U.S. v. Bagnall

• Decision Date: 20 September 1990
• Docket Number: No. 89-5801,No. 89-5802,89-5801,89-5802
• Citation: 907 F.2d 432
• Parties: UNITED STATES of America, v. BAGNALL, Allan J., Appellant in, and Bagnall, Beverly Jayne, Appellant in
• Court: U.S. Court of Appeals — Third Circuit

Page 432

907 F.2d 432

UNITED STATES of America, v. BAGNALL, Allan J., Appellant in No. 89-5801 and Bagnall, Beverly Jayne, Appellant in No. 89-5802.

United States Court of Appeals Third Circuit.

Argued Jan. 31, 1990.

Decided July 6, 1990.

Rehearing Denied Sept. 20, 1990.

Joshua D. Lock (argued), Harrisburg, Pa., for appellants.

William A. Behe (argued), Sally A. Lied, U.S. Atty's. Office, Harrisburg, Pa., for appellee.

Before STAPLETON and MANSMANN, Circuit Judges, and ACKERMAN, District Judge. ^*

OPINION OF THE COURT

STAPLETON, Circuit Judge:

Appellants Allan J. Bagnall and his wife, Beverly J. Bagnall, were each convicted of two counts of introducing and attempting to introduce imported merchandise into the commerce of the United States by means of false statements, in violation of 18 U.S.C. Sec. 542. Allan Bagnall was additionally convicted of one count of conspiracy in violation of 18 U.S.C. Sec. 371. The Bagnalls appeal from the judgments of sentence, challenging their convictions on sufficiency of the evidence grounds. We conclude that the Bagnalls' automobile purchase scheme did not violate Sec. 542, and therefore the convictions must be reversed.

I.

The "Diplomatic Tourist Order Program" (DTOP) is a promotional program of Mercedes-Benz of North America, Inc. ("Mercedes-Benz") through which foreign diplomats and American citizens holding "official passports" ¹ can purchase Mercedes-Benz automobiles for their personal or family use at a ten percent discount off the European delivery price. Eligible DTOP participants can place orders through Mercedes-Benz dealers either in the United States or abroad, and may accept delivery of their cars at either location. However, only those persons currently serving on a foreign assignment, or designated to embark on one, are eligible to participate in the DTOP.

In order to purchase a vehicle through the DTOP, the buyer must submit the following materials: (1) a completed dealer order form and three pre-printed Mercedes-Benz forms; (2) a "Certificate of Status" signed by an authorized representative from the purchaser's place of employment, verifying the purchaser's employment status and passport information; ² (3) a verification letter signed by an authorized representative from the purchaser's place of employment, attesting to the fact that the purchaser currently enjoys diplomatic privileges and immunities; (4) a "Customs License Plate Application" in order to permit overseas operation of the vehicle; and, (5) a "Shipping and Handling Authorization" authorizing Mercedes-Benz to accept delivery of the vehicle and deliver it to the dealer through which it was ordered. ³ Once a purchaser completes these forms and assembles the requisite documentation, the local Mercedes-Benz dealer forwards the materials to a Mercedes-Benz zone office for review and processing. If approved, the paperwork is sent to the manufacturer in Germany, production of the vehicle is commenced, and a "confirmation of order" and invoice are mailed to the customer. Upon importation of the car, Mercedes-Benz furnishes copies of the "confirmation of order" and invoice to the United States Customs Service to document valuation.

Allan Bagnall's involvement with the DTOP began in May, 1984, when he placed a DTOP order for a Mercedes-Benz model 380 SLCR through Lee Stotsky at the Diehl Motor Company, Inc. ("Diehl"). Bagnall, his wife and son had each been issued official passports several years earlier when Bagnall worked in West Germany as a computer analyst for the National Security Agency ("NSA"). Although still employed by NSA at the time he ordered the car, Bagnall was nonetheless ineligible for DTOP participation since his official passport had expired shortly before he placed his order and he was no longer serving on a foreign assignment nor scheduled to depart on one. He used the number from his expired official passport in completing the requisite order forms, and supplied Stotsky with all of the required paperwork except for the NSA verification letter.

When Bagnall later decided that he could not afford the car, he agreed to permit Stotsky, the car dealer, to use his name and official passport number to proceed with the planned DTOP discount purchase in exchange for a thousand dollars. Stotsky could then sell the car at the American fair market value, realizing the amount of the DTOP discount as profit. Bagnall and Stotsky also discussed the possibility of repeating the scheme with other holders of official passports, among them Bagnall's wife and son.

