United States Court of Appeals
For the First Circuit
No. 04-2495
UNITED STATES OF AMERICA,
Appellee,
v.
RAFAEL MORALES-RODRÍGUEZ
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]
Before
Torruella, Circuit Judge,
Hansen,* Senior Circuit Judge,
and Lynch, Circuit Judge.
Erick E. Kolthoff Benners, on brief for appellant.
Germán A. Rieckehoff, Assistant United States Attorney, with
whom Nelson Pérez-Sosa, Assistant United States Attorney, and H.S.
García, United States Attorney, on brief for appellee.
July 21, 2006
*
Of the Eighth Circuit, sitting by designation.
TORRUELLA, Circuit Judge. On August 12, 2003, Rafael
Morales-Rodríguez ("Morales" or "defendant") was charged in the
United States District Court for the District of Puerto Rico in a
fourteen-count indictment. He was accused of conspiracy to commit
mail fraud, in violation of 18 U.S.C. § 371 (Count One); mail
fraud, in violation of 18 U.S.C. § 1341 (Counts Two through Ten);
embezzlement of labor union funds, in violation of 29 U.S.C. § 501
(c) (Counts Eleven and Twelve); structuring money transactions, in
violation of 31 U.S.C. §§ 5322(b) and 5324(3) and 18 U.S.C. § 2
(Count Thirteen); and conspiracy to commit money laundering, in
violation of 18 U.S.C. § 1956(h) (Count Fourteen).
On May 12, 2004, after a six-day jury trial, Morales was
found guilty of all charges except for Count Two. On September 23,
he filed a motion requesting a new trial, but this was denied. He
was sentenced to imprisonment for a term of 121 months as to Counts
Three through Ten, and Counts Thirteen and Fourteen. He was
sentenced to a term of five years as to Counts One, Eleven, and
Twelve. All sentences were to be served concurrently.
Additionally, the district court imposed a supervised release
condition requiring Morales to submit to a drug test within fifteen
days of release and thereafter to random drug testing not to exceed
104 samples per year. On October 4, 2004, Morales filed this
appeal, challenging both his convictions and his sentence. After
careful consideration, we affirm.
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I. Facts
From 1992 to 2003, Morales was Vice-President of Frente
Unido de Policías Organizados ("FUPO"), and José De Jesús-Serrano
("De Jesús") was FUPO's President. FUPO was a not-for-profit
organization open to police officers and security guards, whose
goal was to offer better working conditions and salaries for its
members, as well as to provide legal representation in civil and
criminal cases against its members.
Through various outreach efforts including promotional
materials sent by mail, FUPO made constant efforts to recruit new
members. New members filled out forms to authorize the payment of
FUPO membership fees through automatic deductions from their
salaries. Members either personally delivered these forms to
FUPO's offices or sent them by mail. Once FUPO was in possession
of a new member form, a letter signed by either Morales or De Jesús
would be sent by mail to the relevant agencies and municipalities,
authorizing the deduction of FUPO membership fees from the new
member's salary. Once deducted, membership fees were sent to FUPO
by mail. FUPO received some fifty checks for membership fees each
month by mail, and all checks were handled personally by Morales or
De Jesús. Membership cards that were not picked up at FUPO's
offices were sent by mail. In the years 2002 and 2003, FUPO's
membership reached approximately 18,000.
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Around the year 2000, members began to complain that
promised services and benefits were not being delivered. One of
the ostensible benefits of FUPO membership was that the
organization assumed responsibility for members' attorneys' fees.
It seems that when members availed themselves of attorney services,
it was customary for the attorneys to send the invoices directly to
FUPO. The checks were then prepared by Madeline Cabrera
("Cabrera") but were not actually sent until so authorized by
Morales or De Jesús. Typically, FUPO prepared checks for
attorneys' fees totaling $70,000 to $80,000 per month. Around the
year 2000, payments made for attorneys' fees declined, even though
the invoice amounts actually increased. Although it appears that
the checks were being prepared, they were not always sent. Many
members complained.
Also in the year 2000, members began to complain about
FUPO's failure to provide other promised services. Some members
who were suspended from work complained that they were not being
paid the money FUPO had promised in the event of suspension.
Widows complained that they were not receiving the promised $2000
death benefit. Payments of disability benefits were delayed. At
least one FUPO area director informed De Jesús and Morales about
these problems, but the problems persisted. When Cabrera became
FUPO's Executive Secretary in 2003, she discovered that, while De
Jesús was President and Morales Vice-President, FUPO had fallen
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several years behind in its payments of disability benefits and in
its payments to the IRS, Hacienda (Treasury of Puerto Rico), and
bank credit lines.
