Rutkin v. United States, 343 U.S. 130 (1952)

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Author: Justice Black

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Rutkin v. United States, 343 U.S. 130 (1952)

MR. JUSTICE BLACK, with whom MR. JUSTICE REED, MR. JUSTICE FRANKFURTER, and MR. JUSTICE DOUGLAS concur, dissenting.

In Commissioner v. Wilcox, 327 U.S. 404, decided February, 1946, we held that embezzled money did not constitute taxable income to the embezzler under § 22(a) of the Internal Revenue Code. We there pointed out that the embezzler had no bona fide legal or equitable claim to the money, was under a definite legal obligation to return it to its rightful owner, and consequently had no more received the kind of "gain" or "income" which Congress has taxed than if he had merely borrowed money. One who extorts money not owed him stands in this precise situation. He has neither legal nor equitable claim to the extorted money, and is under a continuing obligation to return it to its owner. See, e.g., Bank of the United States v. Bank of Washington, 6 Pet. 8, 19; Miller v. Eisele, 111 N.J.L. 268, 168 A. 426; 2 N.J.S.A. 2:73-1. A comparison of MR. JUSTICE BURTON’s opinion in this case with his dissent in the Wilcox case reveals beyond doubt that the Court today adopts the reasoning of his prior dissent, thereby rejecting the Wilcox interpretation of § 22(a). A tax interpretation which Congress has left in effect for six years is thus altered largely as a consequence of a change in the Court’s personnel. I think that our former interpretation was right, and do not believe that the Government is suffering because of a failure to collect income taxes from embezzlers and extortioners. Indeed, further considerations strengthen my support of our Wilcox holding.

I fully agree that earnings from businesses such as gambling and bootlegging are subject to the income tax law even though these earnings are derived from illegal transactions. United States v. Sullivan, 274 U.S. 259. The majority seems to think that the Wilcox case holds otherwise because some states have laws which, under special circumstances, permit some particular groups to assert a legal claim for recovery of gambling losses or money paid for bootleg liquor. But these state laws vary far too much in their scope and operation to justify saying that these businessmen never have a bona fide legal or equitable claim to monies paid them. And

. . . we must generally assume, in the absence of a plain indication to the contrary, that Congress, when it enacts a statute, is not making the application of the federal act dependent on state law.

Jerome v. United States, 318 U.S. 101, 104. Moreover, even if we were to take these state recoupment laws into consideration, the sums recovered under them would do no more than decrease the yearly net earnings of such questionable businesses. To all intents and purposes, bootleggers and gamblers are engaged in going businesses, and make regular business profits which should be taxed in the same manner as profits made through more legitimate endeavor. However, in my judgment, it stretches previous tax interpretations too far to classify the sporadic loot of an embezzler, an extortioner, or a robber as taxable earnings derived from a business, trade, or a profession. I just do not think Congress intended to treat the plunder of such criminals as theirs.

It seems illusory to believe, as the majority apparently does, that the burden on honest American taxpayers will be lightened by a governmental policy of pursuing extortioners in futile efforts to collect income taxes. I venture the guess that this one trial has cost United States taxpayers more money than the Government will collect in taxes from extortioners in the next twenty-ive years. If this statute is to be interpreted on the basis of what is financially best for honest taxpayers, it probably should be construed so as to save money by eliminating federal prosecutions of state crimes under the guise of punishing tax evaders.

Since it seems pretty clear that the Government can never collect substantial amounts of money from extortioners, there must be another reason for applying the tax law to money they extract from others. The Government’s brief is suggestive of the only other reason that occurs to me -- to give Washington more and more power to punish purely local crimes such as embezzlement and extortion. Today’s decision illustrates an expansion of federal criminal jurisdiction into fields of law enforcement heretofore wholly left to states and local communities. I doubt if this expansion is wise from the standpoint of the United States or the states.

Insofar as the United States is concerned, many think that taking over enforcement of local criminal laws lowers the prestige of the federal system of justice. It certainly tends to make the federal system top-eavy. Of supreme importance is the fact that the United States cannot perform the monumental tasks which lie beyond state power if the time, energy, and funds of federal institutions are expended in the field of state criminal law enforcement.{1}

Federal encroachment upon local criminal jurisdiction can also be very injurious to the states. Extortion, robbery, embezzlement, and offenses of that nature are traditionally matters of local concern.{2} The precise elements of these offenses, as well as the problems underlying them, vary from state to state. Federal assumption of the job of enforcing these laws must, of necessity, tend to free the states from a sense of responsibility for their own local conditions.{3} Even when states attempt to play their traditional role in the field of law enforcement, the overriding federal authority forces them to surrender control over the manner and policy of construing and applying their own laws. State courts not only lose control over the interpretation of their own laws,{4} but also are deprived of the chance to use the discretion vested in them by state legislatures to impose sentences in accordance with local ideas. Moreover, state prosecutors are deprived of the all-mportant function of deciding what local offenders should be prosecuted. Final authority to make these important decisions becomes located in the distant city of Washington, D.C. Here, as elsewhere, too many cooks may spoil the broth.

