United States v. Daniel S. Gahagan

881 F.2d 1380, 1989 U.S. App. LEXIS 11976, 1989 WL 90851

• Court: Court of Appeals for the Sixth Circuit
• Decided: August 14, 1989
• Docket: 88-1881
• Status: Published

Opinions

BAILEY BROWN, Senior Circuit Judge.

Daniel Gahagan appeals his jury conviction for failing to report his ownership of a 1974 Jaguar in a financial report filed with his probation officer, in violation of 18 U.S.C. § 1001. We determine, however, that there was no evidence from which the jury could find that Gahagan was the owner of the Jaguar and, therefore, there was no evidence from which it could find that he made a false statement or concealed a material fact, as is required for conviction under § 1001. Accordingly, we reverse Ga-hagan’s conviction.

FACTS

On September 12, 1986, Daniel Gahagan, his brother, Michael, and Susan Soper were arrested on drug charges following a search of the Gahagan’s residences in Johannesburg, Michigan. After the arrests, Michael T. Vetter of the DEA Drug Task Force began a forfeiture investigation of Daniel Gahagan's assets. During this investigation, Vetter discovered that a 1974 Jaguar and a 1962 Ford Falcon were registered in Gahagan’s name.

On May 21, 1987, Gahagan was indicted on charges of conspiracy to possess with intent to distribute marijuana and hashish. On July 29 and 30, 1987, a suppression hearing was held during which Vetter acknowledged that the government was pursuing forfeiture proceedings against Gaha-gan’s assets. The motion to suppress was denied by the district court. Gahagan and his co-defendants then entered a plea of guilty pursuant to Rule 11(a)(2) of the Federal Rules of Criminal Procedure. ■ The plea agreement gave the district judge the discretion to impose a $20,000 fine in addition to a term of imprisonment.

Dennis Roy, a United States Probation Officer in Bay City, Michigan, was assigned to Gahagan’s case. On August 7, 1987, Gahagan completed, signed, and filed a financial report with Roy listing his assets. Roy then discussed each entry with Gahagan. Gahagan did not disclose ownership of the 1974 Jaguar in the financial report or in his discussion with Roy. Gaha-gan did, however, report his ownership of the 1962 Ford Falcon, his interest in real estate in Otsego County, Michigan, and the fact that he owed his defense attorney $7000.

At Gahagan’s sentencing proceedings, his attorney stressed Gahagan’s financial condition as reported in the financial statement filed with Roy. The district judge sentenced Gahagan to a two-year prison term followed by a two-year special parole term.¹ The judge declined to impose a fine against Gahagan, however, noting his apparent lack of substantial assets.

On February 23, 1988, Gahagan was indicted on the present charge of concealing his ownership of the 1974 Jaguar from his probation officer in violation of 18 U.S.C. § 1001. Following a jury trial, Gahagan was convicted and sentenced to one year without parole, to be served consecutively with his two-year sentence on the drug charges. Gahagan was also fined $2500.

Gahagan now appeals his § 1001 conviction contending that he cannot be guilty of concealing his ownership of the Jaguar or falsely representing his assets since he transferred title to the automobile to his girl friend, Rosemary Tongish, on July 10, 1987, prior to his completion of the financial report and his discussion with Roy.²

ANALYSIS

Gahagan appeals his jury conviction for concealing ownership of a 1974 Jaguar and falsely representing his assets in a financial report filed with his probation officer, in violation of 18 U.S.C. § 1001. That section provides:

Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined not more than $10,000 or imprisoned not more than five years, or both.

The indictment under which Gahagan was charged stated:

On or about August 6, 1987, in the Eastern District of Michigan, Northern Division, DANIEL GAHAGAN, defendant herein, in a matter within the jurisdiction of the United States Probation Office, an agency of the United States, did knowingly and willfully conceal and cover up by trick, scheme and device a material fact, and make a false, fictitious and fraudulent statement and representation, and make and use a false writing and document, knowing the same to contain a false, fictitious and fraudulent statement and entry, in that DANIEL GAHAGAN submitted a financial report to his probation officer in which DANIEL GAHAGAN failed to report that he owned a 1974 Jaguar, four door, VIN UE2T52476BW, and that he had an asset in the form of the proceeds of the sale of the above described vehicle, in violation of Title 18, United States Code, section 1001.³

Gahagan contends that he was not the owner of the Jaguar, having transferred it to his girl friend, Rosemary Tongish, prior to filing the financial report with his probation officer. He asserts that, therefore, he did not violate 18 U.S.C. § 1001 by failing to report that which he did not own.

A violation of § 1001 can occur in one of two ways: first, knowing and willful concealment “by any trick, scheme, or device” of a material fact; second, the making of a false statement or representation. United States v. Diogo, 320 F.2d 898, 902 (2d Cir.1963). The second method of violation requires: “(1) the making of a statement; (2) the falsity of such statement; (3) knowledge of the falsity of the statement; (4) relevance of such statement to the functioning of a federal department or agency; (5) that the false statement was material.” United States v. Aarons, 718 F.2d 188, 190 (6th Cir.1983).

