United States v. Morales

• Decision Date: 25 March 2014
• Docket Number: 13–1103.,Nos. 12–3558,s. 12–3558
• Citation: 746 F.3d 310
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Hector Rolando MORALES, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

746 F.3d 310

UNITED STATES of America, Plaintiff–Appellee,

v.Hector Rolando MORALES, Defendant–Appellant.

Nos. 12–3558, 13–1103.

United States Court of Appeals,Seventh Circuit.

Argued Nov. 14, 2013.

Decided March 25, 2014.

Matthew B. Burke, Attorney, Office of The United States Attorney, Chicago, IL, for Plaintiff–Appellee.

Michael G. Babbitt, Attorney, Barry Levenstam, Attorney, Jenner & Block LLP, Chicago, IL, for Defendant–Appellant.

Before WOOD, Chief Judge, and CUDAHY and ROVNER, Circuit Judges.

WOOD, Chief Judge.

More than 50 years ago, the Supreme Court announced in Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), that prosecutors have a duty to turn over upon request any material evidence that is favorable to the defense. One would think that by now failures to comply with this rule would be rare. But Brady issues continue to arise. Often, nondisclosure comes at no price for prosecutors, because courts find that the withheld evidence would not have created a “reasonable probability of a different result.” Kyles v. Whitley, 514 U.S. 419, 434, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995) (quotation omitted). We must leave for another day a closer examination of the incentive structure created by Brady's harmless-error exception, because the case before us is another in which the Brady violations do not drive the result. The evidence implicating Hector Morales in a vast mail-fraud scheme was overwhelming, and we are confident that the prosecution's alleged Brady violation (a failure to disclose two possibly exculpatory emails until after trial) made no difference. We therefore affirm the district court's denial of Morales's motion for a new trial.

I

Morales and his son Hector Morales, Jr. (Junior) operated a business they called Intelligent Payment Services (IPS). The only thing intelligent about it, however, was that it served the Moraleses profitably as a vehicle for defrauding small businesses. Sales agents trained by Morales would contact business owners and offer to collect on bad checks from the businesses' customers in exchange for a small commission. The agents would tell the business owners that they worked for either “American Processing Services” or “National Settlements Corporation,” not IPS. The agents would then ask the business owners for certain personal information and requesta voided check, ostensibly so that IPS could later wire funds obtained through its collection efforts to them.

In fact, IPS put the information to a shadier use. Once in possession of the critical data, IPS made unauthorized withdrawals from the businesses' bank accounts through various financial intermediaries. IPS would tell the intermediaries that the withdrawals covered payments on leases of credit-card processing equipment. In reality, IPS neither collected bad checks nor leased credit-card processing equipment. In all, IPS fraudulently withdrew about $645,000 from its customers' accounts.

On July 27, 2004, a team led by Secret Service Agent Jason Kane executed a search warrant on IPS's office in Libertyville, Illinois. IPS's office suite consisted of a small reception area and two adjacent offices. Upon entering the suite, the office on the left was Junior's office, and the office on the right was Morales's. When agents knocked on IPS's front door, receptionist Carmen Donaire was the only person in the reception area, and the door to Morales's office was closed. Before the agents entered, Morales and his daughter Paulina Morales walked out of the office and moved to the reception area.

Agents found a trove of incriminating evidence on the premises. They recovered a laptop from Morales's office on which a credit-card “lease collection” form was open and partially filled out. In addition, they recovered from the same office personal financial information from ten victims and $8,000 cash. Elsewhere on the premises agents found documents in Morales's handwriting describing check collections, commissions paid to agents, and an accounting of IPS's finances with notations reflecting more than $20,000 in reversed transactions over a nine-day period. Forensic analysis of the laptop discovered in Morales's office and a laptop discovered in Junior's office revealed that both machines were used in the fraud.

Other documentary evidence also connected Morales to the scheme. Bank statements showed that during the preceding 12 months, Morales deposited funds from IPS totaling $439,000 in his personal accounts and used an additional $55,000 in IPS funds for his personal credit card bills and car payments. (Morales even deposited IPS funds after the date of the raid.) Telephone records showed numerous calls and faxes related to the scheme from Morales's private residence and office. Finally, investigators obtained a document purporting to be a credit-card lease contract between one Walter Corea and IPS that was filled out entirely in Morales's handwriting. At trial, Corea testified that he had never heard of IPS, nor had he agreed to lease any credit-card equipment. Corea had, however, spoken with someone claiming to work for “National Settlements Corporation”; that person convinced him to sign up for a bad-check collection service that never produced a dollar in recovered funds.

