President's Advisory Council on Effective Organization. The Deputy Attorney General and myself are personally working with this Advisory Council on these matters. Upon completion of that study appropriate recommendations will be made to the President on how to accomplish lasting improvements in executive operations, including the fight against organized criminal activity. With warmest regards, I am

Sincerely,

JOHN MITCHELL,

Attorney General.

Mr. WILSON. S. 975, which has an immunity provision compelling testimony of some witnesses, we favor with the modification suggested in the other immunity statutes, that they be consistent with the recommendations of the Commission.

The increased sentences for organized crime, we favor, with some amendments which we suggest or some change of language which would possibly make them less vulnerable to constitutional attack. S. 2122, we favor.

S. 1624, the wagering tax, we favor.

Mr. MCCLELLAN. With regard to S. 1624, I direct that the letter of May 16, 1969, from the Deputy Attorney General be inserted in the record at this point.

(The letter referred to follows:)

Hon. JAMES O. EASTLAND,

OFFICE OF THE DEPUTY ATTORNEY GENERAL,

Chairman, Committee on the Judiciary,
U.S. Senate,

Washington, D.C.

Washington, D.C., May 16, 1969.

DEAR SENATOR: As you know, on April 23 the President apprised the Congress of his blueprint for combating organized crime in the United States. He indicated the administrative steps he was taking, the assistance to be made available to State and local governments, the expanded Federal budget being allocated for this essential work, and the new legislation which was required.

One of the measures endorsed by the President as warranting "swift enactment" is S. 1624, now pending with the Committee, a bill to amend the wagering tax provisions of the Internal Revenue Code of 1954.

Until recently, a factor of major importance in the fight against organized crime was the availability of the investigative expertise and man power provided by the Intelligence Division of the Internal Revenue Service. Acting under the jurisdiction afforded them by the wagering tax laws, special agents were able to make important inroads into gambling operations of all types in all parts of the country, and their activity, together with that of the Federal Bureau of Investigation, gave to the Federal Government an extremely effective weapon against the source of the great majority of the funds on which organized crime relies.

In January, 1968, the Supreme Court of the United States, in Marchetti v. United States, 390 U.S. 39, and Grosso v. United States, 390 U.S. 62, ruled that a defendant charged with failure to register and purchase the wagering occupational tax stamp as required by sections 4411 and 4412 of title 26, United States Code, or with failure to pay the excise tax required by section 4401 of title 26 could interpose, as a complete defense to such a charge, his privilege against self-incrimination. Those decisions have effectively precluded enforcement of the wagering tax laws by the Internal Revenue Service.

The bill presently before you would amend the Internal Revenue Code of 1954 to prohibit the use of information supplied through registration and payment of the excise tax except in connection with the enforcement of the wagering tax laws themselves. Such a modification is designed to eliminate the hazards of self-incrimination which underlay the Marchetti and Grosso decisions. In addition, the bill would raise the annual occupational tax from fifty dollars to one thousand dollars for principals and to one hundred dollars for their subordinates.

In its present form the bill provides that, upon the approval of the Attorney General or a designated Assistant Attorney General, a United States Attorney may compel the testimony of a witness in connection with any proceeding related to the enforcement of the wagering tax laws by seeking an order of the court granting such a witness immunity from prosecution "on account of any transaction, matter, or thing concerning which he is compelled, after having claimed his privilege against self-incrimination, to testify or produce evidence." We would recommend that this provision of the bill be amended to prohibit only the use of any testimony given or evidence produced by a witness against him in any subsequent criminal proceeding rather than to bar completely his prosecution for the crime about which he testified. Such a provision would comport with the requirements of the Fifth Amendment as interpreted by the Supreme Court in Murphy v. Waterfront Commission, 378 U.S. 52 (1964).

The above recommended modification could be accomplished by changing the final sentence of proposed 26 U.S.C. 7351(a) (beginning at page 14, line 15 of the bill) to read:

"But, if the witness had claimed his privilege against self-incrimination, no testimony so compelled or evidence so produced, or any information or evidence derived therefrom, shall be used in evidence in any criminal proceeding (except prosecutions described in subsection (b)) against him in any court".

The relevant headings on pages 13 and 15 should then be conformed as follows: (a) Section 4 heading (page 13, line 17), change "IMMUNITY FOR WITNESSES IN TAX MATTERS" to "RESTRICTIVE USE OF CERTAIN INFORMATION”.

(b) Subsection 4 (a) heading (page 13, line 18), change "Grants of Immunity" to "Use Restriction".

