United States v. Moratalla ( 2020 )

This opinion is subject to administrative correction before final disposition.
Before
GASTON, STEWART, and BAKER
Appellate Military Judges
_________________________
UNITED STATES
Appellee
v.
Virginia S. MORATALLA
Boatswain’s Mate Second Class (E-5), U.S. Navy
Appellant
No. 201900073
Decided: 27 July 2020
Appeal from the United States Navy-Marine Corps Trial Judiciary
Military Judges:
Hayes C. Larsen (arraignment)
Warren A. Record (trial)
Sentence adjudged 25 October 2018 by a general court-martial con-
vened at Naval Station Norfolk, Virginia, consisting of a military
judge alone. Sentence approved by the convening authority: reduction
to E--1, confinement for 48 months, forfeiture of $1,000.00 per month
for 60 months, and a dishonorable discharge.
For Appellant:
Lieutenant Clifton E. Morgan III, JAGC, USN
For Appellee:
Lieutenant Kevin G. Edwards II, JAGC, USN
Lieutenant Commander Timothy C. Ceder, JAGC, USN
Judge BAKER delivered the opinion of the Court, in which Senior
Judge GASTON and Judge STEWART joined.
United States v. Moratalla, NMCCA No. 201900073
Opinion of the Court
_________________________
This opinion does not serve as binding precedent, but
may be cited as persuasive authority under NMCCA
Rule of Appellate Procedure 30.2.
_________________________
BAKER, Judge:
A military judge sitting as a general court-martial convicted Appellant,
consistent with her pleas, of attempted larceny, larceny, drawing and utter-
ing a check without sufficient funds, bank fraud, and dishonorably failing to
pay a debt, in violation of Articles 80, 121, 123a, and 134 of the Uniform Code
of Military Justice [UCMJ], 10 U.S.C. §§ 880, 921, 923a, 934 (2012); 18 U.S.C
§ 1344 (2016).
In her single assignment of error, Appellant asserts the military judge
abused his discretion in accepting her plea to bank fraud under 18 U.S.C.
§ 1344, charged as a clause three violation of Article 134, UCMJ. 1 We find no
substantial basis in law or fact to question the providence of Appellant’s plea
and affirm the findings and sentence.
I. BACKGROUND
Appellant participated in a variety of economic fraud schemes involving
financial institutions and individuals. In October 2013 she entered into an
agreement with Boatswain’s Mate Second Class [BM2] Morris Whiskey 2
whereby BM2 Whiskey would represent to ABNB Federal Credit Union
[ABNB] that he was taking out a car loan, for the purpose of purchasing
Appellant’s vehicle, a 2009 Kia Rio. Appellant needed funds for her house-
1 The specification charged that Appellant did “knowingly execute or attempt to
execute a scheme or artifice to defraud a financial institution, ABNB Federal Credit
Union, or to obtain moneys, funds, credits, and assets owned by or under the custody
and control of ABNB Federal Credit Union, by means of false or fraudulent pretens-
es, representations, or promises involving Boatswain’s Mate Second Class [Morris
Whiskey], U.S. Navy, and ABNB Federal Credit Union, in violation of 18 U.S.C.
§ 1344, a crime not capital.”
2 The names used in this opinion are pseudonyms.
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United States v. Moratalla, NMCCA No. 201900073
Opinion of the Court
flipping business, and BM2 Whiskey desired to invest funds in that business.
Appellant believed she wasn’t qualified for a loan and concluded that it would
be easier to get a loan from ABNB if BM2 Whiskey represented that he was
purchasing her vehicle.
BM2 Whiskey thus entered into an agreement with Appellant to secure
funds for Appellant to use in her business by taking out a loan to “purchase”
the Kia. He executed paperwork and received a car loan for $8,900 from
ABNB and provided Appellant with these funds to invest in her business. At
the time the loan was secured, the vehicle’s registration and title were
transferred into BM2 Whiskey’s name, but Appellant retained physical
possession and use of the vehicle. Months later, Appellant delivered posses-
sion of the vehicle to BM2 Whiskey.
II. DISCUSSION
Appellant now argues that although she did not transfer possession of the
vehicle contemporaneously with BM2 Whiskey’s securing of the loan and
provision of the funds to her, the vehicle belonged to him. She argues the loan
from ABNB was indeed for the purchase of a car, and not to secure funding
for her house-flipping business; therefore, no false representation was made
to ABNB in order to obtain the loan. Thus, Appellant asserts the military
judge abused his discretion by accepting her guilty plea to bank fraud under
18 U.S.C § 1344.
A. Providence of Guilty Pleas
We review a military judge’s decision to accept a guilty plea for an abuse
of discretion. United States v. Inabinette, 66 M.J. 320, 322 (C.A.A.F. 2008).
