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United States v. McClellan

United States Court of Appeals, Seventh Circuit

July 21, 2015

MICHAEL B. MCCLELLAN, Defendant-Appellant

Argued February 13, 2015.

Page 744

Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 2:12-cr-00153-PPS-PRC-1 -- Philip P. Simon, Chief Judge.

For United States of America, Plaintiff - Appellee: Jennifer S. Chang-Adiga, Attorney, Office of The United States Attorney, Hammond, IN.

For Michael B. Mcclellan, Defendant - Appellant: Scott L. King, Attorney, Scott King Group, Merrillville, IN.

Before WOOD, Chief Judge, and BAUER and RIPPLE, Circuit Judges.


Page 745

Ripple, Circuit Judge.

After a jury trial, Michael McClellan was found guilty of one count of harboring an illegal alien, in violation of 8 U.S.C. § 1324(a)(1)(A)(iii); three counts of mail fraud, in violation of 18 U.S.C. § 1341; and one count of engaging in a monetary

Page 746

transaction involving criminally derived property, in violation of 18 U.S.C. § 1957. Because we believe that the evidence presented to the jury was a sufficient basis on which to rest its verdicts, and because we believe that the jury instructions on the harboring count did not constitute plain error, we affirm the judgment of the district court.




Mr. McClellan and his wife, Tina, operated T & M Daycare (" T & M" ) in Calumet City, Illinois. Nearly all of the families at T & M participated in an Illinois state child-care initiative, which reimbursed daycare centers for care provided to children of eligible families. In order to qualify, the child's parent or guardian had to reside in Illinois, be employed or attend school, and have an income below a specified amount.

Fransis Lopez was hired at T & M in February 2006. At first she had limited contact with Mr. McClellan and Tina. Later, the McClellans promoted Lopez to director; to do so, they had to falsify records to make it appear that she met qualifications dictated by state regulations. Once she became director, she had frequent contact with Mr. McClellan and Tina, both in person and over the phone.

Mr. McClellan and Tina instructed Lopez that, when new families came to the daycare for services, Lopez should falsify applications so that T & M could receive reimbursements from the State. There were also times when the McClellans told Lopez to leave the applications blank so that they could write in the necessary information to obtain reimbursement.

Many of the children who attended T & M also qualified for meals through a state " Healthy Start" program.[1] T & M received reimbursement from the State of Illinois when a qualifying child was provided a meal. Sabrina Sanchez, a former director of T & M, testified that she would record accurately the children in attendance who had eaten meals. She witnessed Mr. McClellan change those numbers on the sheets, which he then submitted to the State for reimbursement. She also noticed that the Healthy Start records contained names of children who did not attend the daycare. When she raised the issue with the McClellans, she was told that the children were on the list because " they may come [to the daycare]." [2] After Lopez took over as director, she would record that children had eaten a meal, when in fact they had not; she did so at the McClellans' instruction.

Testimony from several mothers established that their application forms for T & M had been altered to contain false information, that T & M had sought reimbursement from the State beyond the time their children attended T & M, or that T & M had sought reimbursement from the State when, in fact, their children never actually had enrolled in the daycare.


In 2008, Mr. McClellan purchased The Paragon restaurant in Schererville, Indiana. Unbeknownst to Mr. McClellan, the Department of Homeland Security (" DHS" ) had been investigating The Paragon and its former owners, Louis and Chris Gerodemos, based on information that illegal aliens were working there and

Page 747

living in a house across the street on St. John Road. As part of its investigation, the DHS arrested The Paragon manager Horacio Bastida. Bastida agreed to provide assistance to the Government by recording conversations with Mr. McClellan and also by providing the DHS with documentary evidence that Mr. McClellan was paying part of his employees' wages in cash and was not reporting those wages to the State of Indiana.

In 2008, Mr. McClellan and Tina also signed a purchase agreement for the St. John Road house. When the closing took place, the bulk of the purchase amount was wired from T & M's account. Several members of The Paragon's undocumented kitchen staff lived in the house rent-free. Mr. McClellan paid the utilities for the house and also provided food to these employees.

On July 2, 2009, Bastida recorded a conversation with Mr. McClellan in which he raised the issue of the illegal status of " the guys in the back" of the restaurant.[3] During the conversation, Mr. McClellan stated that he had not been aware of Bastida's illegal status, but he did " kn[o]w about the other guys." [4]

A subsequent recording on August 12, 2009, captured a meeting between Mr. McClellan and his kitchen staff. Mr. McClellan believed that the employees in the back of the restaurant should be doing a better job because they were receiving free rent, utilities, and food.[5] A conversation between Mr. McClellan and Bastida that same day revealed that Mr. McClellan was told that " the guys in back" had " fake" social security numbers, that Mr. McClellan told Bastida that it was " fine" for those employees to use their fake numbers, and that Mr. McClellan did not want " the guys in the back to punch in no longer" using the electronic system because " a record is produced" and he did not want a paper trail.[6]

On March 24, 2010, law enforcement agents executed a search warrant at The Paragon, the McClellans' residence, and the house on St. John Road. There were eight employees in the restaurant that were working without legal status; four other individuals without legal status were found in the St. John Road house.


A grand jury returned a five-count indictment against Mr. McClellan: Count 1 charged Mr. McClellan with harboring five illegal aliens, in violation of 8 U.S.C. § 1324(a)(1)(A)(iii), based on his employment of those aliens and his providing them with housing at the St. John Road house; Counts 2 through 4 charged Mr. McClellan with mail fraud, in violation of 18 U.S.C. § 1341, based on his submission of fraudulent quarterly employment tax reports from October 2009, January 2010, and April 2010; and Count 5 charged Mr. McClellan and Tina with engaging in a monetary transaction involving criminally ...

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