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United States v. Morales

United States Court of Appeals, Seventh Circuit

March 25, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
HECTOR ROLANDO MORALES, Defendant-Appellant

Argued November 14, 2013.

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 9 CR 513-2 -- Charles R. Norgle, Judge.

For United States of America (12-3558, 13-1103), Plaintiff - Appellee: Matthew B. Burke, Office of The United States Attorney, Chicago, IL.

For Hector Rolando Morales (12-3558, 13-1103), Defendant - Appellant: Michael G. Babbitt, Barry Levenstam, Jenner & Block Llp, Chicago, IL.

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

OPINION

Page 311

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, non-disclosure 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 request

Page 312

a 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 ...


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