We review questions of law arising from the guilty plea de novo. Id. Before
accepting a guilty plea, the military judge must ensure there is a factual
basis for the charge; that the accused is pleading guilty voluntarily and with
a full understanding of the factual basis of the charge; that the accused
understands the effect of her plea; and that the accused understands she is
waiving certain rights she would have at trial. Art. 45(a), UCMJ; United
States v. Care, 40 C.M.R. 247 (C.M.A. 1969); Rule for Courts-Martial [R.C.M.]
910(e).
In accepting a guilty plea, a military judge abuses his discretion if he fails
to obtain an adequate factual basis for the plea—but this factual basis is an
area in which the military judge is afforded significant deference. United
States v. Simpson, 77 M.J. 279, 282 (C.A.A.F. 2018) (citing United States v.
Nance, 67 M.J. 362, 365 (C.A.A.F. 2009)). We apply the “substantial basis”
test to determine whether a military judge abused his discretion: “whether
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Opinion of the Court
there is something in the record of trial, with regard to the factual basis or
the law, that would raise a substantial question regarding the appellant’s
guilty plea.” Inabinette, 66 M.J. at 322. In analyzing a plea, we view the
record through a lens most favorable to the Government, and any question of
fact must “overcome the generally applied waiver of the factual issue of guilt
inherent in voluntary pleas of guilty.” United States v. Dawson, 50 M.J. 599,
601 (N-M. Ct. Crim. App. 1999).
B. Factual Basis for Appellant’s Guilty Plea
For an accused to be found guilty of violating 18 U.S.C. § 1344, both
clauses of the statute do not have to be met. 3 A person is guilty of a violation
of the statute if she “knowingly executes, or attempts to execute, a scheme or
artifice—(1) to defraud a financial institution; or (2) to obtain any of the
moneys, funds, credits, assets, securities, or other property owned by, or
under the custody or control of, a financial institution, by means of false or
fraudulent pretenses, representations, or promises . . . .” 4 Courts interpreting
18 U.S.C. § 1344 look to the common-law understanding of fraud, and “com-
mon-law fraud includes acts taken to conceal, create a false impression,
mislead, or otherwise deceive . . . .” United States v. Colton, 231 F.3d 890, 898
(4th Cir. 2000) (citation and internal quotation marks omitted). To maintain
a conviction under 18 U.S.C. § 1344, either a “misrepresentation or conceal-
ment of a material fact” must be proven. United States v. Omer, 395 F.3d
1087, 1088 (9th Cir. 2005). 5
The facts elicited during the military judge’s providence inquiry are suffi-
cient to support Appellant’s plea of guilty to this offense. At the beginning of
the providence inquiry, the military judge explained the elements of a viola-
tion of both clauses of 18 U.S.C. § 1344. To sustain a guilty plea, the military
judge had to find that the following elements were satisfied:
3 See Loughrin v. United States, 573 U.S. 351, 360 (2014) (finding no reason to
doubt that in enacting § 1344, Congress “said what it meant and meant what it said”
when it used the word “or,” or that it meant “or” to be used in the usual sense).
4 Emphasis added.
5 The Supreme Court has determined that the language of § 1344(1), which re-
quires proof of any ‘scheme or artifice to defraud an institution,’ incorporates the
well-settled, common-law meaning of fraud and thus requires the prosecution to
prove a misrepresentation or concealment of a material fact to support a conviction.
Neder v. United States, 527 U.S. 1, 22-23 (1999).