Moreover, I doubt if this expansion of federal criminal jurisdiction can be carried on in a manner consistent with our traditional ideas of what constitutes a fair trial in criminal cases. There is the question of the wisdom and fairness of subjecting a person to double and even triple prosecutions for the same conduct, since the nation, state, and municipality might make this one mistake or wrong punishable as a crime.

That consideration gives additional weight to the view that, where Congress is creating offenses which duplicate or build upon state law, courts should be reluctant to expand the defined offenses beyond the clear requirements of the terms of the statute.Jerome v. United States, supra, at 105. Of course, looked at technically, multiple prosecutions for the same conduct could be avoided by national prosecution of one part of the conduct, state prosecution of another part, and municipal prosecution of a third part. This would still leave a defendant faced with the burden of defending three separate prosecutions.

Expansion of federal criminal jurisdiction entails many other unfair and complicating factors. Criminal rules of substance and of procedure vary widely among the jurisdictions.{5} Punishment is frequently different. In fact, the same kind of conduct may be ignored as not worth criminal punishment by one jurisdiction while considered a serious criminal offense by another. For example, under the Federal White Slave Law, men can be imprisoned five years for conduct which many states would not hold criminal at all. Schwartz, Federal Criminal Jurisdiction and Prosecutors’ Discretion, 13 Law and Contemporary Problems 64, 72. When faced with specific federal legislation, such differences in treatment may be inevitable, but I do not think the tax laws should be judicially extended for the purpose of taking from local officials the responsibility for prosecuting local offenses.

When the Government takes over a case like the one before us, the resulting confusion of issues is manifestly prejudicial to the defendant. Here, for instance, it can hardly be said that Rutkin was tried for tax evasion. Most of the 900 printed pages of oral testimony in the two week’s trial are devoted to proof of things other than an attempt to evade the tax. Four pages deal with Rutkin’s allegedly false 1943 tax return; three pages deal with the amount of tax Rutkin would have owed if he had received $250,000 more income than he actually reported; six pages contain testimony of Rutkin tending to show willful evasion of the tax laws so as to bring the case within Spies v. United States, 317 U.S. 492. A mere reference to the contents of the remaining 887 pages shows what a great threat there was that Rutkin would be convicted because he was a "bad man" ("scoundrel" to use the trial court’s title) regardless of whether he was guilty or innocent of the tax evasion charged.

Most of the evidence dealt with the following aspects of Rutkin’s past life and associations: back in prohibition days, Rutkin had joined one Reinfeld and others in a bootlegging scheme called the "High seas venture." The organization made millions. About 1940, some time after prohibition ended, Reinfeld, apparently acting for the group, sold the business establishment for about $7,500,000 net. Reinfeld’s accounting methods and management of the proceeds were not satisfactory to his associates. They claimed that Reinfeld held back more than his share of the millions. Reinfeld claimed that some of his former associates, including Rutkin, were "overdrawn" and entitled to nothing out of the $7,500,000. This quarrel went on for several years, during which time Reinfeld was required to pay hundreds of thousands of dollars to former partners as a result of their claims that he had swindled them. Rutkin was one of them. Rutkin’s $250,000 was paid to him by lawyers whose reputations seem to have been above reproach. It was paid openly. And it was some eight years later, when Rutkin sued Reinfeld for more millions, that Reinfeld, apparently for the first time, charged that Rutkin had extorted the $250,000 under threats of death. Yet he has been convicted here of federal tax evasion on the theory that he was guilty of the crime of "extortion."{6}

From the beginning to the end, the evidence in this case was devoted to showing the lawless life Rutkin, Reinfeld, and their associates led from the 1920’s to 1950, ranging from bootlegging to bribery to gambling. The charge of the court largely emphasized and reemphasized the iniquity of the criminal conduct shown by the testimony. Early in his charge, the trial court told the jury:

You are not deciding which is the bigger scoundrel, Reinfeld or Rutkin; they have both blandly admitted on the stand that they prostituted justice in this country; that they paid public servants to close their eyes to law violation, and that is a canker which eats away at the body public. But you are not passing upon respective degrees of scoundrelism between any two people. The bland way in which we were told that the Reinfelds and the Rutkins and the Zwillmans and all of the others prostituted justice should give us cause for pause, but we are not passing on that question now.

