United States of America v. Hector Rolando Morales

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 12‐3558 & 13‐1103
U NITED STATES OF A MERICA ,
Plaintiff‐Appellee,
v.
HECTOR R OLANDO M ORALES,
Defendant‐Appellant.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 9 CR 513‐2 — Charles R. Norgle, Judge.
____________________
A RGUED NOVEMBER 14, 2013 — DECIDED MARCH 25, 2014
____________________
Before W OOD, Chief Judge, and C UDAHY and R OVNER , Cir‐
cuit Judges.
WOOD, Chief Judge. More than 50 years ago, the Supreme
Court announced in Brady v. Maryland, 373 U.S. 83 (1963),
that prosecutors have a duty to turn over upon request any
material evidence that is favorable to the defense. One
would think that by now failures to comply with this rule
would be rare. But Brady issues continue to arise. Often, non‐
disclosure comes at no price for prosecutors, because courts

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2 Nos. 12‐3558 & 13‐1103
find that the withheld evidence would not have created a
“reasonable probability of a different result.” Kyles v. Whit‐
ley, 514 U.S. 419, 434 (1995) (quotation omitted). We must
leave for another day a closer examination of the incentive
structure created by Brady’s harmless‐error exception, be‐
cause the case before us is another in which the Brady viola‐
tions do not drive the result. The evidence implicating Hec‐
tor Morales in a vast mail‐fraud scheme was overwhelming,
and we are confident that the prosecution’s alleged Brady vi‐
olation (a failure to disclose two possibly exculpatory emails
until after trial) made no difference. We therefore affirm the
district court’s denial of Morales’s motion for a new trial.
I
Morales and his son Hector Morales, Jr. (Junior) operated
a business they called Intelligent Payment Services (IPS). The
only thing intelligent about it, however, was that it served
the Moraleses profitably as a vehicle for defrauding small
businesses. Sales agents trained by Morales would contact
business owners and offer to collect on bad checks from the
businesses’ customers in exchange for a small commission.
The agents would tell the business owners that they worked
for either “American Processing Services” or “National Set‐
tlements Corporation,” not IPS. The agents would then ask
the business owners for certain personal information and
request a voided check, ostensibly so that IPS could later
wire funds obtained through its collection efforts to them.
In fact, IPS put the information to a shadier use. Once in
possession of the critical data, IPS made unauthorized with‐
drawals from the businesses’ bank accounts through various
financial intermediaries. IPS would tell the intermediaries
that the withdrawals covered payments on leases of credit‐

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Nos. 12‐3558 & 13‐1103 3
card processing equipment. In reality, IPS neither collected
bad checks nor leased credit‐card processing equipment. In
all, IPS fraudulently withdrew about $645,000 from its cus‐
tomers’ accounts.
On July 27, 2004, a team led by Secret Service Agent Jason
Kane executed a search warrant on IPS’s office in Liber‐
tyville, Illinois. IPS’s office suite consisted of a small recep‐
tion area and two adjacent offices. Upon entering the suite,
the office on the left was Junior’s office, and the office on the
right was Morales’s. When agents knocked on IPS’s front
door, receptionist Carmen Donaire was the only person in
the reception area, and the door to Morales’s office was
closed. Before the agents entered, Morales and his daughter
Paulina Morales walked out of the office and moved to the
reception area.
Agents found a trove of incriminating evidence on the
premises. They recovered a laptop from Morales’s office on
which a credit‐card “lease collection” form was open and
partially filled out. In addition, they recovered from the
same office personal financial information from ten victims
and $8,000 cash. Elsewhere on the premises agents found
documents in Morales’s handwriting describing check collec‐
tions, commissions paid to agents, and an accounting of IPS’s
finances with notations reflecting more than $20,000 in re‐
versed transactions over a nine‐day period. Forensic analysis
of the laptop discovered in Morales’s office and a laptop dis‐
covered in Junior’s office revealed that both machines were
used in the fraud.
Other documentary evidence also connected Morales to
the scheme. Bank statements showed that during the preced‐
ing 12 months, Morales deposited funds from IPS totaling