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Opinion of the Court
One, that on or about 24 October 2013, [Appellant] know-
ingly executed or attempted to execute a scheme to defraud a
financial institution or obtain any of the monies, funds, credits,
or assets of the financial institution;
Two, that [Appellant] did so by means of a material false or
fraudulent pretense(s), representation(s), or promise(s);
Three, that the scheme was intended to defraud a financial
institution;
Four, that [Appellant] knowingly and willfully participated
in this scheme with the intent to defraud; and,
Five, that Title 18, U.S. Code Section 1344 was in existence
at the time of the Appellant’s acts on the date of the offense. 6
The military judge properly defined “false or fraudulent pretenses” as
“any false statements or assertions that were either known to be untrue
when made or were made with reckless indifference to their truth and that
were made with the intent to defraud. The term includes actual direct false
statements as well as half-truths and the knowing concealment of facts.” 7
Appellant stated that she understood the elements and associated defini-
tions provided by the military judge and agreed that her conduct satisfied
each element of both clauses. 8 Neither Appellant’s military defense counsel
nor her civilian defense counsel objected to the providence inquiry or stated
their desire for any further inquiry into the specification. 9 Appellant later
told the military judge that she did not have any questions about the mean-
ing and effect of her pleas of guilty; that she still wanted to plead guilty; and
that she was in fact guilty of the offenses. 10
The military judge endeavored to ensure Appellant understood that the
elements he provided at the outset covered both clauses of 18 U.S.C. § 1344.
Citing Loughrin v. United States, 573 U.S. 351 (2014), he advised Appellant
that whereas 18 U.S.C. § 1344 has two distinct theories of criminality, he had
6 Rawle at 70-71.
7 R. at 71.
8 Rawle at 70-73, 136-44, 218-20.
9 Rawle at 86, 217.
10 Rawle at 218-20, 227-28.
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initially “proceeded down the road of asking questions on both” clauses and
was concerned that this had confused the inquiry. 11 The military judge’s
follow-up questions further clarified that Appellant had providently pled to
both clauses of § 1344. 12 The military judge concluded that the conduct
Appellant had pled guilty to “implicat[ed] both the first and second para-
graphs of Section 1344.” 13 He told Appellant, “you’ve acknowledged that you
both intended to defraud the bank and that the scheme involved the presen-
tation of false representations that led to the bank being defrauded, is that
correct?” 14 Appellant responded in the affirmative. 15
The scheme that Appellant admitted she knowingly entered into was to
collaborate with BM2 Whiskey to create the false impression with ABNB that
she was selling her vehicle to BM2 Whiskey in order to defraud ABNB. As
Appellant relayed when the military judge asked her what was false about
the agreement, she responded, “[b]ecause . . . the intention [was] not to
purchase the car, but to use it for something else.” 16 In the Stipulation of
Fact, Appellant admitted:
I entered this scheme involving [BM2 Whiskey] to obtain
money for my house flipping business. It was part of the
scheme for [BM2 Whiskey] to falsely represent to [ABNB] that
the loan would be taken out for the purposes of paying for a
2009 Kia Rio. This representation was made in order to obtain
moneys under the custody and control of [ABNB]. The auto
loan was not taken out for the purposes of purchasing the vehi-
11 Rawle at 136-142, 213-17.
12 Rawle at 142-144, 213-17.
13 Rawle at 143. In the Record, the term “paragraph” is used interchangeably with
the term “clause.”
14R. at 144 (italicization added). The military judge clarified the two clauses of 18
U.S.C. § 1344, stating that there are two ways that an individual could violate the
bank fraud statute. “The First involves specific intent to defraud the bank, and the
second does not require specific intent, it just requires the making of material false
representations that lead to defrauding of the bank.” R. at 143-44.
15 Rawle at 143-44, 213-17.
16 Rawle at 80.
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Opinion of the Court
cle, but was instead used to invest in my house flipping busi-
ness. 17
Appellant admitted that she told BM2 Whiskey to lie to ABNB about pur-
chasing her vehicle to secure funding to invest in the business at a lower
interest rate than she would have otherwise been eligible for, had the true
facts been known. 18 She admitted that BM2 Whiskey entered into this
scheme with Appellant, whereby he would take out the loan to secure funds
to invest in Appellant’s business. 19 Participation in the scheme by Appellant
included providing BM2 Whiskey “with the information on the 2009 Kia Rio
that he needed to secure the loan.” 20 This was how Appellant and BM2
Whiskey fraudulently enticed ABNB to provide funds for them to invest in
her business. 21 As a result, she and BM2 Whiskey agreed that he would lie to
ABNB and tell them that he was buying the car, when they were actually
acquiring funding to invest in Appellant’s business. 22
As elicited by the military judge, Appellant was with BM2 Whiskey at the
time he applied for the loan, and elected to conceal the true nature of the
arrangement:
MJ: How do you know that the representations made in
the loan application were false?
ACC: Because—Your Honor, because we ha[d] discussed the
intentions of the purchase—of the loan as to the inten-
tion of the purposes and to what it is used for.
....
MJ: So you and he agreed that he would lie to ABNB
Credit Union about the purpose of the loan, right?