FUPO had a bank account at First Bank in Puerto Rico.
Morales visited the bank each week. There, he deposited checks
made out to FUPO, and because they were issued by various
government agencies (police force, fire department, etc.), they
cleared immediately. Copies of checks and transaction records
introduced at trial indicate that after depositing the checks,
Morales then would purchase a manager's check, made out to FUPO,
for part of the deposit amount. As for the remainder, he would ask
the bank to issue a check against FUPO's account, made out to
"cash" for a specified amount (never exceeding $10,000). After the
bank prepared the check, Morales would cash it and take the cash
with him.
FUPO also had a bank account at Banco Popular de Puerto
Rico ("BPPR"), opened by Morales and De Jesús. Morales went to
BPPR approximately once a month to deposit the First Bank manager's
checks that were made out to FUPO. Then, Morales would issue
checks from FUPO's BPPR bank account to himself, to his company
(J.R. Bodyguard), and to De Jesús. No single check was ever issued
in an amount exceeding $10,000, despite the fact that Morales often
issued several checks to himself in the same day whose total amount
exceeded $10,000.
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Typically, the total value of all checks issued to
Morales was between $8,000 and $67,000 per month (totaling more
than one million dollars during the course of three years),1 while
those issued to De Jesús ranged from $7,000 to $95,000 per month
(totaling more than $1.5 million during the same period).2 Morales
and De Jesús used these funds for personal expenses, including
payment of personal credit card bills.
Morales and De Jesús concealed the scheme, which was
repeated each month from January 2000 to December 2002, from other
FUPO employees including administrative secretary Joanna Lind
("Lind"), who was in charge of FUPO's monthly expenses, and Héctor
Navarro-Matos ("Navarro"), who was responsible for filing various
FUPO financial reports with the Departments of State and Labor.
Also unaware of the fraud was Angel Troche ("Troche"), one of the
founders and leaders of FUPO. Troche did not know FUPO was issuing
checks to "cash." In fact, neither he nor any of the other
directors ever gained access to FUPO's account books.
1
During this period, Morales's reported income (including his
FUPO salary) steadily progressed from $36,000 in 1999 to $60,000 in
2001.
2
During this period, De Jesús reported his FUPO income as ranging
from $48,000 in 1998 to $72,000 in 2001.
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II. Analysis
A. Sufficiency of the Evidence
Morales challenges the sufficiency of the evidence to
support his conviction for mail fraud, conspiracy to commit mail
fraud, embezzlement, structuring monetary transactions, and
conspiracy to commit money laundering. We consider them seriatim.
To assess a challenge to the sufficiency of the evidence, "we
'review the record to determine whether the evidence and reasonable
inferences therefrom, taken as a whole and in the light most
favorable to the prosecution, would allow a rational jury to
determine beyond a reasonable doubt that the defendants were guilty
as charged.'" United States v. Sullivan, 85 F.3d 743, 747 (1st
Cir. 1996) (quoting United States v. Mena-Robles, 4 F.3d 1026, 1031
(1st Cir. 1993)).
1. Counts One and Three through Ten:
Mail Fraud and Conspiracy to Commit Mail Fraud
Morales claims that the evidence presented at trial was
insufficient to support his convictions for mail fraud and
conspiracy to commit mail fraud. The mail fraud convictions
(Counts Three through Ten) were based on eight separate membership
dues checks, mailed between 2000 and 2002, the period during which
Morales regularly transferred funds from FUPO's First Bank account
to FUPO's BPPR account and then issued checks from FUPO's BPPR
account to himself, De Jesús, or one of their personal interests.
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To demonstrate a violation of the mail fraud statute, 18
U.S.C. § 1341, the prosecution must prove "(1) the devising or
attempting to devise a scheme or artifice to defraud; (2) the
knowing and willing participation in the scheme with the specific
intent to defraud; and (3) the use of the mails in furtherance of
the scheme." United States v. McCann, 366 F.3d 46, 51 (1st Cir.
2004) (citation and internal quotation marks omitted), vacated on
other grounds, McCann v. United States, 543 U.S. 1104 (2005). The
government must also show, "in order to prove causation, that the
defendant knew, or could have reasonably foreseen, that 'the use of
the mails [would] follow in the ordinary course of business.'"
United States v. Pimental, 380 F.3d 575, 584 (1st Cir. 2004)
(quoting Pereira v. United States, 347 U.S. 1, 9 (1954)). Finally,
"[i]t is not necessary to prove that the defendant personally
executed the mailings, but merely that the defendant caused the
mailing by doing some act from which it is reasonably foreseeable
that the mails will be used." Id. (citation and internal quotation
marks omitted).
