In the

United States Court of Appeals

For the Seventh Circuit

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No. 03-1330

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

JAMES E. FALLON,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Western Division.

No. 01 CR 50046—Philip G. Reinhard, Judge.

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ARGUED SEPTEMBER 16, 2003—DECIDED OCTOBER 24, 2003

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Before FLAUM, Chief Judge, DIANE P. WOOD and WILLIAMS, Circuit Judges.

FLAUM, Chief Judge. In 2002, James Fallon was convicted of eleven counts of bank fraud in violation of 18

U.S.C. § 1344(1). He was sentenced to 32 months in prison

and ordered to pay $316,139 in restitution. On appeal,

Fallon argues that he was deprived of a fair trial and that

the district court erred in denying his motion to exclude his

prior convictions. For the reasons set forth herein, we affirm the decisions of the district court and, consequently,

Fallon’s conviction. 
2 No. 03-1330

I. BACKGROUND

James Fallon and co-defendant Michael Borgetti engaged

in a bank fraud scheme that operated in a manner similar

to a check kite. While working as an independent wholesaler with the Greater Rockford Auto Auction, Fallon met

Borgetti who owned a number of small businesses in

Rockford, Illinois including Morgan Auto. Morgan Auto sold

inexpensive ($1800 and less) used cars. Around 1990, Fallon

left the Greater Rockford Auto Auction and went to work as

an independent wholesaler for Morgan Auto.

In May 1992, Fallon and Borgetti opened a used car

dealership known as AutoSmart. AutoSmart sold used cars

in the $6,000 to $12,000 range. Borgetti was the president

of AutoSmart, Fallon was the secretary, and each man

owned 50% of AutoSmart’s stock. 

Borgetti did his banking with Alpine Bank in Rockford.

To control the inventory purchases by the independent car

wholesalers that he financed, Borgetti entered into a drafting agreement with Alpine Bank. Under this agreement,

Borgetti and other representatives of his business could

issue Alpine Bank drafts. Unlike checks, which are drawn

against funds maintained in a particular account, these

drafts were drawn directly on Alpine Bank. When drafts

were presented to Alpine Bank for payment, a bank employee would call Borgetti and ask if he intended to pay the

draft. With Borgetti’s approval, the bank would cash the

draft and Borgetti would then be required to reimburse the

bank. The drafts were used to purchase inventory for both

Morgan Auto and AutoSmart. Though there was no formal

agreement, the parties’ intent was that the drafts would be

used to purchase cars. The drafts included fields for “Make,”

“Year,” and “Serial Number.” 

Around 1994, Fallon and Borgetti began using drafts to

artificially inflate the balances of the AutoSmart and

Morgan Auto checking accounts at Alpine Bank. The fraud
No. 03-1330 3

began when Borgetti discovered that the AutoSmart account was overdrawn. Fallon and Borgetti discussed the

situation and decided to resolve it by kiting checks from

Morgan Auto’s account to AutoSmart’s. As this situation

continued on a regular basis, oftentimes there was not

enough money in the Morgan Auto account to cover the

checks payable to the bank. In those events, Borgetti issued

drafts from AutoSmart to Morgan Auto and deposited those

drafts into the Morgan Auto account. In early stages of

the scheme, the kiting occurred for brief periods and was

then corrected by increased cash flow. By early 1997, the

fraud reached a point where it could not be stopped. After

a while, Borgetti became concerned that the appearance of

his signature on all of the fictitious drafts would cause

Alpine Bank to discover the fraud, so Fallon began signing

the drafts from AutoSmart to Morgan Auto. 

 Understandably, the numerous fraudulent drafts made

it difficult for Jerri Anderson, AutoSmart’s secretary/bookkeeper, to perform her responsibilities. Ordinarily, when

Anderson received copies of the bank drafts she would

match the drafts to purchased vehicles. Once Anderson discovered that cars listed on many of the drafts were “missing,” she alerted Fallon to the problem. Fallon told her to

record the drafts as loans from AutoSmart to Morgan Auto.