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4 Nos. 12‐3558 & 13‐1103
$439,000 in his personal accounts and used an additional
$55,000 in IPS funds for his personal credit card bills and car
payments. (Morales even deposited IPS funds after the date
of the raid.) Telephone records showed numerous calls and
faxes related to the scheme from Morales’s private residence
and office. Finally, investigators obtained a document pur‐
porting to be a credit‐card lease contract between one Walter
Corea and IPS that was filled out entirely in Morales’s
handwriting. At trial, Corea testified that he had never heard
of IPS, nor had he agreed to lease any credit‐card equipment.
Corea had, however, spoken with someone claiming to work
for “National Settlements Corporation”; that person con‐
vinced him to sign up for a bad‐check collection service that
never produced a dollar in recovered funds.
Morales was indicted on nine counts of mail fraud in vio‐
lation of 18 U.S.C. § 1341. At trial, the government presented
dozens of witnesses, including Corea and nine other victims,
forensic analysts, Donaire, and Agent Kane. Donaire testified
that Morales and Junior jointly operated IPS. She noted that
Morales and Junior used their respective laptops and that
Morales at times directed her to call businesses in Texas and
California to offer bad‐check collection services. She identi‐
fied Morales’s handwriting on various documents. Finally,
Donaire testified that she received numerous angry calls
from customers complaining that IPS had made unauthor‐
ized withdrawals from their businesses’ accounts. Donaire
said that Morales seemed “kind of surprise[d]” when told
about the calls and presented with a bank statement faxed
by one customer. Soon after, Donaire testified, Morales and
Junior had a heated conversation behind closed doors in one
of the offices, but Donaire could not hear what they said.

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Nos. 12‐3558 & 13‐1103 5
Agent Kane’s testimony was primarily used to lay a
foundation for the introduction of documents and other evi‐
dence recovered during the search. Kane explained where in
the facility various pieces of evidence were found, so that the
government could then introduce the seized material as an
exhibit. Kane also testified about what the search did not
find, namely, signs of legitimate business activity in check
collecting or credit‐card‐equipment leasing. Morales’s cross‐
examination of Kane was not fruitful. It consisted mostly of
Kane’s admitting that he personally could not identify Mo‐
rales’s handwriting or understand Spanish.
In defense, Morales argued that the scheme was perpe‐
trated entirely by Junior and that Morales had no knowledge
of it. According to Morales, Junior betrayed him by using the
business to perpetrate a fraud. Morales’s counsel argued that
the hundreds of thousands of IPS funds deposited in Mo‐
rales’s account and used to pay his bills was legitimate re‐
muneration for Morales’s work at IPS. The government
opened its closing arguments by saying that Morales had
been caught “red‐handed” because the laptop in his office,
which by all accounts was Morales’s computer, showed a
partially completed “lease collection” form that presumably
was an instrument of the fraud. The government then rattled
off the litany of other evidence in the record connecting Mo‐
rales to the crimes. The jury convicted Morales on all counts,
and he was sentenced to nine years in prison.
Three weeks after the trial, an assistant U.S. attorney sent
Morales’s lawyer two emails from Agent Kane that had not
previously been disclosed. The first email, sent April 15,
2009, was a message to counsel for the government. It read:

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6 Nos. 12‐3558 & 13‐1103
Just another nugget of info. When we entered
to do the search warrant inside Hector Morales
Seniors office the lap top [sic] was on a small
desk beside his. According to the Daughter
[Paulina Morales], she was entering in items in
the computer. Here is a picture of what was on
the computer at the time.
A screenshot from the laptop as it appeared when discov‐
ered in Morales’s office was attached.
The second email, sent June 9, 2009, was also a message
from Kane to government counsel. That email responded to
a note from government counsel indicating that a grand jury
subpoena for Paulina Morales was available to be picked up.
The June 9 email said:
Matt, got the message[.] I will pick it [the sub‐
poena] up and I will serve it and arrest every‐
body in the house because as you know some‐
body is going to jail and no [sic] more than ever
somebody maybe a pet will be tazered!
Despite Agent Kane’s bluster, he did not arrest Morales,
Paulina, or any other suspect. Nor did Kane or anyone else
“tazer” any person, much less pets. Rather, agents simply
served the subpoena on Paulina Morales by leaving it with
her father at their home.
After receiving copies of Kane’s emails, Morales filed a
motion for a new trial, asserting that the government’s with‐
holding of the emails until the trial was over violated his
constitutional rights under Brady. The district court denied
the motion and sentenced Morales to 108 months’ impris‐
onment. This appeal followed.