As to the first requirement, we have held that "[i]n
order to find a 'scheme to defraud,' the jury simply had to
determine that [Morales] was attempting to 'wrong[ ] one in his
property rights by dishonest methods or schemes.'" Id. at 585
(quoting McNally v. United States, 483 U.S. 350, 358 (1987)). The
facts of this case indicate that FUPO membership dues were
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misappropriated for the personal gain of Morales and De Jesús,
rather than put to use for the intended purpose of improving the
working conditions, professional growth, and legal resources of
FUPO members. There is little doubt that a rational jury could
find that Morales devised a scheme to defraud within the meaning of
the statute.
As to the second requirement of § 1341, Morales does not
contend –- and the record does not suggest -- that his
participation was in any way unwilling or unknowing. Under the
third requirement, a conviction for mail fraud must be supported by
evidence that the mail was used in furtherance of the scheme. We
have held that "[t]he mailing 'need not be an essential element of
the scheme'; it can be merely 'incident to an essential part of the
scheme'". Id. at 586 (quoting Schmuck v. United States, 489 U.S.
705, 710-11 (1989)). Here, promotional materials sent by mail were
used to recruit new members, whose dues -- often sent by mail --
Morales misappropriated. New members authorized the deduction of
FUPO fees from their salaries via forms sent by mail, and Morales
and De Jesús in turn sent letters to the relevant agencies,
instructing that members' fees be deducted from their salaries, as
authorized. It seems quite clear that a rational jury could deduce
from these facts that mailing was at least "incident to an
essential part" of the fraudulent scheme.
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Finally, it is patently clear that a reasonable jury
could have found that the use of the mail was foreseeable. In this
circuit, "it is simply the 'use of the mails' in the course of the
scheme rather than the particular mailing at issue that must be
reasonably foreseeable for the causation element of a mail fraud
offense to be satisfied." Pimental, 380 F.3d at 589. Once new
members had authorized automatic deductions of their FUPO
membership dues from their paychecks, FUPO would send a letter --
signed by Morales or De Jesús -- to the relevant agencies and
municipalities. FUPO received some fifty checks per month in
membership dues through the mail. Morales and De Jesús personally
sorted through the mail received at FUPO, kept the checks, and
handed over the remainder of the mail to Cabrera. We have no
trouble concluding that a jury could have found the use of the
mails to be reasonably foreseeable in the course of this scheme.
Morales raises two arguments in support of his contention
that the evidence was insufficient to support his mail fraud
conviction. First, he claims that because FUPO is a charitable
organization engaged in a lawful enterprise, the mail fraud statute
is inapplicable. Second, he argues that because no witness
testified at trial that he used the mail to defraud FUPO, no
rational jury could have convicted him of mail fraud.
In support of his contention that the mail fraud statute
does not apply where funds were received through the mail by a
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legitimate non-profit organization and then misapplied by its
officers, Morales cites only one fifty-year-old case from the
Northern District of California. United States v. Beall, 126 F.
Supp. 363 (N.D. Cal. 1954). This is not the law of our circuit,
and Morales does not persuade us that it should be otherwise.
Morales next contends that because no witness testified
at trial as to his use of the mail to further his fraudulent
scheme, there was insufficient evidence to support his conviction
as to the mail fraud charges. However, direct evidence is not
necessary to prove mail fraud. See Pimental, 380 F.3d at 585. We
find that the evidence was sufficient to support Morales's mail
fraud conviction as to Counts Three through Ten.
To support a guilty verdict as to the conspiracy count
under 18 U.S.C. § 371, the evidence must show beyond a reasonable
doubt "the existence of a conspiracy, the defendant's knowledge of
it, and his voluntary participation in it." United States v.
Yefsky, 994 F.2d 885, 890 (1st Cir. 1993). To prove voluntary
participation, "the government must prove that the defendant had an
intent to agree and an intent to effectuate the object of the
conspiracy." United States v. Royal, 100 F.3d 1019, 1029 (1st Cir.
1996). Further, "when the commission of mail fraud is a goal of
the conspiracy, the government must show either an intent to use
the mails or the reasonable foreseeability of such use." Yefsky,
994 F.2d at 890 (emphasis added).
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Evidence introduced at trial revealed that Morales and De
Jesús worked together to execute the fraud and that they kept it
hidden from all other FUPO members and employees. Morales
personally deposited membership checks in FUPO's First Bank account
each week and issued checks to himself and De Jesús from FUPO's
BPPR account every month. A reasonable jury could have found that
there was a conspiracy, of which Morales was aware, and in which
Morales participated.