 During August and September 1998, Fallon signed a

total of 134 drafts on behalf of AutoSmart that were payable to Morgan Auto. Those drafts listed a total of 324

vehicles, but according to AutoSmart’s police book (an official inventory Illinois requires car dealers to maintain)

AutoSmart purchased no vehicles whatsoever from Morgan

Auto during that time period. 

In October 2001, a federal grand jury returned an indictment charging Fallon with twenty-six counts of bank

fraud. Borgetti was also indicted, pled guilty, and agreed

to cooperate in the case against Fallon. A jury convicted

Fallon on eleven counts.
4 No. 03-1330

II. DISCUSSION

A. Brady violation

On direct examination at Fallon’s trial, Borgetti testified

about cash-flow problems that AutoSmart experienced during the time period of the fraud. On cross-examination,

defense counsel challenged this testimony by confronting

Borgetti with AutoSmart’s monthly “Statements of Profit

and Loss” for 1997 and 1998. The exhibit showed that as of

August 1998 AutoSmart had a total profit of $156,000.

Borgetti explained, however, that he and Fallon had inflated these numbers for the purpose of hiding AutoSmart’s

true financial condition. Borgetti then told the defense

counsel that he had told the government that the statements were inflated. Since the government had not disclosed Borgetti’s statements on the “inflated inventory” to

the defendant, the defense believed Borgetti was lying and

challenged his testimony in front of the jury. 

The next day, after reviewing the FBI’s notes as well as

his own, the government’s attorney confirmed that Borgetti

had, in fact, informed the government of this information.

Despite this admitted oversight, the district court denied

defense counsel’s motion to dismiss the indictment based

upon an alleged Brady violation, finding that the defendant

had not been prejudiced by the late disclosure. We review

the district court’s decision for abuse of discretion. United

States v. Wilson, 237 F.3d 827, 831-32 (7th Cir. 2001) (citing

United States v. Asher, 178 F.3d 486, 496 (7th Cir. 1999)).

Fallon argues that the government’s failure to disclose

this additional material regarding Borgetti prior to trial

constituted a violation of the government’s obligation to

disclose impeaching evidence under Brady v. Maryland, 373

U.S. 83, 83 S.Ct. 1194, 10 L. Ed. 2d 215 (1963), and Giglio

v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L. Ed. 2d

104 (1972). Under Brady and its progeny, the government
No. 03-1330 5

has the affirmative duty to disclose evidence favorable to

a defendant and material either to guilt or punishment.

United States v. Gonzalez, 93 F.3d 311, 315 (7th Cir. 1996).

Although the term “Brady violation” is often used to refer

to any breach of the government’s broad obligation to disclose any exculpatory information, the Supreme Court had

made it clear that there is no true “Brady violation” unless

the non-disclosure was so serious that there is a reasonable

probability that the suppressed evidence would have

produced a different verdict. Strickler v. Greene, 527 U.S.

263, 281, 119 S.Ct. 1936, 144 L. Ed. 2d 286 (1999). To prevail on his Brady claim, Fallon must show three components: (1) that the evidence at issue, Borgetti’s admission

concerning the Profit and Loss statements, was favorable to

him because it is exculpatory or impeaching; (2) that the

government willfully or inadvertently suppressed the evidence; and (3) that Fallon suffered prejudice as a result.

United States v. O’Hara, 301 F.3d 563, 569 (7th Cir. 2002)

(citing Strickler, 527 U.S. at 281-82). 

While Borgetti’s statements regarding the “inflated inventory” may have been favorable to Fallon, we cannot conclude that the delayed disclosure caused him prejudice. To

establish prejudice under Brady, a defendant must establish a reasonable probability that, had the evidence been

disclosed to the defense, the result of the proceeding would

have been different. Strickler, 527 U.S. at 280. The value of

the “inflated inventory” evidence was for the impeachment

of Borgetti—it demonstrated a false statement and unlawful act. However, this evidence was merely cumulative of an

extensive amount of other evidence that showed Borgetti to

be a liar and a fraud (e.g., his admissions that he defrauded

Alpine Bank for four years) and therefore was not material.

See United States v. Wilson, 237 F.3d 827, 832-33 (7th Cir.

