United States v. Paul Musgrave
664 F. App'x 540
| 6th Cir. | 2016Background
- Paul Musgrave was convicted of fraud and sentenced to pay $1,715,650 in restitution plus a $250,000 fine; district court imposed a payment schedule and required financial disclosures.
- Musgrave’s disclosures showed modest personal assets and income but significant assets (home, retirement accounts, investment account, rental condo, cars) titled solely in his wife’s name; the couple’s combined monthly income was much higher and the wife held substantial assets.
- The district court found the formal ownership division largely illusory and concluded Musgrave effectively shared control of his wife’s assets, ordering payments to be made from assets in his name, his wife’s name, or both.
- Musgrave appealed the order and obtained a stay of the large quarterly payments pending appeal.
- The central dispute is whether, under the MVRA (by reference to the federal tax lien statute), Musgrave’s interest or effective control over assets titled in his wife’s name is sufficient to allow restitution to attach to those assets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether assets titled solely in spouse's name are reachable under the MVRA | Government: MVRA reaches any "property" or "rights to property" of the defendant as defined by the federal tax lien analysis; assets reachable if defendant has effective control | Musgrave: Assets titled to wife are separate under state law and not subject to his restitution obligation | Court: Record insufficient; remand for evidentiary hearing to apply Drye two-step to determine which spouse-held assets are reachable |
| Which state law governs property rights analysis | Government implicitly: apply the controlling state law where property or parties are governed | Musgrave: Relies on North Carolina constitutional provision protecting a married woman’s separate property | Court: Left to district court to determine which state law applies as initial step of Drye analysis |
| Proper analytical framework to determine reachability | Government: Use Drye/Craft two-step—identify state-law rights, then apply federal tax-lien law to decide if those rights are "property" or "rights to property" | Musgrave: Agrees on legal standards but disputes application | Court: Confirms Drye/Craft framework must be applied step-by-step by the district court |
| Adequacy of the record to decide reachability on appeal | Government: recommends remand for evidentiary hearing | Musgrave: Challenges district court’s factual basis for finding effective control | Court: Agrees record is insufficient and remands for evidentiary hearing to develop factual basis |
Key Cases Cited
- Drye v. United States, 528 U.S. 49 (1999) (two-step test: state-law rights then federal law to decide if rights are federal "property")
- United States v. Craft, 535 U.S. 274 (2002) (federal tax lien can attach to spouse’s tenancy-by-entirety interest; focus on functional control)
- Morgan v. Commissioner, 309 U.S. 78 (1940) (state law creates interests; federal revenue law determines which are taxed)
- United States v. National Bank of Commerce, 472 U.S. 713 (1985) (federal tax lien statute interpreted broadly to reach taxpayer interests)