Legal and political controversies had arisen regarding whether the people of the newly acquired territories were automatically granted the same rights under the United States Constitution as American citizens.

Magoon drafted a new report which came to precisely the opposite conclusion from the first: the Constitution did not apply in new territories until the United States Congress specifically passed legislation to authorize it.

It argued that precedent was set when Congress passed legislation to apply the Constitution to the Northwest Territory and the Louisiana Purchase.

This revised report was dated February 12, 1900, and released to Congress as a policy document expressing the Department's official stance on the issue.

The request was refused, but a copy of the report was leaked, allowing Minority Leader James D. Richardson to read it aloud on the Senate floor, prior to the vote.

[10] According to President Roosevelt, Magoon deserved the position because he had "won his spurs" working in the War Department and was well respected.

[11] According to Secretary of War William Howard Taft, this clean sweep was due to the "inherent clumsiness" of the Commission, especially as related to sanitary problems in the Zone, as well as the difficulty of reaching consensus between the current seven commissioners.

[13] The new Commission had seven commissioners, as required by the act of Congress that created the body, but responsibilities were to be split such that only Magoon, Shonts, and the chief engineer had any real authority.

Magoon's primary responsibilities within the Canal Zone were to improve sanitation and to deal with the all-too-common outbreaks of yellow fever and malaria.

The Chicago Tribune, in an article about conditions in the canal, referred to the notion that yellow fever was carried by mosquitos as "bugaboo".

[15] While governor, he worked with translators in the War Department to publish an English edition of the complete Civil Code of Panama, which he codified as the law of the Canal Zone on May 9, 1904.

With influential posts in both Panama proper and the Canal Zone, Magoon was an exceptionally powerful man on the Isthmus.

In addition to not officially restructuring the Commission, Congress increasingly fought or raised questions about the appointments of replacement commissioners.

[15] In February, Magoon was called to testify before the Senate Committee responsible for Canal administration, including responding to Bigelow's report.

[18] There was no official outcome from these hearings, but Congress subsequently passed a Consular Reform Bill which included a provision that specifically would not allow a diplomat, such as Magoon, to hold a separate administrative position.

Magoon declined to have an official inauguration ceremony, and, instead, news of the appointment was announced to the Cuban public via the newspapers.

In his written appointment address to the country, Magoon indicated that he would "perform the duties provided for by the ... constitution of Cuba for the preservation of Cuban independence".

[26] More controversially, he called for the removal of the sunken USS Maine, the ship whose destruction led to the Spanish–American War, because it was interfering with traffic in Havana's harbor.

In his yearly report to the secretary of war, Magoon reported that many Cubans held the popular belief that neither the United States nor the US-backed Cuban government had explored the wreckage because evidence might be found to suggest that the ship was not sunk by a torpedo, as was the official report—something that would cast doubt on the justification for the United States' war against Spain.

He reaped a vast number of lurid accusations at the hands of Cuban writers who described him as a "man of wax", who was "gross in character, rude in manners, of a profound ambition and greedy for despoilment".

[29] No explicit evidence of Magoon's corruption ever surfaced, but his parting gesture of issuing lucrative Cuban contracts to U.S. firms was a continued point of contention.