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Nos. 12‐3558 & 13‐1103 7
II
A Brady claim has three components: (1) the evidence at
issue must be favorable to the accused, either because it is
exculpatory or because it is impeaching; (2) the evidence
must have been suppressed by the government, and (3) the
evidence must be material, that is, there must be “a reasona‐
ble probability that the suppressed evidence would have
produced a different verdict.” Strickler v. Greene, 527 U.S. 263,
281–82 (1999); see Kyles, 514 U.S. at 435 (citing United States v.
Bagley, 473 U.S. 667, 682 (1985)). The only issue on appeal re‐
lates to the third of these elements.
The parties have assumed that there is a threshold ques‐
tion in this case, which is whether evidence must be admis‐
sible to be considered material under Brady. We conclude in
the end that the answer does not matter to the outcome here,
because either way the result for Morales is the same. We
discuss the point, however, because there is a difference of
opinion among the circuits.
The Supreme Court’s holding in Brady itself does not an‐
swer this question; there the Court said broadly that “the
suppression by the prosecution of evidence favorable to the
accused upon request violates due process where the evi‐
dence is material either to guilt or punishment.” Brady, 373
U.S. at 87; see also Cone v. Bell, 556 U.S. 449, 470 n.15 (2009)
(“Although the Due Process Clause of the Fourteenth
Amendment, as interpreted by Brady, only mandates the dis‐
closure of material evidence, the obligation to disclose evi‐
dence favorable to the defense may arise more broadly un‐
der a prosecutor’s ethical or statutory obligations.”). In a
number of decisions, we have understood the Court to be
saying that suppressed evidence must be more than material

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8 Nos. 12‐3558 & 13‐1103
to guilt or punishment—it must actually be admissible in
order to trigger Brady analysis. E.g. United States v. Dimas, 3
F.3d 1015, 1019 (7th Cir. 1993) (“[M]ost important, the court
must determine whether and to what extent [withheld] evi‐
dence … would be admissible at trial.”); United States v. Silva,
71 F.3d 667, 670 (7th Cir. 1995) (“[E]vidence that would not
have been admissible at trial is immaterial because it could
not have affected the trial’s outcome.”); United States v. Salem,
578 F.3d 682, 686 (7th Cir. 2009) (“Of course … only admissi‐
ble evidence can be material, for only admissible evidence
could possibly lead to a different verdict.”); Jardine v.
Dittman, 658 F.3d 772, 777 (7th Cir. 2011) (“Logically, inad‐
missible evidence is immaterial under this rule.”). The
Fourth Circuit agrees with this position. See Hoke v. Nether‐
land, 92 F.3d 1350, 1356 n.3 (4th Cir. 1996).
The First, Second, Third, Sixth, and Eleventh Circuits
have not read Brady so narrowly. See Johnson v. Folino, 705
F.3d 117, 130 (3d Cir. 2013) (“[I]nadmissible evidence may be
material if it could have led to the discovery of admissible
evidence.”); Ellsworth v. Warden, 333 F.3d 1, 5 (1st Cir. 2003)
(en banc); United States v. Gil, 297 F.3d 93, 104 (2d Cir. 2002);
Bradley v. Nagle, 212 F.3d 559, 567 (11th Cir. 2000); United
States v. Phillips, 948 F.2d 241, 249 (6th Cir. 1991); see also
United States v. Pflaumer, 473 U.S. 922, 922 (1985) (remanding
without opinion for further consideration in light of Bagley
where appeals court stated that “[i]n order to be material,
evidence suppressed must have been admissible at trial”).
Courts on both sides of this question look for support to
the Supreme Court’s opinion in Wood v. Bartholomew, 516 U.S.
1 (1995). Compare Ellsworth, 333 F.3d at 5 (Wood “implicitly
assumes” that inadmissible evidence could be “so promising

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Nos. 12‐3558 & 13‐1103 9
a lead to strong exculpatory evidence that there could be no
justification for withholding it”), with Hoke, 92 F.3d at 1356
n.3 (citing Wood for the proposition that inadmissible evi‐
dence is, “as a matter of law, ‘immaterial’”). In Wood, the
Court considered a case in which the undisclosed evidence
was unquestionably “inadmissible under state law, even for
impeachment purposes.” 516 U.S. at 6. At the outset, the
Court acknowledged that the evidence “could have had no
direct effect on the outcome of the trial” because it was “not
‘evidence’ at all.” Id. (emphasis added). Nevertheless, the
Court did not end its opinion with that observation, as it
would have done if inadmissibility were the end of the mat‐
ter.
Instead, the Court proceeded to analyze whether the
withheld information “might have led [defendant’s] counsel
to conduct additional discovery that might have led to some
additional evidence that could have been utilized.” Id. It
concluded that the answer to this question was no. In so do‐
ing, it noted that the court of appeals had failed to specify
what evidence might have been found, if the suppressed ma‐
terials had been turned over. Id. The record provided strong
support for a finding of immateriality: defendant’s counsel
“acknowledge[d] that disclosure would not have affected the
scope of his cross‐examination” of the implicated witness. Id.
at 7–8. Under those circumstances, the Court concluded, “it
[was] not ‘reasonably likely’ that disclosure … would have
resulted in a different outcome at trial.” Id. at 8. We find the
Court’s methodology in Wood to be more consistent with the
majority view in the courts of appeals than with a rule that
restricts Brady to formally admissible evidence.