In concluding his charge, the trial court told the jury:

The Government of the United States doesn’t ask you to sacrifice anybody to prove its might. It asks you to do justice. That’s all that Rutkin has a right to ask you to do, and that’s what the government of the United States asks you to do. It asks you to remember its rights too, remembering that unpunished crime, undetected crime, are threats to the majesty and dignity of our government, and that unpunished crime undermines our government. We all of us must do that which is our duty, and do it without fear or favor.

My study of this record leads me to believe that the fantastic story of supposed extortion told here would probably never have been accepted by a jury if presented in a trial uncolored by the manifold other inflammatory matters which took up 887 of the 900 pages in this "tax evasion" case.

If we are going to depart from the Wilcox holding, I think this is a poor case in which to do so. I would reverse this judgment.

1. In opposing certain anti-heft legislation, Attorney General Mitchell wrote Senator Norris that,

. . . The machinery now provided by the Federal Government for the prosecution and punishment of crime is overtaxed.

Earnest efforts are being made to devise methods for the relief of those Federal courts which are congested and to increase the capacity of our prisons to satisfy present requirements. Until we have dealt adequately with the troubles which now confront us, we ought not to be adding to the burden of the law enforcement machinery by enacting legislation of this kind.

72 Cong.Rec. 6214. Along this line, it has been said that

It will be a long time before the few hundred agents of the Department of Justice can expand enough to do the work now given to 130,000 peace officers in the United States. . . .

Broad Program Needed for Crime Control, 20 J.Am.Jud.Soc.196, 200.

2. In 1950 and 1951, the Senate Crime Committee conducted investigations of organized crime. In its Third Interim Report, the Committee stated,

Any program for controlling organized crime must take into account the fundamental nature of our governmental system. The enforcement of the criminal law is primarily a State and local responsibility.

S.Rep.No.307, 82d Cong., 1st Sess. 5.

3. Commenting on this fact, Attorney General Mitchell said,

Experience has shown that, when Congress enacts criminal legislation of this type, the tendency is for the State authorities to cease their efforts toward punishing the offenders and to leave it to the Federal authorities and the Federal courts. That has been the experience under the Dyer Act.

72 Cong.Rec. 6214. See also Boudin, The Place of the Anti-acketeering Act in our Constitutional-egal System, 28 Cornell L.Q. 261, 270 et seq.

United States v. Lanza, 260 U.S. 377, held that a defendant could be subjected to federal prosecution for violation of federal prohibition laws despite the fact that he had already been convicted under New York law for the same conduct. New York’s repeal of her prohibition laws six months later highlights the loss of state responsibility for enforcing the criminal law after the Federal Government has entered the field. N.Y.Laws 1923, c. 871.

4. Seen. 5, infra.

5. Enforcement of all or some of these rules in the federal courts injects an element of uncertainty into criminal trials. Questions arise as to how much law of what state applies. Then the federal court must attempt to decide what the state law actually is, and how it applies to the particular conduct alleged to be criminal. Moreover, an opportunity to obtain an authoritative decision on a matter of state law from the highest state court is denied. Thus, all the uncertain problems involved in Erie R. Co. v. Tompkins, 304 U.S. 64, are thrust upon those accused of crime in the federal courts.

And a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.

Connally v. General Const. Co., 269 U.S. 385, 391

6. The majority leave me in doubt as to whether the "extortion" was a state or federal crime. Seen. 5, supra..

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Chicago: Black, "Black, J., Dissenting," Rutkin v. United States, 343 U.S. 130 (1952) in 343 U.S. 130 343 U.S. 140–343 U.S. 147. Original Sources, accessed February 9, 2023, http://www.originalsources.com/Document.aspx?DocID=8EVGXK6PSRWTT4Q.

MLA: Black. "Black, J., Dissenting." Rutkin v. United States, 343 U.S. 130 (1952), in 343 U.S. 130, pp. 343 U.S. 140–343 U.S. 147. Original Sources. 9 Feb. 2023. http://www.originalsources.com/Document.aspx?DocID=8EVGXK6PSRWTT4Q.

Harvard: Black, 'Black, J., Dissenting' in Rutkin v. United States, 343 U.S. 130 (1952). cited in 1952, 343 U.S. 130, pp.343 U.S. 140–343 U.S. 147. Original Sources, retrieved 9 February 2023, from http://www.originalsources.com/Document.aspx?DocID=8EVGXK6PSRWTT4Q.