author: Mk. Justice White Mr. Justice Marshall,

text:
    WEATHERFORD, AGENT OF THE SOUTH CAROLINA LAW ENFORCEMENT DIVISION, et al. v. BURSEY
    No. 75-1510.
    Argued December 7, 1976
    Decided February 22, 1977

      J. C. Coleman, Deputy Attorney General of South Carolina, argued the cause for petitioners. With him on the brief were Daniel R. McLeod, Attorney General, and A. Camden Lewis and John L. Choate, Assistant Attorneys General.

      Laughlin McDonald argued the cause for respondent. With him on the brief were Neil Bradley, Herbert E. Buhl III, Ray P. McClain, Melvin L. Wulf, and John H. F. Shattuck.

      Deputy Solicitor General Frey argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Bork, Assistant Attorney General Thornburgh, and Marc Philip Bichman.

   Mk. Justice White

delivered the opinion of the Court.

The issue here is whether in the circumstances present in this case the conduct of an undercover agent for a state law enforcement agency deprived respondent Bursey of his right to the effective assistance of counsel guaranteed him by the Sixth and Fourteenth Amendments of the United States Constitution or deprived him of due process of law in violation of the Fourteenth Amendment.

I

This case began when respondent Bursey filed suit under 42 U. S. C. § 1983 against petitioners Weatherford and Strom, respectively an undercover agent for and the head of the South Carolina State Law Enforcement Division, asserting that the defendants had deprived him of certain constitutional rights. The case was tried without a jury. The following facts are taken from the District Court’s findings, which were not disturbed by the Court of Appeals.

During the early morning hours of March 20, 1970, Bursey and Weatherford, along with two others, vandalized the offices of the Richland County Selective Service in Columbia, S. C. Police were advised of the incident by Weatherford, who, in order to maintain his undercover status and his capability of working on other current matters in that capacity, was arrested and charged along with Bursey. Weatherford was immediately released on bond and, continuing the masquerade, retained an attorney, Frank Taylor, Sr. Bursey, who was later released on bond, retained his own counsel, C. Rauch Wise.

On two occasions thereafter and prior to trial, Weather-ford met with Bursey and Wise, and the approaching trial was discussed. With respect to these meetings, the District Court found as follows:

“On neither of these occasions did the defendant Weatherford seek information from the plaintiff or his attorney, and on neither occasion did he initiate or ask for the meeting. He was brought into the meetings by the plaintiff and plaintiff’s attorney in an effort to obtain information, ideas or suggestions as to the plaintiff’s defense. From the beginning Weatherford advised plaintiff and plaintiff’s attorney that Weatherford would obtain a severance of his case from that of the plaintiff. This severance was to be upon the ground that Weatherford might be prejudiced in going to trial with Bursey as a codefendant, because of Bursey’s reputation and participation in other activities which had been covered by the news media. On no occasion did Bursey or his attorney question the granting of a severance, nor did they seem to concern themselves with whether the prosecutor would consent to a severance, although such consent is quite unusual where codefendants are charged with the same crime and proof will be from the same witnesses based upon identical facts. At those meetings between plaintiff, plaintiff’s attorney and defendant Weatherford the plaintiff and his attorney raised the question of a possible informer being used to prove the case, but they never asked Weatherford if he were an informer and he never specifically denied being an informer, since he was never asked or accused.” App. 248-249.

At no time did Weatherford discuss with or pass on to his superiors or to the prosecuting attorney or any of the attorney’s staff “any details or information regarding the plaintiff’s trial plans, strategy, or anything having to do with the criminal action pending against plaintiff.” Id., at 249. Until the day of trial the prosecuting attorney did not plan to use Weatherford as a witness. Consequently, until then, Weatherford had not expected to be a witness and had anticipated continuing his undercover work. However, Weatherford had lost some of his effectiveness as an agent in the weeks preceding trial because he had been seen in the company of police officers, and he was called for the prosecution. He testified as to his undercover activities and gave an eyewitness account of the events of March 20, 1970. Bursey took the stand, was convicted, and then disappeared until apprehended some two years later, at which time he was incarcerated and forced to serve his 18-month sentence.

Bursey then began this § 1983 action, alleging that Weatherford had communicated to his superiors and prosecuting officials the defense strategies and plans which he had learned at his meetings with Bursey and Wise, thereby depriving Bursey of the effective assistance of counsel to which he was entitled under the Sixth and Fourteenth Amendments as well as of his right to a fair trial guaranteed him by the Due Process Clause of the Fourteenth Amendment. The District Court found for the defendants in all respects and entered judgment accordingly.

The Court of Appeals for the Fourth Circuit reversed, 528 F. 2d 483 (1975), concluding that “on the facts as found by the district court Bursey’s rights to effective assistance of counsel and a fair trial were violated.” Id., at 486. The Court of Appeals held that “whenever the prosecution knowingly arranges or permits intrusion into the attorney-client relationship the right to counsel is sufficiently endangered to require reversal and a new trial.” Ibid. That the intrusion occurred in order to prevent revealing Weather-ford’s identity as an undercover agent was immaterial. The Court of Appeals thought that Weatherford was himself “a member of the prosecution,” id., at 487, and that therefore it was also immaterial that he had not informed other officials about what was said or done in the two meetings with Bursey and Wise.

In addition, the Court of Appeals concluded that Bursey had been denied due process of law under Brady v. Maryland, 373 U. S. 83 (1963), by concealment of Weatherford’s identity until the day of trial and by Weatherford’s statement that he would not be a witness, all of which lulled Bursey into a false sense of security and interfered with his preparations for trial. The judgment of the District Court was reversed, but the remand for further proceedings would have allowed Weatherford and Strom to present a qualified immunity defense under Wood v. Strickland, 420 U. S. 308 (1975).

We granted the petition for certiorari filed by Weatherford and Strom, who are represented by the State Attorney General. 426 U. S. 946 (1976). We reverse.

II

The exact contours of the Court of Appeals’ per se right-to-counsel rule are difficult to discern; but as the Court of Appeals applied the rule in this case, it would appear that if an undercover agent meets with a criminal defendant who is awaiting trial and with hi.s attorney and if the forthcoming trial is discussed without the agent’s revealing his identity, a violation of the defendant’s constitutional rights has occurred, whatever was the purpose of the agent in attending the meeting, whether or not he reported on the meeting to his superiors, and whether or not any specific prejudice to the defendant’s preparation for or conduct of the trial is demonstrated or otherwise threatened. The Court of Appeals was of the view, 528 F. 2d, at 486, that this Court “establish [ed] such a per se rule” in Black v. United States, 385 U. S. 26 (1966), and O’Brien v. United States, 386 U. S. 345 (1967). The Court of Appeals also relied on Hoffa v. United States, 385 U. S. 293 (1966).

We cannot agree that these cases, individually or together, either require or suggest the rule announced by the Court of Appeals and now urged by Bursey. Both Black and O’Brien involved surreptitious electronic surveillance by the Government, which was discovered after trial and conviction and which was plainly illegal under the Fourth Amendment. In each case, some, but not all, of the conversations overheard were between the criminal defendant and his counsel during trial preparation. The conviction in each case was set aside and a new trial ordered. The explanatory per curiam in Black, although referring to the overheard conversations with counsel, did not rule that whenever conversations with counsel are overheard the Sixth Amendment is violated and a new trial must be had. Indeed, neither the Sixth Amendment nor the right to counsel was even mentioned in the short opinion. The Solicitor General conceded that Black was entitled to a “judicial determination” of whether “the monitoring of conversations between [Black] and his attorney had [any] effect upon his conviction or the fairness of his trial,” although the Solicitor General contended that information derived from the overheard conversations was not used in any way by the prosecution. Memorandum for United States in Black v. United States, O. T. 1965, No. 1029, p. 4 (emphasis added). The Court focused on the particular form the “judicial determination” should take, concluding that on the particular facts of the case a new trial was the more appropriate means of affording Black “an opportunity to protect himself from the use of evidence that might be otherwise inadmissible.” 385 U. S., at 29 (emphasis added). In O’Brien, the Court wrote nothing further, merely citing the Black per curiam. Once again the Solicitor General did not oppose further judicial proceedings to determine whether any information from the surveillance had been used at trial, notwithstanding his assertion that the contents of the overheard conversations were never communicated to the prosecuting attorneys. Brief for United States in O’Brien v. United States, O. T. 1966, No. 823, pp. 10-12.

It is difficult to believe that the Court in Black and O’Brien was evolving a definitive construction of the Sixth Amendment without identifying the Amendment it was interpreting, especially in view of the well-established Fourth Amendment grounds for excluding the fruits of the illegal surveillance. If anything is to be inferred from these two cases with respect to the right to counsel, it is that when conversations with counsel have been overheard, the constitutionality of the conviction depends on whether the overheard conversations have produced, directly or indirectly, any of the evidence offered at trial. This is a far cry from the per se rule announced by the Court of Appeals below, for under that rule trial prejudice to the defendant is deemed irrelevant. Here, the courts below have already conducted the “judicial determination,” lacking in Black and O’Brien, of the effect of the overheard conversations on the defendant’s conviction, and there is nothing in their findings or in the record to indicate any “use of evidence that might be otherwise inadmissible.”