ACC: Yes, Your Honor.
MJ: He would tell them it was to purchase a car?
17 Pros. Ex. 1 ¶ 43.
18 Rawle at 79-81.
19 R. at 73, 79.
20 Pros. Ex. 1 ¶ 44.
21 Id. ¶ 43; R. at 79-80.
22 Rawle at 79, 81.
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Opinion of the Court
ACC: Yes, Your Honor.
MJ: When [in] fact it was not to purchase a car?
ACC: Yes, Your Honor.
MJ: It was to invest in your business?
ACC: Yes, Your Honor.
MJ: Do you believe that that representation, that lie, was
material, in other words was it of a nature to influence
the person . . . to whom it was made?
ACC: Yes, Your Honor. 23
Thus, Appellant partnered with BM2 Whiskey to create a false impres-
sion as to the character of a material fact regarding the arrangement she had
with him, in order to influence the financial institution to provide funds
based upon that representation. Further, according to Appellant, BM2
Whiskey considered the transfer of funds from the loan, not to be for pur-
chase of the vehicle, but for him to invest in Appellant’s business. 24
The vehicle, the collateral for the “car loan,” remained in the possession of
Appellant, not BM2 Whiskey. 25 Appellant did not turn over custody of the
vehicle until a “[c]ouple of months” after BM2 Whiskey signed the paperwork
and gave her the proceeds from the loan to Appellant to invest in her busi-
ness. 26 When the military judge asked her, “[s]o you were still using the car,
he was taking out a loan against the car, and you were getting the use of the
money contrary to the promises made in the loan application,” Appellant
responded in the affirmative. 27 Thus, at the time that the paperwork was
signed, and the funds were transferred, Appellant maintained control and
possession of the vehicle. The concealment of Appellant’s true reason for
entering into the arrangement with BM2 Whiskey, for the partnership to use
the 2009 Kia as collateral to secure funding to invest in Appellant’s business,
represents the concealment of a material fact and embodies a false represen-
23 Rawle at 83-84.
24 R. at 79-81. Pros. Ex. 1 at 43.
25 Rawle at 79-81. Pros. Ex. 1 at 45.
26 Rawle at 79-81.
27 R. at 82.
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Opinion of the Court
tation made in order to both defraud a financial institution and obtain the
funds of a financial institution, covering both clauses of 18 U.S.C. § 1344.
We find Appellant’s statements during the providence inquiry were con-
sistent with the stipulation of fact and her guilty pleas, demonstrate that she
was convinced of her guilt, and establish the facts necessary to establish her
guilt, including facts that corroborate the violation of both clauses of 18
U.S.C. § 1344. The military judge therefore did not abuse his discretion in
accepting the plea.
III. CONCLUSION
After careful consideration of the record and briefs of appellate counsel,
we have determined that the approved findings and sentence are correct in
law and fact and that no error materially prejudicial to Appellant’s substan-
tial rights occurred. UCMJ arts 59, 66.
However, we note that the court-martial order does not accurately reflect
Appellant’s plea and the resulting guilty finding for Specification 8 of Charge
V, which excepted the following language from the Specification: “or to obtain
monies, funds, credits, and assets owned by or under the custody and control
of the Navy Federal Credit Union by means of false pretenses, representa-
tions, or promises involving Culinary Specialist Second Class [Melanie
Waters], U.S. Navy, and Navy Federal Credit Union.” While such inattention
to detail is concerning, Appellant does not assert, and we do not find, any
prejudice resulting from the court marital order’s failure to reflect the excep-
tion of this language from the specification. 28 However, Appellant is entitled
to have court-martial records that correctly reflect the content of her proceed-
ing. United States v. Crumpley, 49 M.J. 538, 539 (N-M. Ct. Crim. App. 1998).
Accordingly, we order correction of records in this case to accurately reflect
Appellant’s plea and the finding of guilty for that specification.
The findings and sentence as approved by the convening authority are
AFFIRMED.
28 The exception of this language removed one clause of 18 U.S.C. § 1344 from
Appellant’s plea and finding of guilty for the charged offense; however, the remaining
language charges the other clause, to which she pled and was found guilty. As
discussed supra, the law requires only one clause to be met under 18 U.S.C. § 1344 to
sustain a conviction.
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Opinion of the Court
Senior Judge GASTON and Judge STEWART concur.
FOR THE COURT:
RODGER A. DREW, JR.
Clerk of Court
10