Morales was indicted on nine counts of mail fraud in violation of 18 U.S.C. § 1341. At trial, the government presented dozens of witnesses, including Corea and nine other victims, forensic analysts, Donaire, and Agent Kane. Donaire testified that Morales and Junior jointly operated IPS. She noted that Morales and Junior used their respective laptops and that Morales at times directed her to call businesses in Texas and California to offer bad-check collection services. She identified Morales's handwriting on various documents. Finally, Donaire testified that she received numerous angry calls from customers complaining that IPS had made unauthorized withdrawals from their businesses' accounts. Donaire said that Morales seemed “kind of surprise[d]” when told about the calls and presented with a bank statement faxed by one customer. Soon after, Donaire testified, Morales and Junior had a heated conversation behind closed doors in one of the offices, but Donaire could not hear what they said.

Agent Kane's testimony was primarily used to lay a foundation for the introduction of documents and other evidence recovered during the search. Kane explained where in the facility various pieces of evidence were found, so that the government could then introduce the seized material as an exhibit. Kane also testified about what the search did not find, namely, signs of legitimate business activity in check collecting or credit-card-equipment leasing. Morales's cross-examination of Kane was not fruitful. It consisted mostly of Kane's admitting that he personally could not identify Morales's handwriting or understand Spanish.

In defense, Morales argued that the scheme was perpetrated entirely by Junior and that Morales had no knowledge of it. According to Morales, Junior betrayed him by using the business to perpetrate a fraud. Morales's counsel argued that the hundreds of thousands of IPS funds deposited in Morales's account and used to pay his bills was legitimate remuneration for Morales's work at IPS. The government opened its closing arguments by saying that Morales had been caught “red-handed” because the laptop in his office, which by all accounts was Morales's computer, showed a partially completed “lease collection” form that presumably was an instrument of the fraud. The government then rattled off the litany of other evidence in the record connecting Morales to the crimes. The jury convicted Morales on all counts, and he was sentenced to nine years in prison.

Three weeks after the trial, an assistant U.S. attorney sent Morales's lawyer two emails from Agent Kane that had not previously been disclosed. The first email, sent April 15, 2009, was a message to counsel for the government. It read:

Just another nugget of info. When we entered to do the search warrant inside Hector Morales Seniors office the lap top [ sic ] was on a small desk beside his. According to the Daughter [Paulina Morales], she was entering in items in the computer. Here is a picture of what was on the computer at the time.

A screenshot from the laptop as it appeared when discovered in Morales's office was attached.

The second email, sent June 9, 2009, was also a message from Kane to government counsel. That email responded to a note from government counsel indicating that a grand jury subpoena for Paulina Morales was available to be picked up. The June 9 email said:

Matt, got the message[.] I will pick it [the sub-poena] up and I will serve it and arrest everybody in the house because as you know somebody is going to jail and no [ sic ] more than ever somebody maybe a pet will be tazered!

Despite Agent Kane's bluster, he did not arrest Morales, Paulina, or any other suspect. Nor did Kane or anyone else “tazer” any person, much less pets. Rather, agents simply served the subpoena on Paulina Morales by leaving it with her father at their home.

After receiving copies of Kane's emails, Morales filed a motion for a new trial, asserting that the government's withholding of the emails until the trial was over violated his constitutional rights under Brady. The district court denied the motion and sentenced Morales to 108 months' imprisonment. This appeal followed.

II

A Brady claim has three components: (1) the evidence at issue must be favorable to the accused, either because it is exculpatory or because it is impeaching; (2) the evidence must have been suppressed by the government, and (3) the evidence must be material, that is, there must be “a reasonable probability that the suppressed evidence would have produced a different verdict.” Strickler v. Greene, 527 U.S. 263, 281–82, 119 S.Ct. 1936, 144 L.Ed.2d 286 (1999); see Kyles, 514 U.S. at 435, 115 S.Ct. 1555 (ci...