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10 Nos. 12‐3558 & 13‐1103
The fact that evidence that can be used only for im‐
peachment is subject to the Brady rule also supports the ma‐
jority position. See Giglio v. United States, 405 U.S. 150, 154–55
(1972); Bagley, 473 U.S. at 676. Although extrinsic evidence is
not admissible to prove specific instances of a witness’s con‐
duct, see FED. R. EVID. 608(b), withholding such evidence
from the defendant still falls within the ambit of Brady if in‐
quiring about the witness’s conduct during cross‐
examination “may [have made] the difference between con‐
viction and acquittal.” Bagley, 473 U.S. at 676; see, e.g., Salem,
578 F.3d at 689 (explaining that witness’s alleged involve‐
ment in first‐degree murder may have been material im‐
peachment evidence under Brady). It is hard to find a princi‐
pled basis for distinguishing inadmissible impeachment evi‐
dence and other inadmissible evidence that, if disclosed,
would lead to the discovery of evidence reasonably likely to
affect a trial’s outcome.
If, despite all this, we were to adhere to our existing rule
on the materiality of inadmissible evidence for Brady pur‐
poses, Morales’s case would be over. If we thought that Mo‐
rales might prevail under the majority rule, we would enter‐
tain the idea of reconsidering our approach. As we now ex‐
plain, however, we conclude that Morales would lose no
matter what circuit he was in, and so this is not the occasion
for any such reconsideration.
As we already have noted, evidence is material for Brady
purposes only if there is a “reasonable probability” that its
disclosure to the defense would have changed the result of
the trial. Kyles, 514 U.S. at 433–34 (quoting Bagley, 473 U.S. at
682). The defendant need not prove that disclosure would
more likely than not have resulted in acquittal, nor that the

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Nos. 12‐3558 & 13‐1103 11
evidence would have been insufficient to convict if timely
disclosure had been made. Id. at 434–35. Rather, “favorable
evidence is subject to constitutionally mandated disclosure
when it could reasonably be taken to put the whole case in
such a different light as to undermine confidence in the ver‐
dict.” Cone, 556 U.S. at 470 (quotation omitted). Because “the
effect that a particular piece of evidence is likely to have had
on the outcome of a trial must be determined in light of the
full context of the weight and credibility of all evidence ac‐
tually presented at trial,” we review the district court’s deni‐
al of a new‐trial motion based on a finding of lack of materi‐
ality only for an abuse of discretion. Silva, 71 F.3d at 670.
Morales argues that Kane’s April 15 email was material
under Brady because (a) the email contradicted the govern‐
ment’s “trial theme” that Morales was caught “red‐handed,”
and (b) the email was useful impeachment evidence because
of its “inconsisten[cy] with Agent Kane’s trial testimony that
[Paulina Morales] was within sight of the front entrance of
IPS” when agents arrived for the raid. We consider these
points in turn.
Although the April 15 email contains Paulina Morales’s
hearsay statement that she, rather than her father, was enter‐
ing items in the computer, we see no likelihood that her
statement would have affected the outcome of the trial. To
begin with, Morales exaggerates when he says that the gov‐
ernment’s “trial theme” was that it caught Morales red‐
handed. The government’s position was that Morales was
intimately involved in the fraud at every step, and it had
ample evidence to back this up. It showed that Morales
trained and recruited sales agents, falsified documents, kept
the books, and collected the profits from the fraud. That Mo‐