Morales claims that a conviction for conspiracy to commit
mail fraud must be supported by a showing of an intent to use the
mail to effect the scheme. This position is simply incorrect, as
it directly contravenes the law of this circuit. The government
need only show the reasonable foreseeability of the use of the mail
in the execution of the conspiracy. Id.; see also United States v.
Dray, 901 F.2d 1132, 1137 (1st Cir. 1990); United States v.
Delgado-Figueroa, 832 F.2d 691, 696 (1st Cir. 1987).
2. Counts Eleven and Twelve:
Embezzlement of Labor Union Funds
Morales claims there was no federal jurisdiction as to
Counts Eleven and Twelve because they were based on the premise
that FUPO is a labor organization engaged in an industry affecting
interstate commerce, as defined by § 402(j) of the Labor Management
Reporting and Disclosure Act ("LMRDA"). Section § 501(c) of the
LMRDA is violated by "[a]ny person who embezzles, steals, or
unlawfully and willfully abstracts or converts to his own use, or
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the use of another, any of the moneys, funds, securities, property,
or other assets of a labor organization of which he is an officer,
or by which he is employed, directly or indirectly." 29 U.S.C.
§ 501(c) (emphasis added). The term "labor organization" is
defined by the LMRDA as an organization "engaged in an industry
affecting commerce and includes any organization . . . in which
employees participate and which exists for the purpose, in whole or
part, of dealing with employers . . ." 29 U.S.C. § 402(i)
(emphasis added).
Morales appeals his conviction as to Counts Eleven and
Twelve on the ground that FUPO is not a labor organization under
the LMRDA because it is not "engaged in an industry affecting
commerce."3 For its part, the government does not respond to this
argument at all.4
3
Morales also claims that FUPO is not a labor organization
because Puerto Rico law prohibits police officers from organizing
or engaging in collective bargaining. However, Morales was
convicted under LMRDA, a federal statute. Morales develops no
argument as to why Puerto Rico law -- rather than federal law --
should control this case, and we consider this line of inquiry no
further.
4
Instead, the government inexplicably focuses on an altogether
separate component of the definition of a labor organization under
§ 402(i), that it exists "for the purpose, in whole or part, of
dealing with employers." 29 U.S.C. § 402(i)(emphasis added).
Because Morales does not challenge FUPO's status as a labor union
with respect to this requirement, we consider the argument waived.
See, e.g., Am. Cyanamid Co. v. Capuano, 381 F.3d 6, 18 (1st Cir.
2004).
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The LMRDA deems a labor organization to be "engaged in an
industry affecting commerce" if it
(1) is the certified representative of
employees under the provisions of the National
Labor Relations Act, as amended [29 U.S.C.A. §
151 et seq.], or the Railway Labor Act, as
amended [45 U.S.C.A. § 151 et seq.]; or
(2) although not certified, is a national or
international labor organization or a local
labor organization recognized or acting as the
representative of employees of an employer or
employers engaged in an industry affecting
commerce; or
(3) has chartered a local labor organization
or subsidiary body which is representing or
actively seeking to represent employees of
employers within the meaning of paragraph (1)
or (2); or
(4) has been chartered by a labor organization
representing or actively seeking to represent
employees within the meaning of paragraph (1)
or (2) as the local or subordinate body
through which such employees may enjoy
membership or become affiliated with such
labor organization; or
(5) is a conference, general committee, joint
or system board, or joint council, subordinate
to a national or international labor
organization, which includes a labor
organization engaged in an industry affecting
commerce within the meaning of any of the
preceding paragraphs of this subsection, other
than a State or local central body.
29 U.S.C. § 402(j). Morales argues that FUPO does not meet any of
the above requirements because the vast majority of FUPO's members
are police officers employed by the Commonwealth of Puerto Rico and
thus FUPO is not the representative of employees of an employer or
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employers engaged in an industry affecting commerce. The LMRDA
defines the phrase "industry affecting commerce" as
any activity, business, or industry in
commerce or in which a labor dispute would
hinder or obstruct commerce or the free flow
of commerce and includes any activity or
industry "affecting commerce" within the
meaning of the Labor Management Relations Act,
1947, as amended [29 U.S.C. §§ 141 et seq.],
or the Railway Labor Act, as amended [45
U.S.C. §§ 151 et seq.].