Neither does the Court’s decision in Hoffa v. United States, supra, support the proposition urged by respondent. There, an informant sat in on conversations that defendant Hoffa had with his lawyers and with others during the course of Hoffa’s trial on a charge of violating the TaftHartley Act. The jury at that trial hung. Hoffa was then tried for tampering with that jury. The informer testified at the latter trial with respect to conversations he had overheard in Hoffa’s hotel suite during the prior trial, not including, however, the conversations Hoffa had with counsel. The Court sustained Hoffa’s jury-tampering conviction over his claim, among others, that his Sixth Amendment counsel right had been violated.

In doing so, the Court did not hold that the Sixth Amendment right to counsel subsumes a right to be free from intrusion by informers into counsel-client consultations. Nor did it purport to describe the contours of any such right. The Court merely assumed, without deciding, that two cases in the Court of Appeals for the District of Columbia Circuit dealing with the right to counsel, Caldwell v. United States, 92 U. S. App. D. C. 355, 205 F. 2d 879 (1953), and Coplon v. United States, 89 U. S. App. D. C. 103, 191 F. 2d 749 (1951), were correctly decided; assumed without deciding, that had Hoffa been convicted at his first trial, the conviction would have been set aside because the informer had overheard Hoffa and his lawyers conversing and had reported to the authorities the substance of at least some of those conversations; and then held that Hoffa’s assumed Sixth Amendment rights had not been violated because the informer’s testimony at the jury-tampering trial did not touch upon the overheard conversations with counsel but dealt only with conversations between Hoffa and third parties when his lawyers were not present. 385 U. S., at 307-308. Neither Black, O’Brien, Hoffa, nor any other case in this Court to which we have been cited furnishes grounds for the interpretation and application of the Sixth and Fourteenth Amendments appearing in the Court of Appeals’ opinion and judgment.

At the same time, we need not agree with petitioners that whenever a defendant converses with his counsel in the presence of a third party thought to be a confederate and ally, the defendant assumes the risk and cannot complain if the third party turns out to be an informer for the government who has reported on the conversations to the prosecution and who testifies about them at the defendant’s trial. Had Weatherford testified at Bursey’s trial as to the conversation between Bursey and Wise; had any of the State’s evidence originated in these conversations; had those overheard conversations been used in any other way to the substantial detriment of Bursey; or even had the prosecution learned from Weatherford, an undercover agent, the details of the Bursey-Wise conversations about trial preparations, Bursey would have a much .stronger case.

None of these elements is present here, however. Weather-ford’s testimony for the prosecution about the events of March and April 1970 revealed nothing said or done at the meetings between Bursey and Wise that he attended. None of the State’s evidence was obtained as a consequence of Weather-ford’s participation in those meetings. Nevertheless, it might be argued that Weatherford, a dutiful agent, surely communicated to the prosecutors Bursey’s defense plans and strategy and his attorney’s efforts to prepare for trial, all of which was inherently detrimental to Bursey, unfairly advantaged the prosecution, and threatened to subvert the adversary system of criminal justice.

The argument founders on the District Court’s express finding that Weatherford communicated nothing at all to his superiors or to the prosecution about Bursey’s trial plans or about the upcoming trial. App. 249, 252. The Court of Appeals did not disturb this finding, but sought to surmount it by declaring Weatherford himself to have been a member of the prosecuting team whose knowledge of Bursey’s trial plans was alone enough to violate Bursey’s constitutional right to counsel and to vitiate Bursey’s conviction. 528 F. 2d, at 487. Though imaginative, this reasoning is not a realistic assessment of the relationship of Weatherford to the prosecuting staff or of the potential for detriment to Bursey or benefit to the State that Weather-ford’s uncommunicated knowledge might pose. If the fact was, as found by the District Court, that Weatherford communicated nothing about the two meetings to anyone else, we are quite unconvinced that a constitutional claim under the Sixth and Fourteenth Amendments was made out.

This is consistent with the Court’s approach in the Hoff a case. There, the informant overheard several conversations between Hoffa and his attorneys, but the Court found it necessary to deal with the Sixth Amendment right-to-counsel claim only after noting that the informant had reported to the Government about at least some of the activities of Hoffa’s defense counsel. 385 U. S., at 305-306. As long as the information possessed by Weatherford remained uncommunicated, he posed no substantial threat to Bursey’s Sixth Amendment rights. Nor do we believe that federal or state prosecutors will be so prone to lie or the difficulties of proof will be so great that we must always assume not only that an informant communicates what he learns from an encounter with the defendant and his counsel but also that what he communicates has the potential for detriment to the defendant or benefit to the prosecutor’s case.

Moreover, this is not a situation where the State’s purpose was to learn what it could about the defendant’s defense plans and the informant was instructed to intrude on the lawyer-client relationship or where the informant has assumed for himself that task and acted accordingly. Weatherford, the District Court found, did not intrude at all; he was invited to the meeting, apparently not for his benefit but for the benefit of Bursey and his lawyer. App. 248. Weatherford went, not to spy, but because he was asked and because the State was interested in retaining his undercover services on other matters and it was therefore necessary to avoid raising the suspicion that he was in fact the informant whose existence Bursey and Wise already suspected.

That the per se rule adopted by the Court of Appeals would operate prophylactically and effectively is very likely true; but it would require the informant to refuse to participate in attorney-client meetings, even though invited, and thus for all practical purposes to unmask himself. Our cases, however, have recognized the unfortunate necessity of undercover work and the value it often is to effective law enforcement. E. g., United States v. Russell, 411 U. S. 423, 432 (1973); Lewis v. United States, 385 U. S. 206, 208-209 (1966). We have also recognized the desirability and legality of continued secrecy even after arrest. Roviaro v. United States, 353 U. S. 53, 59, 62 (1957). We have no general oversight authority with respect to state police investigations. We may disapprove an investigatory practice only if it violates the Constitution; and judged in this light, the Court of Appeals’ per se rule cuts much too broadly. If, for example, Weatherford at Bursey’s invitation had attended a meeting between Bursey and Wise but Wise had become suspicious and the conversation was confined to the weather or other harmless subjects, the Court of Appeals’ rule, literally read, would cloud Bursey’s subsequent conviction, although there would have been no constitutional violation. The same would have been true if Wise had merely asked whether Weatherford was an informant, Weatherford had denied it, and the meeting then had ended; likewise if the entire conversation had consisted of Wise’s questions and Weatherford’s answers about Weatherford’s own defense plans. Also, and more cogently for present purposes, unless Weatherford communicated the substance of the Bursey-Wise conversations and thereby created at least a realistic possibility of injury to Bursey or benefit to the State, there can be no Sixth Amendment violation. Yet Under the Court of Appeals’ rule, Bursey’s conviction would have been set aside on appeal.

There being no tainted evidence in this case, no communication of defense strategy to the prosecution, and no purposeful intrusion by Weatherford, there was no violation of the Sixth Amendment insofar as it is applicable to the States by virtue of the Fourteenth Amendment., The proof in this case thus fell short of making out a § 1983 claim, and the judgment of the District Court should have been affirmed in this respect.

It is also apparent that neither Weatherford’s trial testimony nor the fact of his testifying added anything to the Sixth Amendment claim. Weatherford’s testimony for the prosecution related only to events prior to the meetings with Wise and Bursey and referred to nothing that was said at those meetings. There is no indication that any of this testimony was prompted by or was the product of those meetings. Weatherford’s testimony was surely very damaging, but the mere fact that he had met with Bursey and his lawyer prior to trial did not violate Bursey’s right to counsel any more than the informant’s meetings with Hoffa and Hoffa’s lawyers rendered inadmissible the informant’s testimony having no connection with those conversations.

Ill

Because under Brady v. Maryland, 373 U. S. 83 (1963), the prosecution has the “duty under the due process clause to insure that ‘criminal trials are fair’ by disclosing evidence favorable to the defendant upon request,” the Court of Appeals also held that the State was constitutionally forbidden to “conceal the identity of an informant from a defendant during his trial preparation,” to permit the informant to “deny up through the day before his appearance at trial that he will testify against the defendant,” and then to have the informant “testify with devastating effect.” 528 F. 2d, at 487. This conduct, the Court of Appeals thought, lulled the defendant into a false sense of security and denied him “the opportunity (1) to consider whether plea bargaining might be the best course, (2) to do a background check on Weatherford for purposes of cross-examination, and (3) to attempt to counter the devastating impact of eyewitness identification.” Ibid. The Court of Appeals apparently would have arrived at this conclusion whether or not Weatherford had ever met with Wise.