The order for the first car proceeded using the paperwork that Bagnall had originally prepared when he placed his order for the 380 SL Coupe, although the dealer order forms were altered so that the more expensive 500 SEL model would be ordered instead. The order forms were then forwarded to the zone office for review, and Stotsky was advised that Bagnall would have to provide the NSA verification letter in order to prove his DTOP eligibility. The letter had to be executed by an authorized NSA representative on the agency's stationery, certifying that Bagnall currently enjoyed diplomatic privileges and immunities. Inasmuch as his official passport had expired and he no longer did enjoy diplomatic privileges and immunities, the requested documentation was falsified. NSA employee Carol Giffin testified at trial that Bagnall contacted Candy Jolles, who was Giffin's roommate as well as the Mercedes-Benz Washington, D.C. Zone Coordinator, and that Jolles enlisted Giffin to obtain blank NSA letterhead. A false verification letter was then prepared on this NSA stationery. On September 21, 1984, after manufacture and delivery of the 500 SEL, Diehl Motors issued a check for one thousand dollars payable to Allan Bagnall. In late September, 1984, Stotsky processed DTOP orders for two additional 500 SEL Mercedes-Benz vehicles, one in the name of Beverly Bagnall and one in the name of Scott Bagnall, using order forms which were signed in blank and submitted to Stotsky. These cars were scheduled to be produced in November, 1984.

However, shortly after submission of the order forms for the second and third cars, the Bagnalls became aware that NSA was conducting an investigation into DTOP abuses, and that Carol Giffin had been questioned regarding her knowledge of NSA employees signing DTOP "Certificate of Status" forms in blank to be used by others to purchase cars. Beverly Bagnall then called Stotsky and asked that he cancel the orders for the second and third cars and return the paperwork to her. Although Stotsky testified that he directed that the orders be canceled, the orders were in fact not canceled and the second and third cars were delivered in January, 1985. Defense testimony at trial indicated that the Bagnalls were never aware that the orders for the second and third cars proceeded against their directive because Stotsky had taken out a post office box in Hellam, Pennsylvania and had used that address on the order forms. Thus the "confirmation of order" documents were sent by Mercedes-Benz to the Hellam address rather than to the Bagnalls' address. The defense further contended that the Bagnalls never received any payment for use of Beverly and Scott's passport numbers on the order forms for the second and third cars, but rather that Stotsky and Jolles divided the profits.

In these consolidated appeals, the Bagnalls raise two sufficiency of the evidence arguments. First, they contend that the false statements contained on their DTOP order forms were not material to the importation of the vehicles within the meaning of Sec. 542. Second, they contend that Beverly Bagnall's cancellation of the orders for the second and third cars constituted a renunciation. We can affirm only if we can conclude that a rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. United States v. Ruuska, 883 F.2d 262, 263 (3d Cir.1989) (citing Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979)).

II.

Section 542 provides in pertinent part:

Whoever enters or introduces, or attempts to enter or introduce, into the commerce of the United States any imported merchandise by means of any fraudulent or false invoice, declaration, affidavit, letter, paper, or by means of any false statement, written or verbal, or by means of any false or fraudulent practice or appliance, or makes any false statement in any declaration without reasonable cause to believe the truth of such statement, or procures the making of any false statement as to any matter material thereto without reasonable cause to believe the truth of such statement, whether or not the United States shall or may be deprived of any lawful duties ... [s]hall be fined for each offense not more than $5,000 or imprisoned not more than two years, or both.

18 U.S.C. Sec. 542.

In order to secure a conviction under Sec. 542, the government must prove not only that the defendant introduced, or attempted to introduce, imported merchandise into our commerce and in connection with doing so, knowingly or recklessly made a false statement, but must also show that the statement was material, i.e. that the introduction or attempted introduction of goods was "by means of" the false statement. United States v. Steinfels, 753 F.2d 373, 377 (5th Cir.1985) (citing United States v. Ven-Fuel, Inc., 602 F.2d 747, 752-53 (5th Cir.1979), cert. denied, 447 U.S. 905, 100 S.Ct. 2987, 64 L.Ed.2d 854 (1980)); United States v. Rose, 570 F.2d 1358, 1363 (9th Cir.1978). As this appeal well demonstrates, the content of the materiality element depends upon what one believes to be the objective of the statute.

The Bagnalls argue that the purpose of the statute is to keep out of United States commerce those goods that cannot lawfully be imported. As a result, they contend that Sec. 542 applies only to the introduction into domestic commerce of goods that would...