(c) Subchapter E headings (page 13, line 21 and page 15, below line 6), change "Immunity" to "Use Restriction".

(d) Section 7351 headings (page 13, below line 21 and line 22), change "Immunity for Witnesses" to "Restrictive Use of Certain Information".

In addition, subsections 2(b), 2(c), 2(d) (1) and 3(c) were substantially enacted as sections 203, 204, and 205 of Public Law 90-618 and should, therefore, be deleted. Also, section 206 of Public Law 90-618 renders subsection 3(d) (1) unnecessary.

The Department of Justice recommends the enactment of this legislation, amended as suggested above.

The Bureau of the Budget has advised that enactment of this legislation, amended as suggested, is in accord with the Program of the President. Sincerely,

RICHARD G. KLEINDIENST,
Deputy Attorney General.

Mr. WILSON. S. 1623, which prohibits the investment of income from organized crime in some businesses, we favor the principle of the act. We have some suggestions on the language to broaden its impact somewhat, and we would ask you to consider the suggestions we have in the statement on that, including the addition of civil remedies and of certain antitrust-like remedies. We favor those with some suggested alternatives.

The bill S. 1861, which deals with infiltration or management of legitimate business, has been under study and we are not prepared at this time to take a departmental position on that. We certainly like the idea. We are trying to examine all of its ramifications, and we will have a separate report on that one in about 3 weeks, if we may (see p. 404).

Senator MCCLELLAN. Well, that will be very good. We appreciate that.

I introduced that bill, and it is a bill with a novel approach, I think. It needs study. We will be glad to have any suggestions you have. I know if it can be done it is a step in the right direction.

Mr. WILSON. It is a bill that certainly is worthy of intense consideration and effort.

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I might say here that, as you know, the vast bulk of the revenues from organized crime are not reached by the Internal Revenue statutes. They don't pay any income tax on it, and that permits the accumulation of capital by people who shouldn't be in charge of capital, who haven't either the character or the patriotism to properly administer the capital of the country.

Senator MCCLELLAN. That is what we are trying to do, to keep them from using that to infiltrate legitimate businesses and pollute the stream of commerce.

Mr. WILSON. That is correct, and that is a very laudable purpose, and we certainly wish, on behalf of the Department, to encourage you in that endeavor.

Senator MCCLELLAN. We realize it is plowing into new ground, so to speak, and we need all the best counsel we can get.

Mr. WILSON. If I might, I would like to call your attention to a particular part of this statement for the purpose of discussion-it is just several pages.

Senator MCCLELLAN. That is your statement?

Mr. WILSON. Yes, sir. I would like to read it in order that we might have a little fuller discussion of it.

Senator MCCLELLAN. What page?

Mr. WILSON. On page 12, the discussion dealing with Senate bill 2022. Senator MCCLELLAN. Yes, sir.

Mr. WILSON. Before you is a bill which is designed to bring to bear on the vast business of illegal gambling a substantially increased effort on the part of Federal law enforcement officers. Title I of the bill would make it a Federal crime to devise or participate in a scheme to obstruct the enforcement of State and local criminal laws in order to promote an illegal gambling business, and title II would make it a Federal crime to participate in such an illegal business.

It is not the intent of this bill to preempt local law enforcement, but it is vital, in the judgment of the Department of Justice, that we expand the available forces in the fight against this pervasive and pernicious enterprise. To this end we have defined, for purposes of both titles, an illegal gambling business as one which is in violation of State or local law, which involves five or more persons who operate, participate in, or derive revenue from it, and which either has been in operation for longer than 30 days or has a single day's gross revenue of $2,000 or more. We believe that this standard will insure that the Federal effort is directed only at the more important gambling operations-those in which there may clearly be said to be a strong Federal interest.

Now, I might insert here, Mr. Chairman, that while that seems to be maybe a cumberstone and perhaps technical definition, the purpose of it is to free local government to do its job. It is not the intent of this bill to relieve local government of the enforcement of gambling laws, but quite the contrary, to make it more effective. The reason local government generally is not effective in this area is, more often than not, bribery or something like it.

In my enforcement career I have encountered situations in this area where they have such weak officials that they didn't even find it necessary to bribe them; they simply elected someone who would be entirely subservient to the racketeering interests.

Senator MCCLELLAN. The bribing was done before the election.
Mr. WILSON. Yes.

Senator MCCLELLAN. In the election process.