Again we are in disagreement. Brady does not warrant the Court of Appeals’ holding. It does not follow from the prohibition against concealing evidence favorable to the accused that the prosecution must reveal before trial the names of all witnesses who will testify unfavorably. There is no general constitutional right to discovery in a criminal case, and Brady did not create one; as the Court wrote recently, “the Due Process Clause has little to say regarding the amount of discovery which the parties must be afforded . . . .” Wardius v. Oregon, 412 U. S. 470, 474 (1973). Brady is not implicated here where the only claim is that the State should have revealed that it would present the eyewitness testimony of a particular agent against the defendant at trial.

In terms of the defendant’s right to a fair trial, the situation is not changed materially by the additional element relied upon by the Court of Appeals, namely, that Weather-ford not only concealed his identity but represented he would not be a witness for the prosecution, an assertion that proved to be inaccurate. There are several answers to the contention that the claim of misrepresentation is of crucial importance. The first is that there was no deliberate misrepresentation in this regard: The trial court found that until the day of trial Weatherford did not expect to be called as a witness; until then he did not know-that he would testify. Second, as we understand the argument, it is that once the undercover agent has successfully caused an arrest, he risks causing an unfair trial if he denies his identity when accused or asked. We would" hesitate so to construe the Due Process Clause. We are not at all convinced that there is a constitutional difference between the situation where the informant is sufficiently trusted that he is never suspected and never asked about the possibility of his testifying but nevertheless surprises the defendant by giving devastating testimony, and the situation we have here, where the defendant is suspicious enough to ask and the informant denies that he will testify but nevertheless does so. Moreover, if the informant must confess his identity when confronted by an arrested defendant, in many cases the agent in order to protect himself will simply disappear pending trial, before the confrontation occurs. In the last analysis, however, the undercover agent who stays in place and continues his deception merely retains the capacity to surprise; and unless the surprise witness or unexpected evidence is, without more, a denial of constitutional rights, Bursey was not denied a fair trial.

The Court of Appeals suggested that Weatherford’s continued duplicity lost Bursey the opportunity to plea bargain. But there is no constitutional right to plea bargain; the prosecutor need not do so if he prefers to go to trial. It is a novel argument that constitutional rights are infringed by-trying the defendant rather than accepting his plea of guilty. Moreover, Wise could have approached the prosecutor before trial and surely was under no misapprehension about Bursey’s plight during trial. It was also suggested by the Court of Appeals that Bursey was deprived of the opportunity to investigate Weatherford in preparation for possible impeachment on cross-examination. But there was no objection at trial to Weatherford’s testimony, no request for a continuance, and even now no indication of substantial prejudice from this occurrence. As for Bursey’s claimed disability to counter Weatherford’s “devastating” testimony, the disadvantage was no more than exists in any case where the State presents very damaging evidence that was not anticipated. Wise and Bursey must have realized that in going to trial the State was confident of conviction and that if any exculpatory evidence or possible defenses existed it would be extremely wise to have them available. Prudence would have counseled at least as much.

The judgment of the Court of Appeals is

Reversed..

Mr. Justice Marshall,

with whom Mr. Justice Brennan- joins,

dissenting.

It is easy to minimize the significance of the incursion into the lawyer-client relationship that the Court sanctions today. After all, as the Court observes, there is no evidence that Weatherford went to the meetings between Bursey and his lawyer with an intent to spy; that he reported to the prosecutor on those meetings; or that what he learned was used to develop evidence against Bursey. But while what occurred here may be “the obnoxious thing in its mildest and least repulsive form . . . illegitimate and unconstitutional practices get their first footing in that way, namely, by silent approaches and slight deviations from legal modes of procedure.” Boyd v. United States, 116 U. S. 616, 635 (1886). I cannot join in providing even the narrowest of openings to the practice of spying upon attorney-client communications.

There are actually two independent constitutional values that are jeopardized by governmental intrusions into private communications between defendants and their lawyers. First, the integrity of the adversary system and the fairness of trials is undermined when the prosecution surreptitiously acquires information concerning the defense strategy and evidence (or lack of it), the defendant, or the defense counsel. In Wardius v. Oregon, 412 U. S. 470 (1973), this Court made clear that while “the Due Process Clause has little to say regarding the amount of discovery which the parties must be afforded ... it does speak to the balance of forces between the accused and his accuser.” Id., at 474. Due process requires that discovery “be a two-way street.”

“The State may not insist that trials be run as a ‘search for truth’ so far as defense witnesses are concerned, while maintaining ‘poker game’ secrecy for its own witnesses. It is fundamentally unfair to require a defendant to divulge the details of his own case while at the same time subjecting him to the hazard of surprise concerning refutation of the very pieces of evidence which he disclosed to the State.” Id., at 475-476.

At issue in Wardius was a statute compelling defendants to provide certain information about their case to the prosecution. But the same concerns are implicated when the State seeks such information, not by force of law, but by surreptitious invasions and deceit.

Of equal concern, governmental incursions into confidential lawyer-client communications threaten criminal defendants’ right to the effective assistance of counsel. Only last Term we held that the right to counsel encompasses the right to confer with one’s lawyer. Geders v. United States, 425 U. S. 80 (1976). See also Reynolds v. Cochran, 365 U. S. 525, 531 (1961); Hawk v. Olson, 326 U. S. 271, 278 (1945); Avery v. Alabama, 308 U. S. 444, 446 (1940); Powell v. Alabama, 287 U. S. 45, 57 (1932). But “[a]s a practical matter, if the client knows that damaging information could more readily be obtained from the attorney following disclosure than from himself in the absence of disclosure, the client would be reluctant to confide in his lawyer and it would be difficult to obtain fully informed legal advice.” Fisher v. United States, 425 U. S. 391, 403 (1976). See also United States v. Nobles, 422 U. S. 225, 238-239 (1975). For this reason, it has long been recognized that “the essence of the Sixth Amendment right is . . . privacy of communication with counsel.” United States v. Rosner, 485 F. 2d 1213, 1224 (CA2 1973), cert. denied, 417 U. S. 950 (1974). See, e. g., Caldwell v. United States, 92 U. S. App. D. C. 355, 205 F. 2d 879 (1953); Coplon v. United States, 89 U. S. App. D. C. 103, 191 F. 2d 749 (1951); Louie Yung v. Coleman, 5 F. Supp. 702, 703 (Idaho 1934); cf., e. g., In re Rider, 50 Cal. App. 797, 195 P. 965 (1920); Thomas v. Mills, 117 Ohio St. 114, 157 N. E. 488 (1927); State ex rel. Tucker v. Davis, 9 Okla. Crim. 94, 130 P. 962 (1913); Turner v. State, 91 Tex. Crim. 627, 241 S. W. 162 (1922); Annot., 5 A. L. R. 3d 1360 (1966).

The Court today apparently concludes that neither of these constitutional values is infringed when, as here, the State does not act with a purpose to intercept information about the defense, and the information that is uncovered is neither transmitted to the prosecutor nor used by him to the defendant’s detriment. I respectfully disagree. In my view, the “balance of forces between the accused and his accuser” is sharply skewed in favor of the accuser if the government’s key witnesses are permitted to discover the' defense strategy by intercepting attorney-client communications, even if the witnesses cannot divulge the information to the prosecution. With this information, the witnesses are in a position to formulate in advance answers to anticipated questions, and even to shade their testimony to meet expected defenses. Furthermore, because of these dangers defendants may be deterred from exercising their right to communicate candidly with their lawyers if government witnesses can intrude upon the lawyer-client relationship with impunity so long as they do not discuss what they learn with the prosecutor. And insofar as the Sixth Amendment establishes an independent right to confidential communications with a lawyer, that right by definition is invaded when a government agent attends meetings of the defense team at which defense plans are reviewed.

But even if I were to agree that unintended and undisclosed interceptions by government witness-employees affect neither the fairness of trials nor the effectiveness of defense counsel, I still could not join in upholding the practice. For in my view, the precious constitutional rights at stake here, like other constitutional rights, need “breathing space to survive,” NAACP v. Button, 371 U. S. 415, 433 (1963), and a prophylactic prohibition on all intrusions of this sort is therefore essential. A rule that offers defendants relief only when they can prove “intent” or “disclosure” is, I fear, little better than no rule at all. Establishing that a desire to intercept confidential communications was a factor in a State’s decision to keep an agent under cover will seldom be possible, since the State always can argue plausibly that its sole purpose was to continue to enjoy the legitimate services of the undercover agent. . Proving that an informer reported to the prosecution on defense strategy will be equally difficult, not only because such proof requires an informer or prosecutor to admit his own wrongdoing (and open the door to damages suits and attacks on convictions), but also because an informer’s failure to make a report after overhearing a lawyer-client session oftentimes can be an effective means of communicating to the prosecutor that nothing surprising was uncovered. Given these problems of proof, the only way to assure that defendants will feel free to communicate candidly with their lawyers is to prohibit the government from intercepting such confidential communications, at least absent a compelling justification for doing so.

