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United States v. McCabe

United States District Court, W.D. New York

February 19, 2014

UNITED STATES OF AMERICA
v.
TIMOTHY McCABE and THERESA MORALES, Defendants.

DECISION AND ORDER

RICHARD J. ARCARA, District Judge.

INTRODUCTION

Before the Court is defendant Timothy McCabe's motion for severance of Counts 1 through 7 from Counts 8 and 9 of the Superseding Indictment and for severance of defendants. (Dkt. No. 48) Also before the Court is defendant Theresa Morales' motion for severance of Counts 1 through 8 from Count 9 of the Superseding Indictment and for severance of defendants. (Dkt. No. 58) For the following reasons, defendant McCabe and defendant Morales' motions for severance of Counts and severance of defendants are denied.

SUMMARY OF THE FACTS

On April 26, 2013, a grand jury for the Western District of New York returned a 9-Count Superseding Indictment against Timothy McCabe ("defendant" or McCabe") and Theresa Morales ("defendant" or "Morales") alleging various frauds and schemes to defraud in obtaining mortgages and other loans. Specifically, it is alleged that from sometime in 2006 through August 2007, defendant McCabe made arrangements to obtain seven loans for residential properties. The applications were made through Nickel City Funding, a mortgage broker in Western New York. The loans were in the form of mortgages, home equity lines of credit and/or refinancing of existing mortgages, and they were to be obtained from six different financial institutions. Defendant Morales, McCabe's wife, signed and swore to the truth and accuracy of the loan documents.

It is alleged that in applying for these loans, McCabe and Morales submitted documents that contained materially false and fraudulent statements and representations. Specifically, it is alleged that the documents falsely inflated income for Morales' employment with Verizon, falsely inflated income for her employment with National Auto Leasing, and provided false and fraudulent employment verification information for Morales on behalf of National Auto Leasing. It is also alleged that some of the loan documents contained false information as to properties allegedly owned by Morales and false statements as to Morales' intent to occupy the properties as her primary residence. In reliance on these documents, seven mortgage loans were issued in Morales' name. The total amount of the loans obtained was $2, 326, 000.

It is also charged that between on or about August 6, 2007 and on or about August 26, 2008, McCabe submitted documentation to Erie Metropolitan Federal Credit Union in Morales' name in support of loan applications. The loans were purportedly to be used to purchase vehicles and a boat with a trailer. Three separate loans were ultimately issued, in the total amount of $88, 500. The Government alleges that McCabe did not intend to use the loans for the purchases indicated. Instead, the money was funneled into bank accounts controlled by McCabe and Morales.

Counts 1 through 7 of the Superseding Indictment pertain to defendants' alleged use of fraudulent applications, supporting statements and documents to obtain mortgages, home equity lines of credit, and re-financing of existing mortgages. Count 8 charges defendants with conspiracy to commit bank fraud, relative to Counts 1 through 7. Count 9 charges bank fraud against defendant McCabe only, and pertains to his use of fraudulent applications and documents to obtain vehicle and boat loans.

MOTIONS FOR SEVERANCE

Defendant McCabe's Motion to Sever Counts

Federal Rule of Criminal Procedure 8(a) allows for the joinder of offenses that "are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan." "Similar" charges include those that are "somewhat alike", or those "having a general likeness" to each other. United States v. Rivera, 546 F.3d 245 (2d. Cir. 2008); accord United States v. Werner, 620 F.2d 922, 926 (2d. Cir. 1980) ("similar" character means "corresponding; resembling in many respects; somewhat alike; having a general likeness"). Counts that have a "sufficient logical connection" to each other can be tried together, as can those "where the same evidence may be used to prove each count." United States v. Blakney, 941 F.2d 114, 116 (2d. Cir. 1991). Rule 8(a) recognizes the adverse effect on the defendant by a joinder of counts, but considers this to be outweighed by gains in trial economy when one of the criteria of the rules are met. Werner, 620 f.2d at 928.

Defendant McCabe moves for severance of Counts 1 through 7 from Counts 8-9 of the Superseding Indictment on the grounds that a joint trial will cause a "prejudicial spillover effect from the other counts." He argues that the charges involve various alleged transactions and occurrences that are not connected to one another and are not part of any alleged common scheme or plan. He maintains that the mortgage fraud counts involve completely different alleged transactions and occurrences than the boat and auto loans, and that the transactions are separated in time and involve distinctly different evidence and theories of proof.

Counts 1 through 7 (Fraud Against Financial Institutions) and Count 8 (Bank Fraud relative to Counts 1-7) are clearly connected, are of a similar character and constitute part of the same or similar scheme or plan. The Counts involve the very same transactions, over the same time period, and would clearly involve the same witnesses and evidence. Thus, Counts 1 through 8 are properly joined pursuant to Rule 8(a).

While the transactions were separate and occurred at different time, Counts 1 through 8 and Count 9 are also similar and have a sufficient logical connection to be tried together. All of the offenses involve the submission of fraudulent information and false documentation to financial institutions, in the name of defendant Morales, in order to obtain various loans at more favorable terms than defendants would otherwise have be able to secure. The loans were all arranged through defendant McCabe's contacts in the Western District of New York. In addition, the time periods of Counts 1 through 8 and Count 9 overlap once, during the month of August 2008. In United States v. Werner , the Second Circuit held that the district court properly joined separate theft and robbery counts, despite the fact that one involved violence and the other did not, since "both offenses arose out of [defendant's] scheme to use his position as an insider [at the airport] to obtain money ...


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