Discovery violations and delays might result in the dismissal of a indictment involving a $500 million fraud.  This after the original indictment was dismissed without prejudice for similar issues.  United States v. Morgan, et al, 18-cr-108; 21-cr-00032 (W.D.N.Y.).

In early May 2018, agents executed wide sweeping search warrants on the offices of Bob Morgan.  Computers, phones, servers, hard drives, and so much more was seized.  Prior to the execution of the May 2018 search warrants, a search warrant was executed on the cellular phone of a girlfriend of one of Morgan’s associates, who was later indicted with Morgan.

Morgan and his associates were indicted in 2018.  The Indictment alleged that Morgan and his co-conspirators were involved in a $500 million mortgage fraud scheme.  The indictment was eventually dismissed without prejudice.  The Court held that prosecutors blew deadlines and mishandled discovery, which violated defendant’s speedy trial rights.  The government’s justification for blown deadlines was that it expected quick pleas and didn’t anticipate litigation.

The government indicted Morgan and others again in 2021.  The allegations in the Indictment were the same.  The discovery issues continued in the second indictment, which resulted in the court entering a strict scheduling order.  The government failed to comply with the scheduling order.  Worse, the government disclosed the existence of the phone seized February 2018 for the first time on March 2021.  Then, in August 2021, the government disclosed that instead of reviewing and producing all seized materials to comply with its Rule 16 obligations, the government made ad hoc decisions on what to produce by creating a subset of documents and running search terms on the subset.  Given these circumstances, the defendants filed a motion to reconsider its motion to dismiss the indictment.  The government opposed the request noting that while failures and mistakes were made, the mistakes did not warrant dismissal of the Indictment.

Following review of the pleadings and a status hearing, the court scheduled an evidentiary hearing for the week of April 4, 2022 and ordered prosecutors involved in the discovery process to be present to give live testimony.  The court also ordered production of emails exchanged between the prosecution team.  In anticipation of the evidentiary hearing, the defense provided the court with a list of more than twenty four misrepresentations prosecutors made to the court.

Minutes before the hearing was scheduled to start, three of the four defendants announced that they had entered plea agreements and withdrew their motions.  The plea agreements were extremely lenient.  Each defendant agreed to plead guilty to one count of bank larceny with losses under $1000.  This is a far cry from the $500 million fraud alleged in the Indictment.

The evidentiary hearing as to the remaining defendant has been stayed pending a status conference.

It will be interesting to see whether the evidentiary hearing will go forward as to the last standing defendant.

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