Like the Court of Appeals, and unlike the majority today, I believe a per se rule of this sort is fully supported, if not compelled, by our decisions in Black v. United States, 385 U. S. 26 (1966), and O’Brien v. United States, 386 U. S. 345 (1967). In both cases, the United States informed this Court that lawyer-client conversations had been intercepted by surveillance devices installed to investigate crimes unrelated to the crimes for which the defendants were convicted. Memorandum for United States in Black v. United States, O. T. 1965, No. 1029, p. 2; Brief for United States in O’Brien v. United States, O. T. 1966, No. 823, pp. 10-11. In Black the Government reported that information uncovered through the monitoring had been relayed to the prosecutors, but maintained that none of the evidence against the defendant had been derived from the surveillance, and that nothing was learned “which had any effect upon the presentation of the government’s case or the fairness of petitioner’s trial.” Memorandum for United States in Black v. United States, supra, at 4. In O’Brien the Government stated that the only intercepted lawyer-client conversation concerned the terms of the defendant’s bail, and that neither this conversation nor any other conversation was disclosed to the prosecuting attorneys. Brief for United States in O’Brien v. United States, supra, at 11. In both cases, the United States urged a remand for a hearing to determine whether the intrusions had tainted the trials. Memorandum for United States in Black v. United States, supra, at 5; Brief for United States in O’Brien v. United States, supra, at 12. Yet in each case this Court rejected that course and instead remanded for a new trial. To say that these cases establish that “when conversations with counsel have been overheard, the constitutionality of the conviction depends on whether the overheard conversations have produced, directly or indirectly, any of the evidence offered at trial,” ante, at 552, twists the cases beyond recognition That is precisely the principle that was urged by the Government and by the dissenters, Black v. United States, supra, at 30-31 (Harlan, J., dissenting); O’Brien v. United States, supra, at 346-347 (Harlan, J., dissenting), but was rejected by the Court. By vacating the convictions without proof that “the overheard conversations have produced . .. any of the evidence offered at trial,” Black and O’Brien establish that “any governmental activity of the kind here in question automatically vitiates . . . any conviction occurring during the span of such activity,” Black v. United States, supra, at 31 (Harlan, J., dissenting), and precludes the use of tainted evidence at any retrial.

Rather than retreating from Black and O’Brien, I would reaffirm them and would affirm the judgment of the Court of Appeals.

       In Silverman v. United States, 365 U. S. 505 (1961), the Court had held that eavesdropping accomplished through use of an electronic listening device similar to the “tubular microphone” used to overhear Black’s and O’Brien’s conversations constituted an unauthorized physical penetration of the petitioners’ premises in violation of the Fourth Amendment. The Solicitor General conceded that both Black and O’Brien should have been allowed to establish that the prosecution’s case was tainted by the interception of conversations between Black and persons other than their attorneys as well as by conversations involving counsel, thus indicating his awareness of the illegality of the Government’s eavesdropping under the Fourth Amendment.

       See n. 1, supra.

        Coplon held that interceptions by Government agents of telephone messages between the defendant and her lawyer before and during trial, if proved by the defendant, deprived her of her right to counsel and entitled her to a new trial. Caldwell held that the defendant’s right to counsel was violated where a Government undercover agent went to work as an assistant for the defense and reported frequently to the prosecution on “many matters connected with the impending trial.” 92 U. S. App. D. C., at 356, 205 F. 2d, at 880 (footnote omitted).

         In Hoffa, the United States conceded, as it does here as amicus curiae, that the Sixth Amendment would be violated “if the government places an informant in the defense camp during a criminal trial and receives from that informant privileged information pertaining to the defense of the criminal charges . . . because the Sixth Amendment’s assistance-of-counsel guarantee can be meaningfully implemented only if a criminal defendant knows that his communications with his attorney are private and that his lawful preparations for trial are secure against intrusion by the government, his adversary in the criminal proceeding.” Brief for United States in Hoffa v. United States, O. T. 1966, No. 32, p. 71, quoted in Brief for United States as Amicus Curiae in the instant case, p. 24 n. 13.
      Respondent argues that Hoffa established the same right-to-counsel standard for government interception of attorney-client communications by an undercover agent as for interception by electronic surveillance. Even apart from the fact that the Court was merely assuming the existence of a right-to-counsel violation in that case, see supra, at 553, we find respondent’s argument questionable. One threat to the effective assistanee of counsel posed by government interception of attorney-client communications lies in the inhibition of free exchanges between defendant and counsel because of the fear of being overheard. However, a fear that some third party may turn out to be a government agent will inhibit attorney-client communication to a lesser degree than the fear that the government is monitoring those communications through electronic eavesdropping, because the former intrusion may be avoided by excluding third parties from defense meetings or refraining from divulging defense strategy when third parties are present at those meetings. Of course, in some circumstances the ability to exclude third parties from defense meetings may not eliminate the chilling effect on attorney-client exchanges, but neither Hoff a nor any other decision of this Court supports respondent’s theory that the chill is the same whether induced by electronic surveillance or by undercover agents. Cf. Fisher v. United States, 425 U. S. 391, 402-405 (1976) (attorney-client privilege protects only those disclosures which might not haye been made absent the privilege, because the purpose of the privilege is to encourage confidential disclosures by a client to an attorney); 8 J. Wigmore, Evidence § 2311, pp. 601-602 (McNaughton rev. ed. 1961) (attorney-client communications in the presence of a third party not the agent of either are generally not protected by the privilege).

       See App. 225-240 (testimony of Weatherford at state trial). On cross-examination by Wise (Bursey’s lawyer), Weatherford acknowledged that at the second meeting with Bursey and Wise, Weatherford told Wise, in response to the latter’s questions, that he had not been asked to testify for the prosecution and that he did not anticipate being present at Bursey’s trial. This testimony, elicited by defense counsel apparently for the purpose of discrediting Weatherford’s testimony on direct examination, obviously does not constitute use by the prosecution of information obtained from Weatherford’s attendance at defense meetings. Whatever the limitations on testimony by informants about statements made at defense meetings attended by them, 'the Sixth Amendment does not prevent the defense from introducing such statements to undercut the effectiveness of the informant’s testimony for the prosecution.

       Because we hold that Bursey’s constitutional rights were not violated by Weatherford’s actions, we reverse the holding of the Court of Appeals that Weatherford’s superior, Strom, was also liable because of his involvement in Weatherford’s undercover activities.

       If, for example, Weatherford had learned that Bursey would use an entrapment defense against whoever admitted to being a government agent, Weatherford could have planned his testimony so as to minimize his own role and emphasize Bursey’s predisposition. Bursey, on the other hand, would have had little time to reconstruct in his mind Weatherford’s role in the decision to commit the crime once Weatherford testified that he was the state agent. Cf. United States v. Orman, 417 F. Supp. 1126, 1137 (Colo. 1976).

       The Court suggests, ante, at 555 n. 4, that defendants can protect themselves against intrusions by third parties by excluding them from meetings at which defense strategy is discussed. But when, as here, the third party is an indicted codefendant, exclusion is not practicable; codefendants need to be informed of each other’s strategy if only to determine whether joinder is prejudicial, cf. Fed. Rule Crim. Proc. 14. Indeed, because of the interdependence of codefendants, communications between a lawyer and his client generally remain privileged even when disclosed to a codefendant or his attorney. See The Attorney-Client Privilege in Multiple Party Situations, 8 Colum. J. Law & Soc. Problems 179 (1972).

       Of course, the fact that Weatherford did not reveal what he learned may be relevant to the amount of damages Bursey can recover, as the Court of Appeals acknowledged. 528 F. 2d 483, 487 (CA4 1975). No damages assessment has been made in this case, however, since the District Court found no liability.

         In this case, for example, the prosecutor might have assumed that Weatherford had been privy to Bursey’s defense plans, and that Weather-ford’s acquiescence when told of the prosecutor’s decision to use him as a witness meant that the defense did not suspect Weatherford or have any damaging information about him.

       There is no evidence in this record that Weatherford’s life would have been jeopardized or any ongoing investigations compromised had Weatherford given up his cover on March 20, 1970, after the crime was committed, rather than on July 27, 1970, after trial began. To the contrary, the fact that Weatherford felt no need for police protection after trial, App. 107, suggests that there was no danger at any time. And the Chief of the South Carolina State Law Enforcement Division conceded that Weatherford was not working on “anything particular” between the time of the crime and the time of the trial. Id., at 125. Indeed the Chief admitted that he "wasn’t concerned” about losing Weatherford’s cover because after breaking the case “his identity is going to be known anyway.” Id., at 124. Thus the only legitimate justification the State had for arresting and indicting Weatherford, and for retaining a lawyer and manufacturing a story for him was to postpone for several months the date at which a new agent would have to be assigned again.