2001) (finding that undisclosed evidence that a cooperating witness had tested positive for marijuana use while in

the witness protection program was not material because it
6 No. 03-1330

would have been cumulative of extensive evidence of

the witness’s drug use); United States v. Dweck, 913 F.2d

365, 370-72 (7th Cir. 1990) (concluding that government did

not violate duty to disclose material about a witness under

Brady where material was merely cumulative of witness’s

extensive involvement in the drug trade). 

Fallon argues that his trial strategy was affected by the

late disclosure of Borgetti’s statements. Materiality focuses

not on trial preparation, but instead on whether earlier disclosure would have created a reasonable doubt of guilt. See

United States v. Agurs, 427 U.S. 97, 112, n.20, 96 S.Ct.

2392, 49 L. Ed. 2d 342 (1976) (rejecting argument that the

materiality test should be defined in terms of the defendant’s ability to prepare for trial rather than in terms of

fact finders’ assessments of guilt); Matthew v. Johnson, 201

F.3d 353, 360 (5th Cir. 2000) (finding that a definition of

the materiality requirement in terms of defense strategies

is at odds with the Brady rule’s purpose of ensuring that

the accused receives an impartial party’s assessment of

guilt based on all available evidence); United States v.

Rogers, 960 F.2d 1501, 1511 (10th Cir. 1992) (materiality

does not focus on trial strategy). Accordingly, despite

Fallon’s insistence that the delayed disclosure caused the

defense’s theory to shift midstream and undermined the

defense counsel’s credibility with the jury, the salient issue

remains whether the late disclosure of Borgetti’s statements

undermines confidence in the outcome of the trial. See

United States v. Bagley, 473 U.S. 667, 682, 105 S.Ct. 3375,

87 L. Ed. 2d 481 (1985). 

The government presented overwhelming evidence of

Fallon’s guilt, including evidence that he signed a total of

134 drafts for nonexistent vehicles during the last two

months of the scheme and mislead Jerri Anderson as to the

purpose of the fraudulent drafts. In light of the weight of

countervailing evidence, we are unconvinced that there is
No. 03-1330 7

a reasonable probability that timely disclosure of the evidence would have changed the result of the proceeding. 

In any event, we have serious reservations as to whether

Fallon’s claim satisfies the suppression prong of the Brady

test. Evidence is “suppressed” for Brady purposes if (1) the

prosecution failed to disclose the evidence before it was too

late for the defendant to make use of the evidence; and (2)

the evidence was not otherwise available through the exercise of reasonable diligence. O’Hara, 301 F.3d at 569;

United States v. Reyes, 270 F.3d 1158, 1167 (7th Cir. 2001).

Again, the value of the “inflated inventory” evidence in this

case was for the impeachment of Borgetti—it demonstrated

an additional false statement and unlawful act. Borgetti

expressly admitted falsifying the documents on crossexamination, thus the delayed disclosure did not prevent

the defense counsel from effectively using the information.

Furthermore, the “inflated inventory” evidence was clearly

otherwise available through the exercise of reasonable

diligence. Although Fallon claims to have relied upon the

inflated “Statement of Profit and Loss,” other financial

documents and tax returns disclosed to the defense showed

that AutoSmart had indeed sustained a large loss in 1998.

Accordingly, we find that the district court did not abuse

its discretion in denying Fallon a new trial.

B. Ostrich Instruction

Fallon claims that the district court abused its discretion

by including the “conscious avoidance” or “ostrich” language

in the jury instruction that defined the word “knowingly.”

We review the district court’s decision to give the “ostrich”

instruction for abuse of discretion, viewing the evidence in

the light most favorable to the government. United States

v. Craig, 178 F.3d 891, 896 (7th Cir. 1999). 
8 No. 03-1330

The “conscious avoidance” or “ostrich” instruction “explain[s]to the jury that the legal definition of ‘knowledge’

includes the deliberate avoidance of knowledge.” United

States v. Carrillo, 269 F.3d 761, 769 (7th Cir. 2001). The

instruction is appropriate when: (1) the defendant claims a

lack of guilty knowledge; and (2) the facts and evidence support an inference of deliberate ignorance. Id. 