29 U.S.C. § 402(c). At trial, the government presented evidence to
the jury of FUPO's activities "affecting commerce," consisting of
the following: the majority of FUPO's members are members of the
police force in Puerto Rico, which uses Smith and Wesson firearms,
Crown Victoria cars, and helicopters, none of which are
manufactured in Puerto Rico; and FUPO has six or seven dues-paying
members who work for J.R. Bodyguard, a private security company
that uses armored trucks purchased in Canada, cars manufactured by
Suzuki, arms manufactured by Smith and Wesson, and which services
national companies like Sam's Club and Office Max. Morales cites
nary a case to support his contention that these activities do not
constitute engagement in an industry affecting commerce and are
thus not sufficient to qualify FUPO as a labor organization under
the statute. Our standard of review constrains us to consider the
evidence in the light most favorable to the verdict. A reasonable
jury could conclude that FUPO was sufficiently engaged in commerce
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to satisfy the statute, and we affirm Morales's conviction as to
Counts Eleven and Twelve.
3. Count Thirteen: Structuring Monetary Transactions
Morales argues that there was insufficient evidence to
sustain his conviction for structuring monetary transactions. The
Bank Secrecy Act requires domestic banks to report any transactions
involving more than $10,000 in cash (such reports are known as cash
transaction reports, or "CTR"). See 31 U.S.C. § 5313. Further,
"[n]o person shall, for the purpose of evading the reporting
requirements of section 5313(a) . . . structure or assist in
structuring, or attempt to structure or assist in structuring, any
transaction with one or more domestic financial institutions." Id.
§ 5324(a)(3). The Supreme Court has defined structuring as "to
break up a single transaction above the reporting threshold into
two or more separate transactions for the purpose of evading a
financial institution's reporting requirement." Ratzlaf v. United
States, 510 U.S. 135, 136 (1994).
Morales contends 1) that the evidence was insufficient
because none of the government witnesses testified as to any
willful violation of the structuring statute, and 2) that because
the transactions in question involved checks, not cash, they do not
fall within the ambit of 31 U.S.C. § 5324.
Evidence introduced at trial reveals that BPPR never
filed a CTR for any of Morales's transactions because he never
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issued a check in excess of $10,000, despite the fact that he often
issued several checks to himself on the same day, whose total value
exceeded that amount. Similarly, of the numerous handwritten
checks made out to "cash" signed by Morales and drawn upon FUPO's
First Bank account, none exceeded $10,000, even when the total
value of checks cashed in a single day exceeded $10,000.
Additionally, the checks that Morales's brothers cashed from FUPO's
First Bank account never exceeded $10,000.
Morales maintains that there was insufficient evidence to
support his conviction because none of the government witnesses
testified that Morales ever willfully caused a financial
institution to fail to file a CTR. Although this argument is quite
poorly developed, we assume that its intention is to suggest that
his violation of § 5324 was not willful. In Ratzlaf, the Supreme
Court held that a structuring conviction requires a showing "that
the defendant acted with knowledge that his conduct was unlawful."
510 U.S. at 137. However, Congress later amended the statute so
that willfulness is no longer required for a violation of 31 U.S.C.
§ 5324. See Aversa v. United States, 99 F.3d 1200, 1205 n.4 (1st
Cir. 1996).
Drawing all reasonable inferences in favor of the
verdict, we have no doubt that the evidence presented in this case
would permit a rational jury to find that Morales violated the
anti-structuring statute. During the period between January 2000
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and December 2002, Morales prepared dozens of BPPR checks, drawn
against FUPO's account and made out to cash, for a total value of
well over $1,000,000. Not a single check exceeded $10,000 in
value. The consistent avoidance of the $10,000 threshold over a
period of almost three years would, in our view, permit a jury to
conclude that Morales divided all transactions above the reporting
threshold "for the purpose of evading the reporting requirements,"
in violation of § 5324.
Morales next argues that the transactions that served as
the basis for his conviction do not come within the ambit of
sections 5314 and 5324 of Title 31 because they involved checks and
not cash. This argument fails because many of the transactions in
question involved cashing checks, such that Morales -- or someone
sent on his behalf -- would routinely exit the bank with thousands
of dollars in cash. We have observed that "[t]he most common
method of 'structuring' is to divide sums of cash into amounts that
are either under the $10,000 reporting threshold or into amounts
that are larger but still less likely to attract attention."
United States v. Hurley, 63 F.3d 1, 12 (1st Cir. 1995). The
evidence in this case suggests that Morales acted exactly as Hurley
describes. Morales develops no argument as to why this activity
does not fall within the purview of the Bank Secrecy Act, which
"requires domestic banks to report any transactions involving more
than $10,000 in cash." Id. (emphasis added). We find that his
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activity was exactly the sort that 31 U.S.C. § 5324(a)(3)
proscribes.