       The Court’s alternative suggestion, ante, at 551-552, that Black and O’Brien were actually Fourth Amendment cases is equally unpersuasive. The briefs in Black, while noting the Fourth Amendment issue, Memorandum for United States 4; Supplemental Memorandum for Petitioner 6, focused on the Sixth Amendment violation, Memorandum for United States 3-4; Supplemental Memorandum for Petitioner 7-20. The opinion does not mention either the Fourth or Sixth Amendment, but the narration of the facts malees clear that the Court’s primary concern was the interception of lawyer-client conversations. 385 U. S., at 27-28. Moreover, during the same Term that Black and O’Brien were decided, the Court, in another electronic surveillance ease, remanded for a taint hearing rather than for a new trial because, “[u]nlike the situations in Black . . . and O’Brien . . . there was apparently no direct intrusion here into attorney-client discussions.” Hoffa v. United States, 387 U. S. 231, 233 (1967). See also Wolff v. McDonnell, 418 U. S. 539, 576 (1974) (White, J.) (citing Black and O’Brien as Sixth Amendment cases); Hoffa v. United States, 385 U. S. 293, 307 (1966) (citing Black as Sixth Amendment case).


source: Caselaw Access Project

author: Mr. Justice Blackmun Mr. Justice Stevens, Mr. Justice Stewart,

license: Public Domain

text:
    DON E. WILLIAMS CO. v. COMMISSIONER OF INTERNAL REVENUE
    No. 75-1312.
    Argued December 8, 1976
    Decided February 22, 1977

      Marvin L. Schrager argued the cause for petitioner. With him on the briefs was Durward J. Long, Sr.

      Deputy Solicitor General Jones argued the cause for respondent. On the brief were Solicitor General Bork, Assistant Attorney General Crampton, Stuart A. Smith, Leonard J. Henzke, Jr., and David English Carmack.

   Mr. Justice Blackmun

delivered the opinion of the Court.

The issue in this federal income tax case is whether an accrual-basis corporate taxpayer, by delivering its fully secured promissory demand note to the trustees of its qualified employees' profit-sharing trust, is. entitled to a deduction therefor under § 404 (a) of the Internal Revenue Code of 1954, 26 U. S. C. §404 (a).

I

The pertinent facts are stipulated. Petitioner, Don E. Williams Company (taxpayer), is an Illinois corporation with its principal office at Moline in that State. It serves as a manufacturers’ representative and wholesaler for factory tools and supplies. It keeps its books and files its federal income tax returns on the accrual method of accounting and on the basis of the fiscal year ended April 30. Don E. Williams, Jr., president of the taxpayer, owns 87.08% of its outstanding capital stock; Joseph W. Phillips, Jr., vice president, owns 4.17% thereof; and Alice It. Williams, secretary-treasurer, owns 4.58%.

In November 1963, the taxpayer’s directors adopted the Don E. Williams Company Profit Sharing Plan and Trust. The trustees are the three officers of the taxpayer and the First National Bank of Moline. The trust was “qualified” under § 401 (a) of the Code and thus, under § 501 (a), is exempt from federal income tax.

Near the end of each of its fiscal years 1967, 1968, and 1969, the taxpayer’s directors authorized a contribution of approximately $30,000 to the trust. This amount was accrued as an expense and liability on the taxpayer’s books at the close of the year. In May, the taxpayer delivered to the trustees its interest-bearing promissory demand note for the amount of the liability so accrued. The 1967 and 1968 notes bore interest and the 1969 note bore 8% interest. Each note was guaranteed by the three officer-trustees individually and, in addition, was secured by collateral consisting of Mr. Williams’ stock of the taxpayer and the interests of Mr. Williams and Mr. Phillips under the plan. The value of the collateral plus the net worth of Alice R. Williams, a guarantor, greatly exceeded the face amount of each note.

Within a year following the issuance of each note the taxpayer delivered to the trustees its check for the principal amount of the note plus interest. Each check was duly honored.

In its federal income tax return filed for each of the fiscal years 1967, 1968, and 1969 the taxpayer claimed a deduction under § 404 (a) for the liability accrued to the trustees. On audit, the Commissioner of Internal Revenue, respondent here, ruled that the accruals and the deliveries of the notes to the trustees were not contributions that were “paid,” within the meaning of §404 (a). Accordingly, he disallowed the claimed accrual deductions and, instead, allowed deductions only for the checks for the respective fiscal years in which they were delivered. These adjustments resulted in deficiencies of $15,162.87, $1,360.64, and $530.42, respectively, in the taxpayer’s income taxes for the three years.

On petition for redetermination, the United States Tax Court, in a reviewed opinion with three dissents, upheld the Commissioner. 62 T. C. 166 (1974). In so doing, it adhered to its consistent rulings since 1949 to the effect that an accrual-basis employer’s contribution to its qualified employees’ profit-sharing plan in the form of the employer’s promissory note was not something “paid,” and therefore deductible, under § 404 (a) of the 1954 Code or under the predecessor § 23 (p) of the Internal Revenue Code of 1939. With the taxpayer’s case being subject to an appeal to the United States Court of Appeals for the Seventh Circuit, which had not yet ruled on the issue, the Tax Court declined to follow decisions of the Third, Ninth, and Tenth Circuits that had disagreed with the Tax Court in earlier cases. 62 T. C., at 168.

On appeal, the Seventh Circuit also declined to follow its sister Circuits, and affirmed. 527 F. 2d 649 (1975). We granted certiorari to resolve the conflict. 426 U. S. 919 (1976).

II

A. The statute. Under § 446 of the Code, 26 U. S„ C. § 446, taxable income is computed under the accounting method regularly utilized by the taxpayer in keeping its books. Subject to that requirement, “a taxpayer may compute taxable income” under the cash receipts and disbursements method or, among others, under “an accrual method.” As a consequence, the words “paid or accrued” or “paid or incurred” appear in many of the Code’s deduction provisions. The presence of these phrases reveals Congress’ general intent to give full meaning to the accrual system and to allow the accrual-basis taxpayer to deduct appropriate items that accrue, or are incurred, but are unpaid during the taxable year.

Section 404 (a),, however, quoted in n. 1, supra, stands in obvious contrast. It provides that “[i]f contributions are paid by an employer to . . . a . . . profit-sharing . . . plan,” the contributions, subject to a specified limitation in amount, shall be deductible “[i]n the taxable year when paid” (emphasis supplied). The usual alternative words, “or accrued” or “or incurred,” are missing, and their absence indicates congressional intent to permit deductions for profit-sharing plan contributions only to the extent they are actually paid and not merely accrued or incurred during the year. Congress, however, by way of addendum, provided a grace period for the accrual-basis taxpayer. Section 404 (a) (6) allowed a deduction for the taxable year with respect to a contribution on account of that year if it was a “payment . . . made” within the time prescribed for filing that year’s return. Under § 6072 (b) of the Code, this period, for petitioner-taxpayer, was two and one-half months after April 30, the close of its fiscal year, or July 15.

B. The legislative history. This history, as is to be expected, is consistent with the theme of the statute’s language. Section 404 is virtually identical with § 23 (p) of the 1939 Code, as amended by § 162 (b) of the Revenue Act of 1942, 56 Stat. 863. Committee reports at that time speak of an accrual-basis taxpayer’s deferral of paying compensation and state that, if this was done “under an arrangement having the effect of a . . . profit-sharing . . . plan . . . deferring the receipt of compensation, he will not be allowed a deduction until the year in which the compensation is paid” (emphasis supplied). H. R. Rep. No. 2333, 77th Cong., 2d Sess., 106 (1942); S. Rep. No. 1631, 77th Cong., 2d Sess., 141 (1942). This, however, would have created a computational problem for the accrual-basis taxpayer who wished to make the maximum contribution possible under the percentage limitations of the statute, see § 404 (a)(3)(A), n. 1, supra, but who would not be able to determine that figure until after the close of the taxable year. See Hearings before the Senate Committee on Finance on the Revenue Act of 1942, 77th Cong., 2d Sess., 465 (1942). Accordingly, Congress provided the grace period, originally 60 days under § 23 (p)(l)(E) of the 1939 Code, as amended, 56 Stat. 865, for the accrual-basis taxpayer.

Six years later the House Committee on Ways and Means recommended an extension of the grace time and referred to the then-existing 60-day period for the deduction of “contributions actually paid” (emphasis supplied). H. R. Rep. No. 2087, 80th Cong., 2d Sess., 13 (1948). The Senate did not then go along. But in 1954 the grace period was lengthened to coincide with the period for filing the return, § 404 (a)(6) of the 1954 Code, and at that time a similar reference, “actually makes payment,” was repeated in the legislative history. S. Rep. No. 1622, 83d Cong., 2d Sess., 55 (1954). See, id., at 292, and H. R. Rep. No, 1337, 83d Cong., 2d Sess., A151 (1954).