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12 Nos. 12‐3558 & 13‐1103
rales may or may not have been “caught red‐handed” dur‐
ing the office raid was not crucial to the government’s case.
Even if Morales did not enter information in his computer
immediately before the agents’ arrival, that would do almost
nothing to advance his argument that he had no involve‐
ment in the fraud, given the wealth of other evidence. Cf.
Strickler, 527 U.S. at 293 (rejecting Brady claim where “there
was considerable forensic and other physical evidence link‐
ing petitioner to the crime”).
In using the expression “caught red‐handed” during
closing arguments, the government’s attorney was urging
the jury to draw the inference that Morales was caught in the
act of perpetuating the fraud because the computer that he
regularly used and that was in the office from which he
emerged showed a fraudulent lease form in progress. Even if
Paulina Morales’s statement that she was “entering in items
in the computer” when agents arrived had been revealed to
the jury, the government could just as easily have urged the
jury to draw the inference that Morales was caught red‐
handed because his daughter was in the midst of helping
him to carry out his fraudulent scheme. Whether, or the ex‐
tent to which, Paulina was involved in the scheme does not
mitigate Morales’s own substantial role.
Moreover, Paulina’s hearsay statement from the April 15
email contains no information that Morales should not al‐
ready have known. See United States v. Mahalick, 498 F.3d
475, 478–79 (7th Cir. 2007) (“Brady requires disclosure only of
exculpatory material known to the government but not to
the defendant.”) (quoting United States v. Dawson, 425 F.3d
389, 393 (7th Cir. 2005)). Morales contends that he could not
have known before the disclosure of the April 15 email what

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Nos. 12‐3558 & 13‐1103 13
his daughter was entering into his computer and that, had
he known, he would have called her to testify. But that is
nonsense. Morales knew from the moment the agents con‐
ducted their raid that Paulina was with him in his office; all
he had to do was ask her what she was doing. By the time of
trial, Morales knew exactly what the agents had found on
the laptop in his office. Nothing in the contested emails
would have helped him decide whether to call Paulina to the
stand. The notion that Morales would have called Paulina as
a witness if he had the April 15 email available to impeach
her, and that her testimony would have affected the trial, is
too speculative to be availing. See Wood, 516 U.S. at 6 (reject‐
ing finding of Brady materiality where “judgment is based
on mere speculation”).
Nor could Morales have used the April 15 email to im‐
peach Agent Kane’s testimony. See Salem, 578 F.3d at 688
(“[O]rdinarily, newly discovered impeachment evidence will
not warrant a new trial under Brady.”). Indeed, we see noth‐
ing in the April 15 email that contradicts Kane’s testimony.
Kane’s account of Paulina Morales’s location was clear and
consistent with the email. Using a blueprint of the offices,
Kane pinpointed every person’s location. Donaire corrobo‐
rated Kane’s account by testifying that Morales and Paulina
were in Morales’s office when the agents arrived, but came
out to the reception area by the time they entered. At most,
the April 15 email reveals a slight discrepancy between these
accounts and Paulina’s. But that discrepancy is resolved by
reading the word “entered” to mean “arrived.” When agents
“arrived” to execute the search warrant, Paulina was in the
office. By the time agents walked into the premises, Paulina
was in the reception area. None of this matters, however.
Whether Paulina was or was not in the reception area when

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14 Nos. 12‐3558 & 13‐1103
officers entered to execute the search warrant has no bearing
on Morales’s guilt or innocence. Because the April 15 email
does not undermine confidence in the verdict, it was imma‐
terial for Brady purposes.
Morales’s argument about the June 9 email fares no bet‐
ter. He contends that the June 9 email was material because
it could have been used to impeach Kane’s testimony on
grounds of bias. Once again, we conclude that the email
could have had no discernible effect on the trial.
This argument founders because it is hard to see how the
June 9 email demonstrates any bias. Kane’s little show of
bravado in an internal email to a colleague had no real‐
world consequence, as he neither arrested nor tazed anyone
(or anyone’s pet). Because the impeachment value was min‐
imal at best, Morales has not shown that disclosure of the
June 9 email would have created a reasonable probability of
a different outcome. See United States v. Agurs, 427 U.S. 97,
109–10 (1976) (“The mere possibility that an item of undis‐
closed information might have helped the defense … does
not establish ‘materiality’ in the constitutional sense.”).
Finally, we see no cumulative effect from the belated dis‐
closure of the two emails. The government’s case did not rest
entirely, or even principally, on Agent Kane’s testimony. The
government could have called a different agent to testify
about the office layout and the location of the items that
were seized had Kane been discredited. Indeed, it did: sev‐
eral witnesses, as well as documentary and forensic evi‐
dence, corroborated Kane’s testimony.
In light of the strength of the evidence against Morales,
the emails do not undermine our confidence in the verdict.

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Nos. 12‐3558 & 13‐1103 15
Under any test that might apply, we conclude that the dis‐
trict court did not err when it denied Morales’s motion for a
new trial.
A FFIRMED.

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