The jury in this case was instructed on both means of violating § 1001. The question to be resolved by this court is the same for both methods of violation. With regard to concealment, we must determine whether Gahagan’s ownership of the Jaguar was a “fact” the concealment of which was sufficient to sustain his conviction. Concerning the false statement, we must determine whether Gahagan’s implied representation in the financial report that he did not own the Jaguar was a false representation. Thus, both methods of violation require a determination of whether Gahagan owned the Jaguar at the time he completed the financial report and discussed his assets with his probation officer.

To resolve the question of whether Gaha-gan in fact “owned” the Jaguar, it is necessary to consider the law of automobile ownership in Colorado, where Gahagan and Tongish resided and where the Jaguar was registered at the time Gahagan filed the financial report. Colorado Revised Statutes § 42-6-102(9) defines an “owner” of an automobile as “any person, association of persons, firm, or corporation in whose name the title to a motor vehicle is registered.” Section 42-6-107 provides, in part, that “[t]he certificate of title shall be prima facie evidence of all of the matters therein contained and that the person in whose name said certificate is registered is the lawful owner of the vehicle therein described.” Section 42-6-108 declares that “no purchaser or transferee shall acquire any right, title, or interest in and to a motor vehicle purchased by him unless and until he obtains from the transferor the certificate of title thereto, duly transferred to him in accordance with the provisions of this part 1.”⁴

In this case, title was held by Tongish at the time Gahagan was alleged to have concealed his ownership of the automobile. The government asserts, however, that the transfer of title to Tongish was a sham and did not effect a transfer of ownership rights in the automobile.⁵ Nevertheless, under Colorado law, all of the procedures necessary for the transfer of ownership from Gahagan to Tongish were satisfied before the financial statement was completed,⁶ making Tongish, and not Gahagan, the owner of the Jaguar at that time. Therefore, Gahagan could not be guilty of either concealing his ownership rights in the Jaguar or of falsely reporting that his assets did not include the automobile.

This determination is similar to the Eighth Circuit’s reversal of a § 1001 false statement conviction in United States v. Vesaas, 586 F.2d 101 (8th Cir.1978). In that case, Vesaas was convicted in district court under § 1001 for falsely reporting that he had no knowledge of property owned by his deceased mother and himself in joint tenancy. The Eighth Circuit held that Vesaas’ denial of such ownership “cannot constitute a false statement since it is legally impossible to be a joint tenant with a decedent.” Id. at 103.

[A] prosecution for a false statement under § 1001 or under the perjury statutes cannot be based on an ambiguous question where the response may be literally and factually correct.... An indictment premised on a statement which on its face is not false cannot survive.

Id. at 104. Here, the concealment charged in the indictment does not constitute concealment for purposes of 18 U.S.C. § 1001 since the material fact Gahagan allegedly concealed was not a fact. Furthermore, Gahagan’s representation that his assets did not include the Jaguar was on its face not a false representation.

Similarly, the Second Circuit in United States v. Diogo, 320 F.2d 898 (1963), reversed the § 1001 false statement convictions of the defendant-aliens who had represented that they were married to United States citizens in order to gain entry into this country. The marriages were valid under New York law, where the defendants resided, but were not “marriages” within the meaning of the statute which allowed the aliens to enter. The court held that “so long as falsity is an element of a criminal prosecution for false representations with respect to one’s marital status, we hold that the validity of the marriage will be material to such a prosecution.” Id. at 905. Since the government had not proved the invalidity of the marriages under New York law, the court reversed the false statement convictions. "[I]t is incumbent upon the Government to negative any reasonable interpretation that would make the defendant’s statement factually correct.” Id. at 907.

In this case, the validity of Tongish’s ownership of the Jaguar, or, conversely, Gahagan’s lack of ownership, is material to the false representation charge, since falsity is an element of that charge. Because, under the procedures required in Colorado, the transfer of title to Tongish was valid, Gahagan did not falsely represent his assets when, relying on the transfer, he failed to acknowledge ownership of the automobile.

The Diogo court also addressed the government’s argument in that case that the defendants were guilty of concealment in violation of § 1001. The court stated that the defendants did not knowingly and willfully conceal the nature of their marriages if they believed the marriages to be valid. Id. at 909. In this case, as in Diogo, the government did not prove the intent necessary for a § 1001 violation. Section 1001 requires that a false statement be made with knowledge of the falsity and that the concealment be made knowingly and willfully. To demonstrate that the alleged misrepresentation and concealment were knowingly made, it was necessary for the government to show that Gahagan knew he owned the Jaguar despite the transfer of title to Tongish. The government, however, failed to prove that the transfer of title did not convey ownership to Tongish and, therefore, a fortiori, failed to prove that Gahagan had knowledge that he owned the Jaguar and failed to prove that he willfully and knowingly concealed his ownership.

Therefore, not only did the government fail to prove that Gahagan owned the Jaguar but it also failed to demonstrate the intent necessary for a § 1001 conviction.

