation of a regulation indicates that Congress approved of the regulation. That has generally been the case where the regulation has been of longstanding, where it was well-known, where it had been subject to court interpretation, and where it was brought home to Congress. If you look at the legislative reports which accompanied the 1954 Revenue Code, which reenacted the statute, you'll see that there's just this one sentence passing reference to the gambling taxes then lead to the effect that we have reenacted the gambling taxes to say that when Congress did that, it took this Treasury interpretation and put it into the gambling tax statutes goes entirely too far in our opinion. So what we come back to is the statute which is where we started. And we submit that if you stick with the statute and avoid this rather easy way of getting at it by saying, “Oh, let's bring everybody in because Congress was trying to hit everybody in this lane, you stay with the statute, you can only come to the result which the court below bridge.” And since this is a statute which is both a taxing measure and a criminal measure, there is no justification for taking this attitude of broadening it beyond its plain terms and extending it to situations which were not contemplated and which do not fit in with the statute taken as a whole. Thank you, sir.
Earl Warren: Mr. Sand.
Leonard B. Sand: Mr. Chief Justice. With reference to Mr. Justice Harlan's question whether people in fact registered under the statute, the answer is yes, they in fact do. In 1952, some 11,000 persons filed the registration forms as principals and 11,000 filed forms as agents. The figures vary between 52 and 55, between 8000 and 11,000 people have registered as principals, and between 7000 and 11,000 have registered as agents.
Felix Frankfurter: It curves go up or down?
Leonard B. Sand: The -- the figures have gone down.
Felix Frankfurter: Down?
Leonard B. Sand: Yes, gone down.
Felix Frankfurter: It shows the country's morals are improving, does it? [Laughter]
Leonard B. Sand: With respect to Mr. Justice Frankfurter's question as to the production of revenue under the statute, under the excise tax in 1953, some $9.5 million revenue is produced. And the excise tax has produced in 1953 974,000, in 1954 some $1 million. With respect to whether --
Harold Burton: This is the occupation tax?
Leonard B. Sand: The occupational tax?
Harold Burton: Yes.
Leonard B. Sand: That's -- that is at $50. Produced in --
Harold Burton: But how much? How much?
Leonard B. Sand: Produced in 1953, $974,000, in 1954, $1,008,000.
William J. Brennan, Jr.: Are -- are you citing those figures to suggest that really the statute was aimed at getting more revenue?
Leonard B. Sand: Well, that the statute was a -- a valid revenue measure as -- as --
William J. Brennan, Jr.: No, I didn't ask that. I didn't ask that. I ask whether -- asking as on the basis of those figures to agree that this was a measure aimed at increasing revenue in any substantial way?
Felix Frankfurter: You draw that inference from the fact that it was the standard of taxing measure because, presumably, taxing measures are passed in order to produce revenue.
Leonard B. Sand: Yes. I think -- I think there is at -- at this point, no question that -- that this is a revenue statute and the constitutionality of which has -- has been sustained and Government points to the fact that it has -- it has, in fact, produced revenue as a revenue statute should. With -- with respect to whether the defendant was a writer or a runner, the court below referred to him as a runner. And of course, the examples in the Treasury Regulations indicate that the writers are person such as news dealers, bootblacks, who remain in one -- one place and the pick-up man is, of course, the man who literally runs, who goes from place to place collecting these slips.
William J. Brennan, Jr.: Well, what do you do with the fellow who carries the winnings to the writers? They passed on to the people who were supposed to get them? What's the --
Leonard B. Sand: I -- I would have some difficulty in all candid, Mr. Justice Brennan, where the sole function performed by the moneyman, who -- who in this area is -- is known as the bagman, where his sole function was distribution of winnings whether that was receiving wagers. In fact, the -- the person who handles the funds also collects money from the writer and distributes the payoff. And I would say that such a person receive wagers within the meaning of -- of the statute (Voice Overlap) --
William J. Brennan, Jr.: Well, I know. That is he -- he receives the moneys that were placed in bet. But the winnings, you suggest that would give you difficulty?
Leonard B. Sand: Where -- I -- I think I would resolve the question by saying that he -- he was a person who serves in the transmission function.
William J. Brennan, Jr.: I would suppose you'll have to if that's the basis on which you say we ought to hold the pick-up man. Isn't basically the Government's argument that anybody connected with the operation, say those clerks and others who are excluded by the regulations are required to register?
Leonard B. Sand: It's the Government's position that any agent of the banker who serves to transmit the wager from the player to the banker is a person who receives wagers. My -- my only hesitation is because that is the -- your hypothetical is the outgoing transaction. I would think there that -- that both the in-going and the out-going transaction would be subject to -- to the statute.
Earl Warren: Thank you, Mr. Sand.