Fallon clearly claimed a lack of guilty knowledge, thus,

the second factor becomes the critical determination. Fallon

argues that the government presented no evidence that he

took any action to avoid knowing the truth. However, an

inference of willfulness need not be shown by overt physical

acts—“ ‘a cutting off of one’s normal curiosity by an effort

of will’ is enough.” United States v. Neville, 82 F.3d 750,

760 (7th Cir. 1996) (quoting United States v. Stone, 987

F.2d 469, 472 (7th Cir. 1993)). Again, evidence demonstrated that during August and September 1998 Fallon

signed drafts listing a total of 324 vehicles on behalf of

AutoSmart that were payable to Morgan Auto. According to

AutoSmart’s police book, AutoSmart purchased no vehicles

from Morgan Auto during this period. Moreover, when Jerri

Anderson pointed out to Fallon that there was a problem

with the drafts, he made no effort to investigate the problem. To a normally curious and innocently ignorant person,

especially one who co-owns a company, over 300 paid for

but unaccounted for vehicles would presumably raise a red

flag. However, Fallon did not investigate the problem and

told Anderson to record these drafts as loans to Morgan

Auto. On these facts, the district court did not abuse its

discretion in giving the “ostrich” instruction as a jury could

reasonably conclude that Fallon consciously avoided discovering the ongoing fraud.

C. Motion in Limine 

Prior to trial, Fallon filed a motion in limine to preclude

impeachment with his two prior state theft convictions, his
No. 03-1330 9

federal conviction for conspiracy to alter odometers and

mail fraud, and his federal false statement conviction. The

court denied the motion with respect to Fallon’s 1986 federal conviction to alter odometers and his 1989 federal false

statements conviction. Although the two federal convictions

were outside the normal ten-year period, the court found

that the probative value of the convictions substantially

outweighed their prejudicial effect. 

The district court’s decision to admit these convictions

falling outside the ten-year time limitation set forth in

Fed. R. Evid. 609(b) causes us concern. As we noted in

United States v. Shapiro, the legislative history leading to

the enactment of Rule 609 indicates that “it is intended that

convictions over 10 years old will be admitted very rarely

and only in exceptional circumstances.” 565 F.2d 479, 481

(7th Cir. 1977) (citing Notes of the Committee on the

Judiciary, Senate Report No. 93-1277). 

Nevertheless, we are unable to substantively address the

appropriateness of the district court’s decision that this case

falls within the limited “exceptional circumstances” category. Fallon chose not to testify at trial and therefore

waived his right to challenge the district court’s decision on

this issue. Under Luce v. United States, “to raise and preserve for review the claim of improper impeachment with a

prior conviction, a defendant must testify.” 469 U.S. 38, 43,

105 S.Ct. 460, 83 L. Ed. 2d 443 (1984). See also United

States v. Burrell, 963 F.2d 976, 991-92 (7th Cir. 1992). The

Luce court noted that when a reviewing court does not

“know the precise nature of the defendant’s testimony,” it

is impossible for the court to weigh the probative value of a

prior conviction against the prejudicial effect to the defendant. 469 U.S. at 41. Although Luce dealt with prior convictions admitted under Rule 609(a)(1), we find that it

applies with equal force to convictions admitted under Rule

609(b). 
10 No. 03-1330

Fallon attempts to distinguish his case by arguing that he

explicitly informed the district court that his decision not to

testify was based on the denial of the motion in limine,

whereas in Luce it was unclear to the reviewing court what

motivated the defendant’s decision not to testify. Neither

Luce nor its rationale makes exception for a defendant who

informs the trial judge that the denial of his motion in

limine is the basis for his decision not to take the stand.

Accordingly, we find that Fallon waived this argument and

the district court’s ruling on his motion in limine is unreviewable.

III. Conclusion

The defendant did not show that the district court abused

its discretion by (1) failing to grant a new trial based on the

alleged Brady violation or (2) giving the “ostrich” instruction to the jury. The defendant waived his right to challenge

the district court’s ruling on his motion in limine to exclude

impeachment with his prior convictions. We therefore

AFFIRM his conviction.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—10-24-03