The applicable Treasury Regulations since 1942 consistently have stressed payment by the accrual-basis taxpayer. See Reg. Ill, § 29.23 (p)-l (1943); Reg. 118, § 39.23 (p)-l (d) (1953); Reg. § 1.404 (a)-l (c), 26 CFR § 1.404 (a)-l (c) (1975). With the statute re-enacted in the 1954 Code, this administrative construction may be said to have received congressional approval. See Lykes v. United States, 343 U. S. 118, 127 (1952).

We thus have, in the life and development of the statute, an unbroken pattern of emphasis on payment for the accrual-basis taxpayer. Indeed, the taxpayer here concedes that more than mere accrual is necessary for the accrual-basis taxpayer to be entitled to the deduction. Tr. of Oral Arg. 17. The taxpayer would find that requirement satisfied by the issuance and delivery of its promissory note. To that aspect of the case we now turn.

Ill

In the light of the language of the statute, its legislative history, and the taxpayer’s just-mentioned concession, the controversy before us obviously comes down to the question whether the taxpayer’s issuance and delivery of its promissory note to the trustees within the grace period, unaccompanied, however, by discharge of the note within that period, made the accrued contribution one that was “paid” within the meaning of §404 (a). The obligation to make the contribution for the taxable year existed, and the liability was even formally recognized by the taxpayer by the issuance and delivery of its note of acknowledged value. But was all this a contribution “paid” to the profit-sharing plan?

Two decisions of this Court, although they concern cash-basis taxpayers, are of helpful significance. The first is Eckert v. Burnet, 283 U. S. 140 (1931). There a taxpayer had endorsed notes issued by a corporation which later became insolvent. The taxpayer and his partner took up the notes with the creditor by replacing them with their own joint note. The Court unanimously held that this did not entitle the cash-basis taxpayer to a bad-debt deduction for, as the Board of Tax Appeals observed, he had “ 'merely exchanged his note under which he was primarily liable for the corporation’s notes under which he was secondarily liable, without any outlay of cash or property having a cash value.’ ” Id., at 141. The second decision is Helvering v. Price, 309 U. S. 409 (1940). There the taxpayer argued that his giving a secured note to a bank in response to a guarantee gave rise to a deduction. The Court observed that the note “was not the equivalent of cash to entitle the taxpayer to the deduction,” and concluded that the fact the note was secured made no difference in the result. “[T]he collateral was not payment. It was given to secure respondent’s promise to pay” and “did not transform the promise into the payment required to constitute a deductible loss in the taxable year.” Id., at 413-414.

The reasoning is apparent: the note may never be paid, and if it is not paid, “the taxpayer has parted with nothing more than his promise to pay.” Hart v. Commissioner, 54 F. 2d 848, 852 (CA1 1932).

If, as was suggested, the language of § 404 (a) places all taxpayers on a cash basis with respect to payments to a qualified profit-sharing trust, the principle of Eckert and of Price clearly is controlling here. The petitioner argues, of course, that that principle is not applicable to the accrual-basis taxpayer. We are not persuaded. The statutory terms “paid” and “payment,” coupled with the grace period and the legislative history’s reference to “paid” and “actually paid,” demonstrate that, regardless of the method of accounting, all taxpayers must pay out cash or its equivalent by the end of the grace period in order to qualify for the § 404 (a) deduction.

This accords, also, with the apparent policy behind the statutory provision, namely, that an objective outlay-of-assets test would insure the integrity of the employees’ plan and insure the full advantage of any contribution which entitles the employer to a tax benefit.

Other arguments advanced by the taxpayer are also unconvincing:

1. The taxpayer argues that because its notes are acknowledged to have had value, it is entitled to a deduction equal to that value. It is suggested that such a note would qualify as income to a seller-recipient. Whatever the situation might be with respect to the recipient, the note, for the maker, even though fully secured, is still only his promise to pay. It does not in itself constitute an outlay of cash or other property. A similar argument was made in Helvering v. Price, supra, and was not availing for the taxpayer there. See Brief for Respondent, O. T. 1939, No. 559, pp. 16-17.

2. The taxpayer suggests that the transaction equates with a payment of cash to the trustees followed by a loan, evidenced by the note in return, in the amount of the cash advanced. But

“a transaction is to be given its tax effect in accord with what actually occurred and not in accord with what might have occurred.
“. . . This Court has observed repeatedly that, while a taxpayer is free to organize his affairs as he chooses, nevertheless, once having done so, he must accept the tax consequences of his choice, whether contemplated or not. . . and may not enjoy the benefit of some other route he might have chosen to follow but did not.” Commissioner v. National Alfalfa Dehydrating, 417 U. S. 134, 148-149 (1974).

See Central Tablet Mfg. Co. v. United States, 417 U. S. 673, 690 (1974). What took place here is clear, and income tax consequences follow accordingly. We do not indulge in speculating how the transaction might have been recast with a different tax result.

3. Taxpayer heavily relies on the fact that three Courts of Appeals — the only courts at that level to pass upon the issue until the present case came to the Seventh Circuit, see n. 4, supra — have resolved the issue adversely to the Commissioner. We cannot ignore those decisions or lightly pass them by. Indeed, petitioner taxpayer has a stronger argument than the taxpayers in those cases because they concerned note transactions of somewhat lesser integrity, in the sense that the notes either bore a lower interest rate or no interest at all, or were less adequately secured. After careful review of those cases, however, we conclude that their analytical structure rests on two errors:

(a) The three Courts of Appeals, in considering § 404 (a), assumed, mistakenly we feel, that the word “paid” in the statute has the same meaning it possesses in § 267 (a). The latter section disallows deductions by an accrual-basis taxpayer for certain items that are accrued but not yet paid to related cash-basis payees. The analogy the Courts of Appeals drew between § 404 (a) and § 267 (a) derives from two earlier cases, namely, Anthony P. Miller, Inc. v. Commissioner, 164 F. 2d 268 (CA3 1947), cert. denied, 333 U. S. 861 (1948), and Musselman Hub-Brake Co. v. Commissioner, 139 F. 2d 65 (CA6 1943), where it was ruled that an accrual-basis corporate taxpayer’s delivery of a demand note to one of its officers for salary or to its controlling shareholder for royalties and interest effected a payment of those items under § 24 (c) of the 1939 Code (the predecessor of § 267 (a) of the 1954 Code). But this interpretation of the term "paid” in § 267 (a) necessarily resulted from the desirability of affording simultaneously consistent treatment to the deduction and to the income inclusion. The statute’s purpose was to prevent the tax avoidance that would result if an accrual-basis corporation could claim a deduction for an accrued item its related cash-basis payee would not include in income until it was paid, if ever. See H. R. Rep. No. 1546, 75th Cong., 1st Sess., 29 (1937); S. Rep. No. 1242, 75th Cong., 1st Sess., 31 (1937). Because the recipient of the note was required to include its value in income at the time of receipt, disallowance of the deduction to the maker corporation sympathetically was deemed not to serve the underlying policy of § 24 (c) of the 1939 Code. Musselman, 139 F. 2d, at 68; Logan Engineering Co. v. Commissioner, 12 T. C. 860, 868 (1949). The term "paid” in the statute was thus used merely, and only insofar as, to insure that transactions between related entities received consistent tax treatment. This situation has no counterpart under § 404 (a), for the qualified plan is exempt from tax. A policy consideration that might call for equivalence on both sides of the income tax ledger plainly is not present. And one is not brought into being by the fact that the trustees must disclose the note in the information report required to be filed by § 6047 (a) of the Cbde.

(b) The three Courts of Appeals seemed to equate a promissory note with a check. The line between the two may be thin at times, but it is distinct. The promissory note, even when payable on demand and fully secured, is still, as its name implies, only a promise to pay, and does not represent the paying out or reduction of assets. A check, on the other hand, is a direction to the bank for immediate payment, is a medium of exchange, and has come to be treated for federal tax purposes as a conditional payment of cash. Estate of Spiegel v. Commissioner, 12 T. C. 524 (1949); Rev. Rul. 54-465, 1954-2 Cum. Bull. 93. The factual difference is illustrated and revealed by taxpayer’s own payment of each promissory note with a check within a year after issuance.

We therefore find ourselves in disagreement with the result reached by the Third, Ninth, and Tenth Circuits in their respective cases hereinabove cited. We agree, instead, with the Tax Court in its uniform line of decisions and with the Seventh Circuit in the present case. The judgment of the Court of Appeals is affirmed.

It is so ordered.

Mr. Justice Stevens,

concurring.

Mr. Justice Blackmun’s opinion for the Court, which I join, construes the word “paid” to require the delivery of cash or its equivalent. In my judgment, that construction best serves the statutory purpose of protecting the integrity of pension plans because the employer and the pension trust are often controlled by the same interests.