Mr. WILSON. But in the main, all of these gambling enterprises are businesses in the sense that they work through employees, they must be trained, they must have procedures, and the person who is running it is interested that the fruits of the enterprise all come through to the owner or proprietor and not be lost in transit. Likewise he is interested in seeing that his customers get fair earnings, because they won't come back unless they do, and therefore he has an internal disciplinary problem. To accomplish that he must build a business organization. That cannot be done and at the same time resist a determined and persistent law-enforcement effort.

So in order to exist he must make his peace in some fashion.

Senator MCCLELLAN. What you are saying is to operate a gambling establishment successfully and with immunity you have to have some business organization in it?

Mr. WILSON. You certainly do. You have got to have some arrangement with at least some of the enforcement officials. So what this bill would do it probably is properly labeled a subversion of government bill-what it would do is to make it a Federal crime to conspire with law enforcement officials for the purpose of not having law enforced in effect.

We have tried to draft this in such a way that it would bring that situation into the Federal orbit, but not bring in the whole enforcement problem.

In my career as an official I have many times dealt with the problem of bribery, both as a local district attorney and as a State attorney general, and to a certain extent now in this office. That goes to the heart of good government, and that is one of the problems of government anywhere.

It has been my experience that under most State constitutions the problem of enforcing the integrity of officials or guaranteeing integrity of officials is usually a local problem. Sometimes the State attorney general has it, but more often than not local prosecutors have it.

I am convinced that in our Federal structure one of the soundest principles is that if we can have the supervisory or second level of government enforce the integrity against subordinate units it will be accomplished; whereas, if you leave it to the subordinate unit is usually will not.

Second, it is a method of preventing the centralization of government. It might be argued that this is a centralizing measure to a certain extent, but it is an anticentralizing measure, too, in that its purpose is to guarantee the functioning of the local unit.

As you know, the thing that brings about the centralizing of government is decay or inoperation. The people want something done, they turn to the local government, they can't get it done, and so they move their request up. It moves from local to State to Federal because of the failure of officials to perform. If we keep the processes such that the local units perform their function, then there won't be such a tremendous pressure to get some higher unit of government to do it.

The purpose of this bill is twofold. It strikes at the income of organized crime because it gets at the existence of the conspiracy

between the racketeer and local officials, and it also serves as a purification of local government so that it can perform its function.

Now, I don't personally see anything the Federal Government can do to make local government perform as long as, first, the Federal Government has no jurisdiction of the subject matter as it does not in most situations; and second, it can do nothing about the bribery situation as between the racketeer and the local government unit.

Therefore, it seems to me that the Federal function in preserving the health of local government will be forwarded by a provision such as this which gets at breaking up illegal arrangements which would obstruct the functioning of local government. That is the theory of this bill. It gets right to the heart of the organized crime problem.

We have here in our statement a number of illustrations of factual situations that are known to the Department where this exists.

You, in your long years of work in this field also, of course, are familiar with many factual situations where in some situations the enforcement official is in effect a partner in the racketeering enterprises. We think that this bill strikes at the heart of that, and is one which, if it is enacted, would give us the jurisdiction we need to make the local governments go forward with a task of eliminating the gambling enterprises.

Senator MCCLELLAN. Do you have any further testimony?
Mr. WILSON. I believe that would cover our statement.

Senator MCCLELLAN. I will ask you a few questions on S. 2022.
Mr. WILSON. Yes, sir.

Senator MCCLELLAN. I support the very laudible objectives of S. 2022, the illegal gambling business bill. Nevertheless, there are some reservations that I must express. I am concerned that the effect of this bill would be to extend Federal jurisdiction so far that it would be virtually the same as local criminal jurisdiction in this area. Now, you have mentioned this problem in your remarks already.

Mr. WILSON. We have tried to head that off, and if we haven't done it, it needs to be done, because it is not our purpose to move all this into Federal courts.

Senator MCCLELLAN. Our experience in the past has been that in such situations the expansion of Federal power has tended to supplant, not merely supplement, State criminal jurisdiction. Again I take it that is what you want to avoid?

Mr. WILSON. Yes, sir.

Senator MCCLELLAN. For example, bank robbery is today a Federal offense and normally prosecuted in Federal courts without regard to who commits the robbery. An interstate gang, obviously beyond the power of local prosecution, is treated identically with the casual offender who walks in off the street. Now, do you think we have the resources on the Federal level now available to undertake to enforce a nationwide prohibition against gambling?

Mr. WILSON. No, sir; we don't, and I don't anticipate that the Federal Government should ever undertake that task. I don't feel we should.

Senator MCCLELLAN. Let's turn now to the substance of S. 2022. Let us assume that title II of S. 2022 is enacted, making it a Federal offense to engage in an illegal gambling business as defined in the proposed section 1953.