4. Count Fourteen: Conspiracy to Commit Money Laundering
Morales was convicted of conspiracy to commit money
laundering under 18 U.S.C. § 1956(h). To find Morales guilty, the
jury had to find that the government proved beyond a reasonable
doubt that Morales conspired with De Jesús to commit the offense of
money laundering, which is comprised of four elements:
(1) that [Morales] knowingly conducted a
financial transaction, (2) that he knew the
transaction involved funds that were the
proceeds of some form of unlawful activity,
(3) that the funds involved were in fact the
proceeds of a specified unlawful activity, and
(4) that [Morales] engaged in the financial
transaction knowing that it was designed in
whole or in part to conceal or disguise the
nature, location, source, ownership, or
control of the proceeds of such unlawful
activity.
United States v. Cruzado-Laureano, 404 F.3d 470, 483 (1st Cir.
2005) (internal quotation marks omitted).
Morales claims that no rational jury could have convicted
him of money laundering because 1) he did not conduct any financial
transactions that affected interstate commerce; 2) he did not
engage in any transaction knowing that it was designed in whole or
in part to conceal or disguise the nature, location, source,
ownership, or control of the proceeds of such unlawful activity;
and 3) the government did not present any direct evidence to
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establish that he conducted financial transactions to conceal the
nature of his mail fraud activities.
Morales first maintains that he was not properly
convicted under the money laundering statute because he did not
conduct a "financial transaction" within the meaning of 18 U.S.C.
§ 1956(c)(4). That section defines a financial transaction as
(A) a transaction which in any way or degree
affects interstate or foreign commerce (i)
involving the movement of funds by wire or
other means or (ii) involving one or more
monetary instruments, or (iii) involving the
transfer of title to any real property,
vehicle, vessel, or aircraft, or (B) a
transaction involving the use of a financial
institution which is engaged in, or the
activities of which affect, interstate or
foreign commerce in any way or degree;
18 U.S.C. § 1956(c)(4) (emphases added). Morales only addresses
part (A), claiming that he was involved in no transaction that
affected interstate or foreign commerce. He entirely ignores the
remainder of this subsection.
Even if we accept, arguendo, Morales's contention that he
was involved in no financial transaction affecting interstate
commerce within the meaning of subsection (A), we find that a jury
could have determined that he was involved in financial
transactions as defined in subsection (B). The government's case
included evidence that Morales and De Jesús retained exclusive
control of the membership dues checks received by mail, that they
deposited the majority of the checks so received in FUPO's First
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Bank account each month, that they then transferred funds -- using
manager's checks -- from FUPO's First Bank account to its BPPR
account, and that Morales and De Jesús regularly issued checks to
themselves from the BPPR account. Each of these actions –-
depositing checks at a bank, transferring funds from one bank to
another, and issuing checks –- involved one or more financial
institutions engaged in interstate commerce. Given these facts, we
think a rational jury could easily have found that Morales
conducted a financial transaction within the plain meaning of 18
U.S.C. § 1956(c)(4)(B).
Morales next challenges the sufficiency of the
government's evidence as to the fourth element of the Cruzado-
Laureano test, claiming that "absolutely no evidence" –- either
direct or circumstantial -- was presented at trial to establish
that he engaged in any financial transaction knowing that it was
designed in whole or in part to conceal or disguise the nature,
location, source, ownership, or control of the proceeds of such
unlawful activity. Morales points to United States v. Dimeck, 24
F.3d 1239 (10th Cir. 1994), to support his argument that, even if
the checks that he issued to himself and De Jesús were the proceeds
of illegal activity, his activities did not constitute money
laundering. In Dimeck, the court found that the mere
transportation of concealed drug money did not constitute money
laundering because the money laundering statute "was designed to
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punish those . . . who thereafter take the additional step of
attempting to legitimize their proceeds so that observers think
their money is derived from legal enterprises." Id. at 1247. We
find the facts of Dimeck to be easily distinguishable from the
present case. The facts, when considered in a light most favorable
to the verdict, suggest that Morales did far more than simply
transport ill-gotten wealth. A rational jury could have found the
evidence sufficient to indicate that Morales's monthly secretive
transfer of FUPO membership funds between three separate bank
accounts -- FUPO's First Bank account, FUPO's BPPR account, and
Morales's personal BPPR account -- was an attempt to conceal the
nature, location, source, ownership, and control of proceeds.
Further, a jury could have found that Morales's practice of
limiting the value of each check issued to himself or De Jesús to
$10,000 so as to avoid bank reporting, indicates an effort to
conceal the true nature, source, and ownership of the proceeds.