Mr. Justice Stewart,

with whom Mr. Justice Powell joins,

dissenting.

The Court says that § 404 (a) “places all taxpayers on a cash basis with respect to payments to a qualified profit-sharing trust.” Ante, at 578. This assumption is the keystone of today’s decision, for only by treating the petitioner as a cash-method taxpayer can the Court apply the rule of Eckert v. Burnet, 283 U. S. 140, and Helvering v. Price, 309 U. S. 409, to require the petitioner to have paid out “cash or its equivalent” in order to be allowed a deduction. But the assumption is just that — an assumption that is not and cannot be supported.

It is true, as the Court observes, ante, at 574-577, that the statute, the applicable committee reports, and the underlying Treasury Regulations all emphasize that the employer’s contribution must be “paid”; mere accrual of the obligation is therefore insufficient to obtain the deduction. The question in this case, however, is whether the word “paid” requires an accrual-basis taxpayer to part with “cash or its equivalent” or whether the obligation may be “paid” by the delivery of a negotiable, interest-bearing, fully secured demand note. When the Court responds by stating baldly that “the language of § 404 (a) places all taxpayers on a cash basis,” it begs rather than answers the question.

This question-begging assumption is at odds with the long-accepted principle that cash- and accrual-basis taxpayers should not be lumped together when applying statutes such as this one. The case of Musselman Hub-Brake Co. v. Commissioner, 139 F. 2d 65 (CA6), expressed this principle more than 30 years ago. There an accrual-method corporation sought a business-expense deduction for patent royalties and interest paid to its controlling shareholder in the form of demand promissory notes. The applicable statute, as in the present case, required business expenses to be “paid” in the taxpayer’s taxable year or within two and one-half months thereafter. Internal Revenue Code of 1939, § 24(c). The court held that the deduction was permissible, noting that Eckert and Price “are not in point here” because in each case “[t]he method of accounting followed by the taxpayer . . . was the premise of . . . decision.” 139 F. 2d, at 69. The court explicitly rejected the contention that the requirement of actual payment “put an accrual taxpayer on a cash basis,” and held that such a restrictive interpretation of the word “paid” was unnecessary to achieve the congressional purpose.

The Musselman decision, and the reasoning that underlies it, have been approved by the Courts of Appeals in case after case, in connection with both § 404 (a) and other analogous provisions of the Internal Revenue Code. See, e. g., Fetzer Refrigerator Co. v. United States, 437 F. 2d 577 (CA6) ; Wasatch Chemical Co. v. Commissioner, 313 F. 2d 843 (CA10); Time Oil Co. v. Commissioner, 258 F. 2d 237 (CA9) ; Sachs v. Commissioner, 208 F. 2d 313 (CA3); Commissioner v. Mundet Cork Corp., 173 F. 2d 757 (CA2); Anthony P. Miller, Inc. v. Commissioner, 164 F. 2d 268 (CA3); Celina Mfg. Co. v. Commissioner, 142 F. 2d 449 (CA6); accord, Advance Constr. Co. v. United States, 356 F. Supp. 1267 (ND Ill.). See also Hart v. Commissioner, 54 F. 2d 848, 851-852 (CAI). The Court of Appeals for the Sixth Circuit considered the doctrine most recently in Patmon, Young & Kirk v. Commissioner, 536 F. 2d 142 (1976), a case decided after the decision of the Seventh Circuit that the Court affirms today. The court in Patmon, relying on Eckert and Price, denied a § 404 (a) deduction to a cash-basis taxpayer that had contributed a guaranteed demand note to its profit-sharing trust. The court was careful, however, to distinguish accrual-method taxpayers, noting that “the word 'paid’ [must] be defined in the context and in light of the purpose of the particular statute in which it is used,” 536 F. 2d, at 144.

In short, until the Court of Appeals for the Seventh Circuit held as it did in the present case, no federal appellate court had ever held that use of the word “paid” in a statute such as § 404 (a) requires that cash- and accrual-basis taxpayers be treated identically. This unanimity was .soundly supported by a long-established principle of tax law — that the construction of words in a tax statute should be in “harmony with the statutory scheme and purpose.” Helvering v. Hutchings, 312 U. S. 393, 398. Under this principle, there is no reason to suppose that the word “paid” means the same thing with respect to taxpayers who use different accounting methods, and every reason to suppose it does not.

The Eckert and Price cases, requiring the payment of “cash or its equivalent,” were explicitly premised on the taxpayers' use of the cash method. See Eckert, 283 U. S., at 141 (“For the purpose of a return upon a cash basis, there was no loss in 1925”); Price, 309 U. S., at 413 (“As the return was on the cash basis, there could be no deduction in the year 1932 . . ,”). Indeed, their focus explains their result. Because the returns at issue were filed on a cash basis, the thrust of the inquiry was upon determining what the taxpayers had surrendered. They had given up nothing of immediate cash value to them, and so it would have been inconsistent with fundamental principles of cash-method accounting to have allowed them deductions.

In this case, however, the taxpayer seeking the deductions keeps its books on the accrual basis; no accounting principles require that the inquiry be focused on the value to it of the property it surrenders or that its payments be made in cash or the equivalent. In such a situation I think “the word 'paid’ [must] be defined in the context and in light of the purpose of the particular statute in which it is used.” Patmon, Young & Kirk v. Commissioner, supra, at 144. That is, the normal rules governing accrual-method accounting should apply except as necessary to achieve the purpose of § 404 (a). Since that purpose is to protect the employees’ trust fund and to ensure that the fund receives the “full advantage” of the employer’s deductible contribution, ante, at 579, the focus is properly on the value to the trust of what it has received. Here it received tangible, interest-bearing, fully secured demand notes, upon which the trust concededly could have obtained full face value at any local bank. The notes would have been “income” to any cash-basis taxpayer, and the trust was required to report them as such. Ante, at 582. Indeed, the Commissioner concedes that the petitioner could have obtained its deductions had it tendered to the trust identical notes of a different company, for such a transaction would have been treated as a deductible transfer of property. See Colorado Nat. Bank of Denver v. Commissioner, 30 T. C. 933.

Plainly, then, neither the purpose of the statute nor any principles of cash-basis or accrual-basis accounting require or even suggest a construction of the word “paid” in § 404 (a) to deny this accrual-method taxpayer a deduction because it did not part with “cash or its equivalent” during the statutory period. As the Court says, the term “paid” in § 404 (a) was used to “insure the integrity of the employees’ plan and insure the full advantage of any contribution which entitles the employer to a tax benefit.” Ante, at 579. That purpose was wholly served by the delivery of negotiable, interest-bearing, fully secured demand notes.

I would reverse the judgment of the Court of Appeals.

       Section 404 (a), as amended by § 24 of the Technical Amendments Act of 1958, 72 Stat. 1623, reads in pertinent part:
      “(a) General rule.
      “If contributions are paid by an employer to or under a stock bonus, pension, profit-sharing, or annuity plan, . . . such contributions . . . shall not be deductible under section 162 (relating to trade or business expenses) or section 212 (relating to expenses for the production of income) ; but, if they satisfy the conditions of either of such sections, they shall be deductible under this section, subject, however, to the following limitations as to the amounts deductible in any year:
      “(3) Stock bonus and profit-sharing trusts.
      “(A) Limits on deductible contributions.
      “In the taxable year when paid, if the contributions are paid into a . . . profit-sharing trust, and if such taxable year ends within or with a taxable year of the trust with respect to which the trust is exempt under section 501 fa), in an amount not in excess of 15 percent of the compensation otherwise paid or accrued during the taxable year to all employees under the . . . profit-sharing plan. . .

       Respondent acknowledges that a solvent taxpayer’s issuance and delivery of a check is a contribution that is “paid,” within the language of §404 (a). Tr. of Oral Arg. 28-31. See Dick Bros. v. Commissioner, 205 F. 2d 64 (CA3 1953).

        Logan Engineering Co. v. Commissioner, 12 T. C. 860 (Kern, J., reviewed by the court with no dissents), appeal dismissed (CA7 1949); Slaymaker Lock Co. v. Commissioner, 18 T. C. 1001 (1952) (Bruce, J.), rev’d sub nom. Sachs v. Commissioner, 208 F. 2d 313 (CA3 1953); Time Oil Co. v. Commissioner, 26 T. C. 1061 (1956) (Withey, J.), remanded, 258 F. 2d 237 (CA9 1958), supplemental opinion, 294 F. 2d 667 (1961); Wasatch Chemical Co. v. Commissioner, 37 T. C. 817 (1962) (Fay, J., reviewed by tbe court with no dissents), remanded, 313 F. 2d 843 (CA10 1963). Memorandum decisions to the same effect are Freer Motor Transfer v. Commissioner, 8 TCM 507 (1949), ¶ 49,124 P-H Memo TC (Kern, J.); Sachs v. Commissioner, 11 TCM 882 (1952), ¶ 52,256 P-H Memo TC (LeMire, J.), remanded, 208 F. 2d 313 (CA3 1953); Lancer Clothing Corp. v. Commissioner, 34 TCM 776 (1975), ¶ 75,180 P-H Memo TC (Scott, J.), on appeal to the Second Circuit, No. 76-4012; Coastal Electric Corp. v. Commissioner, 34 TCM 1007 (1975), ¶ 75,231 P-H Memo TC (Goffe, J.), on appeal to the Fourth Circuit, No. 75-2184. See Rev. Rul. 71-95, 1971-1 Cum. Bull. 130; Rev. Rul. 55-608, 1955-2 Cum. Bull. 546, 548. See also Patmon, Young & Kirk v. Commissioner, 536 F. 2d 142 (CA6 1976), concerning a cash basis taxpayer.

