United States v. Morales-Rodriguez

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.

-9-
 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).

-11-
 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

-15-
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

-17-
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

-18-
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

-19-
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

-20-
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

-21-
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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