Specifically, we think it quite clear that a jury could have found
that these complicated machinations were intended to create the
appearance of legitimate income.
Finally, Morales suggests that the evidence at trial was
insufficient to support his conviction because no government
witness directly testified as to his participation in any money
laundering activity. However, we have held that circumstantial
evidence can be sufficient to support a money laundering
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conviction. Cruzado-Laureano, 404 F.3d at 483 ("A conviction
requires evidence of intent to disguise or conceal the transaction,
whether from direct evidence, like the defendant's own statements,
or from circumstantial evidence, like the use of a third party to
disguise the true owner, or unusual secrecy."). In this instance,
the lack of direct evidence is a direct result of the secret
conspiracy between Morales and De Jesús. The fact that only
Morales and De Jesús knew of the scheme only emphasizes its
secretive nature and the deceit involved with its execution.
Everyone else at FUPO -- from top-level officers to administrative
secretaries -- was kept in the dark. For these reasons, we find
that a rational jury could have found the evidence at trial
sufficient to convict Morales of conspiracy to commit money
laundering.
B. Brady Violation
Morales argues that the government breached its duty
under Brady v. Maryland, 373 U.S. 83 (1963), to provide him with
exculpatory evidence in its possession. On August 18, 2003,
Morales filed a motion requesting any exculpatory information from
the government, consistent with Brady. On August 25, the district
court granted the motion. By letter dated August 26, the
government noted that "[a]s of this date, no exculpatory evidence
has been uncovered," but promised to "provide any exculpatory
evidences which may be uncovered in the future."
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Morales maintains that, at the time of the prosecution's
August 26 letter, the government was already in possession of
exculpatory evidence that it failed to disclose, in violation of
Brady. The evidence in question was the contents of two FBI
reports detailing interviews with De Jesús. In those reports, De
Jesús stated -- among other things -- that he had won approximately
$2.5 million over the course of three years in a horse race, which
had enabled him to regularly loan money to FUPO. Specifically, he
said that during an approximately three-year period, he had lent
more than $300,000 to FUPO, and that Morales had lent FUPO $75,000.
De Jesús explained that the money he and Morales took from FUPO's
bank accounts constituted repayment of the loans. As evidence, De
Jesús presented copies of two cancelled checks, dated 1998 and
1999, drawn on his personal account and made out to FUPO for
$50,000 and $100,000 respectively. Morales claims that the
government never informed him of the contents of these reports or
of the two cancelled checks. He argues that this information was
material and exculpatory because it provided a legitimate
explanation for his appropriation of FUPO's funds.
An alleged Brady violation must satisfy three elements:
"The evidence at issue must be favorable to the accused, either
because it is exculpatory, or because it is impeaching; that
evidence must have been suppressed by the State, either willfully
or inadvertently; and prejudice must have ensued." Strickler v.
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Greene, 527 U.S. 263, 281-82 (1999). We review the district
court's denial of a motion for a new trial on the basis of alleged
Brady violations for manifest abuse of discretion. United States
v. Hansen, 434 F.3d 92, 102 (1st Cir. 2006).
Morales claims that all three prongs are satisfied
because the information was exculpatory, the prosecution suppressed
it, and there was a reasonable probability that the verdict would
have been different if the evidence had been disclosed to the jury.
We consider each element in turn.
Morales claims that the evidence was exculpatory because
it provided a legitimate explanation for his activities. We
disagree. Even assuming the credibility of De Jesús's statements
regarding his loan to FUPO of $300,000 and Morales's loan of
$75,000, there still remains $2.4 million of FUPO funds unaccounted
for. Further, the allegedly exculpatory reports include many
statements by De Jesús, ignored in Morales's brief, that are
actually incriminating to Morales. For example, the report
reflects 1) that De Jesús admits that "he kept writing checks to
himself and Morales after he felt that he had repaid himself for
the loans"; 2) that De Jesús and Morales continued writing checks
to themselves because "they started the organization and they
looked on it as their own money"; 3) that they always wrote the
checks for $10,000 or less "so that they could avoid notification
to Hacienda and the federal reporting requirements"; 4) that De
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Jesús never reported the money he took from FUPO to Hacienda on his
tax returns and does not believe Morales did either; 5) that De
Jesús believes that he has taken between $1 million and $1.5
million from FUPO in addition to what he claims to have lent the
organization; and 6) that De Jesús believes Morales used the funds
to open and support several security businesses. Although we are
not convinced that this evidence was exculpatory, we proceed to the
second prong of Brady.