        Sachs v. Commissioner, 208 F. 2d 313 (CA3 1953) (negotiable interest-bearing demand notes); Time Oil Co. v. Commissioner, 258 F. 2d 237, 240 (CA9 1958) (non-interest-bearing demand notes, said to present a “close” question); Wasatch Chemical Co. v. Commissioner, 313 F. 2d 843 (CA10 1963) (unsecured interest-bearing five-year promissory notes). Accord, Advance Constr. Co. v. United States, 356 F. Supp. 1267 (ND Ill. 1972) (secured interest-bearing term promissory note).
      The persistence of the Government in pursuing its position on an issue of tax law has been noted before. United States v. Foster Lumber Co., ante, at 54-55 (dissenting opinion). This time, however, the Government’s position has been consistently accepted for more than 25 years by the Tax Court. It thus has not encountered uniform judicial rejection over a substantial period, as it had on the Foster Lumber issue.

       See, e. g., §§162 (a), 163(a), 164(a), 174(a)(1), 175(a), 177(a), 180 (a), 182 (a), 212, 216 (a), and 217 (a). See also § 7701 (a) (25).

       Section 404 (a) (6), as it read prior to a 1974 amendment, provided:
      “(6) Taxpayers on accrual basis.
      “For purposes of paragraphs (1), (2), and (3), a taxpayer on the accrual basis shall be deemed to have made a payment on the last day of the year of accrual if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extension thereof).”
      Section 1013 (c) (2) of the Employee Retirement Income Security Act of 1974, 88 Stat. 923, amended this section to afford the same grace period to a cash-basis taxpayer.

       At least one witness at the time aptly described the law as having been “drafted in such a way that all corporations are put on a cash basis on the payment to trusts.” Statement of Richard D. Sturtevant in Hearings before the Senate Committee on Finance on the Revenue Act of 1942, 77th Cong., 2d Sess., 465 (1942).

       Reg. § 1.404 (a)-l (c) reads:
      “Deductions under section 404 (a) are generally allowable only for the year in which the contribution or compensation is paid, regardless of the fact that the taxpayer, may make his returns on the accrual method of accounting. Exceptions are made in the case of . . . and, as provided by section 404 (a)(6), in the case of payments made by a taxpayer on the accrual method of accounting not later than the time prescribed by law for filing the return for the taxable year of accrual (including extensions thereof). This latter provision is intended to permit a taxpayer on the accrual method to deduct such accrued contribution or compensation in the year of accrual, provided payment is actually made not later than the time prescribed by law for filing. the return for the taxable year of accrual (including extensions thereof) . . . .”

       Other courts have applied Eckert and Price to situations other than a claimed bad-debt deduction, Cleaver v. Commissioner, 158 F. 2d 342 (CA7 1946), cert. denied, 330 U. S. 849 (1947) (interest); Jenkins v. Bitgood, 101 F. 2d 17 (CA2), cert. denied, 307 U. S. 636 (1939) (loss); Baltimore Dairy Lunch, Inc. v. United States, 231 F. 2d 870, 875 (CA8 1956) (loss); Guren v. Commissioner, 66 T. C. 118 (1976) (charitable contribution); Petty v. Commissioner, 40 T. C. 521, 524 (1963) (Atkins, J., for seven judges, concurring) (charitable contribution).

       A similar policy applies to deductions for charitable contributions under § 170 (a) of the Code. These deductions, too-, are limited to those the “payment of which is made within the taxable year,” even though the particular taxpayer is on the accrual basis. See H. R. Rep. No. 1860, 75th Cong., 3d Sess., 19 (1938), referring to §§23 (o) and (q) of the Revenue Act of 1938, 52 Stat. 463, 464.

       By § 2003 (a) of the Employee Retirement Income Security Act of 1974, 88 Stat. 971, § 4975 was added to the 1954 Code. It makes an employer’s issuance of its promissory note to a qualified profit-sharing plan a “prohibited transaction” subject to penalty. See §§4975 (a), (b), and (c)(1)(B). See also H. R. Conf. Rep. No. 93-1280, p. 308 (1974). By this penalty imposition, Congress has reaffirmed the actual-payment requirement of §404 (a), and strengthened its enforceability.

       Section 267 relates to items that would be deductible under §§ 162 or 212 and reads:
      “(a) Deductions disallowed.
      “No deduction shall be allowed—
      “(2) Unpaid expenses and interest.
      “In respect of expenses, otherwise deductible under section 162 or 212, or of interest, otherwise deductible under section 163,'—
      “(A) If within the period consisting of the taxable year of the taxpayer and 2% months after the close thereof (i) such expenses or interest are not paid, and (ii) the amount thereof is not includible in the gross income of the person to whom the payment is to be made; and
      “(B) If, by reason of the method of accounting of the person to whom the payment is to be made, the amount thereof is not, unless paid, includible in the gross income of such person for the taxable year in which or with which the taxable year of the taxpayer ends; and
      “(C) If, at the close of the taxable year of the taxpayer or at any time within 2% months thereafter, both the taxpayer and the person to whom the payment is to be made are persons specified within any one of the paragraphs of subsection (b).
      “(b) Relationships.
      “The persons referred to in subsection (a) are:
      “ (4) A grantor and a fiduciary of any trust . . . .”
      Section 404 (a), on the other hand, concerns items specifically precluded as deductions under §§ 162 and 212.

        Celina Mfg. Co. v. Commissioner, 142 F. 2d 449 (CA6 1944) ; Commissioner v. Mundet Cork Corp., 173 F. 2d 757 (CA2 1949); Akron Welding & Spring Co. v. Commissioner, 10 T. C. 715 (1948), are to the same effect. See Rev. Rul. 55-608, 1955-2 Cum. Bull. 546, 548.

       In some instances the language is “actually paid,” see, e. g., H. R. Rep. No. 2087, 80th Cong., 2d Sess., 13 (1948) (emphasis added), quoted ante, at 576, an embellishment that adds nothing of substance.

       The only thread of support the Court finds is the statement of one witness before the Senate Committee on .Finance that § 404 (a) puts corporations “on a cash basis on the payment to trusts.” Ante, at 575 n. 7. We have recently noted the gossamer quality of that kind of legislative history. Ernst & Ernst v. Hochfelder, 425 U. S. 185, 204 n. 24.

       The invocation of the “re-enactment doctrine” in the Court’s opinion today, ante, at 576-577, is therefore dramatically misplaced. The “administrative construction” of § 404 (a) that supposedly received congressional approval when the 1954 Code was enacted was in fact nothing more than an administrative rehash of the statutory language that did not illumine its meaning. The regulation, Treas. Reg. § 1.404 (a)-l (c), 26 CFR § 1.404 (a)-l (e) (1975), refers simply to “actual payments” and restates the statute’s requirements that the employer’s contribution to the profit-sharing plan be “paid” before a deduction may be had. That the contribution must be “paid” whether the taxpayer files his returns on the accrual or cash method of accounting of course does not bear on the question whether the word “paid” means the same thing in both situations. The answer to this question in the appellate courts as of 1954 was clearly “no.” Thus, the “re-enactment doctrine” not only fails to support the Court’s decision in this case, but cuts strongly against it.

       The Court correctly notes that Eckert and Price have been applied to claimed deductions for items other than bad debts, such as interest and business losses, ante, at 578 n. 9, but all of the cases that the Court cites involved cash-basis taxpayers.

       The Court’s construction of § 404 (a) is inconsistent with its analysis of §267 (a). The term “paid” in §267 (a), the Court acknowledges, was used “merely, and only insofar as” necessary to accomplish that section’s purpose of ensuring consistent tax treatment of transactions between related entities. Ante, at 582. The implication is that normal accounting principles continue to apply to the full extent that their application is consistent with that purpose, and the cases the Court cites so hold. Anthony P. Miller, Inc. v. Commissioner, 164 F. 2d 268 (CA3); Musselman Hub-Brake Co. v. Commissioner, 139 F. 2d 65 (CA6). The Court never explains why the same logic should not inform the construction of § 404 (a).