Like the Diogo court, we distinguish Lutwak v. United States, 344 U.S. 604, 73 S.Ct. 481, 97 L.Ed. 593 (1953). In Lutwak, which was not a prosecution under § 1001, the Court held that the defendants had conspired to fraudulently conceal the circumstances surrounding their marriages by asserting to immigration officials the existence of the marriages in order to gain entry into the United States. The proof showed that the defendants went through marriage ceremonies with honorably discharged veterans of World War II in order to gain admission to the United States. The proof also showed that the defendants did not intend to be married to the veterans in the ordinary sense and in fact did not live with them after the marriages. The Court held that under a proper interpretation of the statute (the War Brides Act, 8 U.S.C. § 232), this benefit was to be bestowed only on persons who married veterans in the ordinary sense of marriage, i.e., with the good faith intent to live with them. Therefore, the Court held, the defendants could be found guilty of conspiracy to violate 8 U.S.C. § 180(a), which made it an offense to gain entry to the United States by making a willfully false or misleading representation, and conspiracy to violate 8 U.S.C. § 220(c) by knowingly making a false statement in any document required by the immigration laws. In other words, since the War Brides Act required, for admission to the United States, that the person intend to be married in the ordinary sense, it was fraudulent and misleading, in this context, to represent that there was a marriage.

In the instant case, on the contrary, Ga-hagan is charged with willfully and knowingly concealing his ownership of the Jaguar and knowingly misrepresenting that he did not own it. Certainly a fair interpretation of the indictment, in charging that Gahagan owned the Jaguar, is that he had title to the automobile. And, as stated, it is “incumbent upon the Government to negative any reasonable interpretation that would make the defendant’s statement factually correct.” Diogo, 320 F.2d at 907. On the contrary, in Lutwak, there was a statute (the War Brides Act) that gave meaning to marriage. Here, in this prosecution under § 1001, we have no statutory definition of ownership and the proof did not negative a reasonable belief that the transfer of title conveyed ownership to Tongish.

CONCLUSION

In summary, we determine that this conviction must be reversed because there is no evidence from which the jury could within reason find beyond a reasonable doubt that Gahagan owned the Jaguar on August 6, 1987, or that he willfully and knowingly concealed his ownership or knowingly misrepresented that he did not own it at that time.

Accordingly, we REVERSE Gahagan’s conviction for violating 18 U.S.C. § 1001.

1 . The district court’s entry of judgment against Gahagan was subsequently affirmed by this court in United States v. Gahagan, 865 F.2d 1490 (6th Cir.1989).

2 . Gahagan also argues on appeal that the district court committed reversible error by permitting the government to introduce evidence of extrinsic acts which resulted in prejudice to Gahagan in violation of Rules 403 and 404(b) of the Federal Rules of Evidence. It is unnecessary for us to address this contention since reversal of Gahagan’s conviction is warranted on another ground.

3 . It should be noted that, in charging that on August 6, 1987, Gahagan falsely concealed his ownership of the Jaguar and falsely concealed his "asset in the form of the proceeds of the sale” of the Jaguar, the indictment is inconsistent. On the one hand, it alleges that Gahagan owned the Jaguar and, at the same time, alleges that he had sold it and possessed the proceeds from the sale. In any event, it is without dispute that Gahagan did not, on August 6, 1987, have the proceeds from the sale. It is not contended that Tongish paid Gahagan for the Jaguar. Moreover, the government does not contest that Tongish sold the automobile in Novem-her of 1987 for $4500 and deposited that amount in her bank account.

4 . Colorado Revised Statutes § 42-6-109, which enumerates the procedures for transfer of title, provides:

(1) Upon the sale or transfer of a motor vehicle for which a certificate of title has been issued, the person in whose name said certificate of title is registered, if he is other than a dealer, shall, in his own person or by his agent or attorney thereunto duly authorized, execute a formal transfer of the vehicle described in the certificate, which transfer shall be subscribed and sworn to before an officer authorized to administer oaths in the state. The purchaser or transferee, within forty-five days thereafter, shall present such certificate, duly transferred, together with his application for a new certificate of title to the director or one of his authorized agents, accompanied by the fee required in section 42-6-135 to be paid for the issuance of a new certificate of title; whereupon, a new certificate of title shall be issued and disposition thereof made as required in this part 1.

Section 42-6-118 directs the application of these procedures to the transfer of vehicles registered in other states. Here, the Jaguar was registered in Michigan prior to its transfer to Tongish in Colorado.

5 . We point out that, as noted in footnote 3, this contention is inconsistent with the indictment because it alleges that at the time Gahagan made his statement to the probation officer, he had received the proceeds from the sale of the Jaguar.

6 . In compliance with Colorado Revised Statutes § 42-6-109, Tongish presented the transferred certificate of title together with her application for a new certificate to the county motor vehicle registration office and paid the required fee for the issuance of a new certificate of title. Although it is unclear from the record whether Gahagan executed a formal transfer of title sworn and subscribed to before a state officer, as is required by § 42-6-109, it appears that he endorsed his title to the automobile in blank, which gave Tongish the authority to surrender it to the registration office to obtain a new title. Codding v. Jackson, 132 Colo. 320, 287 P.2d 976 (1955).