Under Brady, the government is obligated to disclose
exculpatory evidence. 373 U.S. at 87. Assuming that the evidence
in question is exculpatory, we find no Brady violation because the
government did not suppress it. The government allowed the defense
to conduct open-file discovery of all documents in its possession,
which included the FBI reports of De Jesús's statements, which the
government requested to be returned only after the defense had an
opportunity to read them. At sentencing, the district judge found
unpersuasive Morales's claim that the government requested the
return of the documents before the defense had an opportunity to
read all of them. We find no abuse of discretion.
Finally, a valid Brady claim requires a showing that the
evidence in question was material. The Supreme Court has made
quite clear that, for Brady purposes, "[t]he evidence is material
only if there is a reasonable probability that, had the evidence
been disclosed to the defense, the result of the proceeding would
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have been different." United States v. Bagley, 473 U.S. 667, 682
(1985). We find that the proffered evidence was not material. The
evidence against Morales was very strong, and De Jesús's statements
contained within the allegedly exculpatory FBI reports only served
to corroborate the prosecution's theory of the case. Further, even
if credible, De Jesús's explanation of the scheme leaves almost
$2.5 million unaccounted for. We find no Brady violation.
C. Sentencing Guidelines
Morales contends that the district court improperly
delegated its sentencing authority when it imposed a supervised
release condition requiring Morales to submit to a drug test within
fifteen days of release, and thereafter to random drug testing not
to exceed 104 samples per year. Morales claims that this condition
warrants remand for re-sentencing in light of United States v.
Booker, 543 U.S. 220 (2005).
Morales did not preserve his Booker claim below, and thus
our review is for plain error. See United States v.
Antonakopoulos, 399 F.3d 68, 75 (1st Cir. 2005). Similarly,
Morales did not object to the supervised release conditions at
sentencing, and our review of that issue is for plain error. See
United States v. Padilla, 415 F.3d 211, 218 (1st Cir. 2005) (en
banc). In order for us to correct an error to which there was no
objection in the district court, "[t]here must be an 'error' that
is 'plain' and that 'affect[s] substantial rights.'"
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Antonakopoulos, 399 F.3d at 77 (quoting United States v. Olano, 507
U.S. 725, 732 (1993)).
Morales claims that the supervised release terms were an
impermissible delegation of judicial authority. Morales
specifically claims that the supervised release terms allowed the
probation officer to decide the number of drug tests to which he
would need to submit. It is the law of this circuit that, in
stipulating the terms of a supervised release provision, a
sentencing judge "may not . . . vest the probation officer with the
discretion to order an unlimited number of drug tests." United
States v. Meléndez-Santana, 353 F.3d 93, 103 (1st Cir. 2003), rev'd
on other grounds, Padilla, 415 F.3d at 215. However, Morales's
claim fails because no such delegation actually occurred in this
case. At sentencing, the judge ordered Morales to
refrain from the unlawful use of controlled
substances and submit to drug testing within
fifteen days of release. Thereafter submit to
random drug tests not to exceed 104 samples
per year, in accordance with the drug after
care program policy of the U.S. probation
office, approved by this Court.
The probation officer did not have unlimited discretion to order an
unlimited number of tests. Rather, the sentencing judge clearly
established an upper limit to the number of drug tests that can
properly be ordered upon Morales's release. In a recent case
raising almost the identical issue, we held that where, as here,
the "district court itself required that defendant submit to random
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drug testing 'not to exceed 104 samples per year,'" there was no
delegation error. United States v. Laureano-Vélez, 424 F.3d 38, 41
(1st Cir. 2005). Because we find no error, we need not reach the
other prongs of plain error review.
Morales next maintains that the supervised release
condition warrants remand in light of Booker.5 The government
concedes that the district court treated the sentencing guidelines
as mandatory. In Antonakopoulos, we held that "[t]he first two
Olano requirements -- that an error exists and that it is plain at
the time of appeal -- are satisfied whenever the district court
treated the Guidelines as mandatory at the time of sentencing."
399 F.3d at 75. Under the third prong we ask "whether [Morales
has] pointed to circumstances that create a reasonable probability
that the district court would have imposed a more lenient sentence
had the guidelines been advisory." United States v. Sánchez-
Berríos, 424 F.3d 65, 80 (1st Cir. 2005). Morales has made no such
showing.
III. Conclusion
For the foregoing reasons, we affirm Morales's conviction
and sentence.
Affirmed.
5
Morales does not contend that remand is warranted so that the
district court can reconsider the severity of the sentence in light
of Booker. Thus, we do not consider this possibility.
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