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UNITED STATES v. ARTHALONY

April 7, 1983

UNITED STATES OF AMERICA
v.
DAN ARTHALONY, DEFENDANT.



The opinion of the court was delivered by: J. Waldo Ackerman, Chief Judge.

ORDER

Defendant Dan Arthalony was tried in this Court in November, 1982, for mail fraud and odometer disclosure violations. He was acquitted by a jury of mail fraud but was convicted of the misdemeanor of failing to give an odometer statement to RBM of Atlanta, Inc., a company owned in part by John Ellis, its President (hereinafter referred to as Ellis).

The background of this case is as follows: Dan Arthalony operated a body shop where he repaired wrecked or salvaged vehicles. Under Illinois law, once a vehicle has been declared a total loss, it must contain an "S.V." designation on its certificate of title, indicating to all concerned that the vehicle is a salvaged vehicle. Neighboring states, like Missouri, do not require any indication on the title of vehicles which would reveal that a particular vehicle was once wrecked. Consequently, Missouri owners, dealers and body shop owners can obtain a higher price for such vehicles than an Illinois owner, dealer or body shop owner. To circumvent this problem, some body shop owners, including defendant Arthalony, began a practice of laundering Illinois "S.V." titles. In Arthalony's case, he would send his Illinois titles with an "S.V." designation to John Ellis in Georgia, a state which does not require any indication to be placed on a title to show that a car was once wrecked. Ellis would obtain a clean Georgia title (one without the "S.V." designation), and mail the clean title back to Arthalony in Illinois. Arthalony would then exchange his Georgia title for a new Illinois title without the "S.V." on it.

During this transaction, the vehicles in question never left Arthalony's possession — it was a purely paper transaction. Arthalony did not sell, give or bequeath these vehicles to Ellis. He transferred legal title to Ellis, but retained a beneficial interest in the vehicles. Arthalony did not provide an odometer mileage statement to Ellis when he transferred title to him. Likewise, Ellis did not provide an odometer statement to Arthalony when he transferred title back to him. Arthalony was convicted of failing to give an odometer statement to Ellis disclosing the cumulative mileage on the vehicles at the time he transferred the titles to him in Georgia.

In 1972, Congress adopted Subchapter IV of the Motor Vehicle Information and Cost Savings Act (MVICS), 15 U.S.C. § 1981 et seq. The Congressional findings and declaration of purpose of the Act are contained in 15 U.S.C. § 1981. Congress found that purchasers, when buying a motor vehicle, rely heavily on the odometer reading as an index of condition and value of the vehicle. Congress further found that purchasers are entitled to rely on the odometer reading as an accurate reflection of the mileage actually traveled by the vehicle and as an indicator of the vehicle's safety and reliability. "It is therefore, the purpose of this subchapter to prohibit tampering with odometers on motor vehicles and to establish certain safeguards for the protection of purchasers with respect to the sale of motor vehicles having altered or reset odometers."

Section 1988 of the Act directs the Secretary of the Department of Transportation to promulgate rules requiring a transferor to give to a transferee in connection with the transfer of ownership of a motor vehicle, a written disclosure of the cumulative mileage registered on the odometer. If the odometer reading is known to the transferor to be different from the number of miles the vehicle has actually traveled, then the transferor must disclose that the actual mileage is unknown. 15 U.S.C. § 1988(a)(1) and (2). Subsection (b) of Section 1988 provides that no transferor shall violate any rule so prescribed.

Congress provided individuals with a private right of action to enforce liability for violations of the odometer requirements. 15 U.S.C. § 1989. Under that provision, any person who, with intent to defraud, violates the odometer requirements, is liable for a minimum of $1,500. A person may recover triple his actual damages if that amount exceeds $1,500, together with reasonable attorney's fees and costs. In addition, the Attorney General of the United States can bring an action to restrain violations of the Act or its rules. 15 U.S.C. § 1990.

Because few consumers were utilizing the private enforcement provisions and because the Attorney General was not vigorously pursuing injunctive enforcement actions, Congress decided to provide additional authority to enforce the odometer anti-tampering provisions of the Act. S. Rep. No. 94-155, 94th Cong., 2d Sess. 2, 6 reprinted in 1976 U.S.Code Cong. & Ad.News 1718, 1719, 1723. One of those additional provisions provides for enforcement by criminal prosecution. Section 1990c states that

  any person who knowingly and willfully commits any
  act or causes to be done any act that violates any
  provision of this subchapter or knowingly and
  willfully omits to do any act or causes to be omitted
  any act that is required by any such provision shall
  be fined not more than $50,000 or imprisoned not more
  than one year, or both.

15 U.S.C. § 1990c(a). Although it is clear from the legislative history that Congress wanted to give the government an additional tool to accomplish the goals of the Act, there is no indication that Congress intended to reach conduct less culpable than that covered by the civil section of the Act.

It is undisputed that Arthalony did not intend to defraud Ellis in any respect. The evidence also indicated that Arthalony did not intend to defraud any potential purchasers with respect to the mileage stated on the odometers of these vehicles. There was no evidence presented of odometer tampering or of misstatements on odometer disclosure forms at the time Arthalony actually sold the vehicles. The fraud, if any, involved the clearing of the "S.V." designation from the titles of these vehicles.

The question now before the Court is whether the failure to give an odometer statement to a straw person, where there is no intent to deceive that person or any subsequent owner of the car with respect to the cumulative mileage traveled by the vehicle, constitutes a crime within the scope of 15 U.S.C. § 1990c. The Government contends that it does. The issue appears to be one of first impression.

It is obvious that if criminal liability is imposed in these circumstances, the anomalous result is that a person would be criminally liable in a situation where civil liability would not attach. Clearly, Congress could have made the knowing failure to give an odometer statement with every transfer of title, regardless of the transferor's intent to defraud, a crime. The question, though, is whether, in light of the civil statute, its non-use and Congress' overall intent when it enacted Subchapter IV, Congress intended to include intent to defraud in the meaning of a "knowing and willful" violation of the Act.

Prior to determining the state of mind required to sustain a conviction under the Act, this Court will examine whether Arthalony was a "transferor" within the meaning of the regulations, such that the Act would even apply to him. "Transferor" is defined in 49 C.F.R. § 580.3 as any person who transfers his ownership in a motor vehicle by sale, gift, or any means other than by creation of a security interest. "Transfer," as defined in 15 U.S.C. § 1982, means to change ownership by purchase, gift or any other means. Although legal title to the vehicles was transferred by the Defendant, there was no intent to transfer his ownership interest to Ellis. There was no sale, no gift, no bequest. If Ellis had refused to retransfer title to Arthalony, Arthalony undoubtedly could have recovered the same through judicial process. As the Illinois Supreme Court recognized in People v. Chicago Title and Trust Co., 75 Ill.2d 479, 27 Ill.Dec. 476, 389 N.E.2d 540 (1979), title to property does not necessarily involve ownership of the property. Id. at 489, 27 Ill.Dec. 476, 389 N.E.2d 540. The ...


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