That didn’t stop him from participating in a multistate Ponzi scheme that ripped off four Kansans of $845,900 between 2011 and 2013. The losses hit the victims hard, but that wasn’t the most alarming element of Morley’s criminal saga.
In 2016, Morley was charged in Shawnee County with 12 felony counts of securities fraud linked to losses of the four individuals in Kansas. Two years later, he entered a no contest plea on two felony counts. He hoped to avoid jail time, but a presumption written into Kansas law says defendants should be sentenced to prison if guilty of perpetuating fraud in excess of $25,000.
Morley’s victims, blue-collar folks and a pair of elderly siblings, asked a Shawnee County District Court judge for justice. They requested he be ordered to pay restitution. They directly or indirectly urged that Morley be imprisoned.
“I regret that you’re experiencing what you’re experiencing,” Morley told his victims in court. “I serve the same God as you do … and I hope you can find forgiveness in your heart.”
District Court Judge Mark Braun took Morley’s words to heart and let him walk. Braun, who has since retired from the branch, used his judicial authority to depart from state sentencing guidelines. He told Morley to serve 36 months of probation and reimburse the Kansas victims.
Braun said he gave this white-collar criminal a break because he believed Morley accepted responsibility for his crimes — a point disputed by the Kansas attorney general’s office.
“It’s the overall issue of accepting responsibility for entering a plea to the two offenses and agreeing to pay restitution is where I’m hanging my hat,” the sentencing judge said.
Hold on there
Attorney General Derek Schmidt’s office appealed the sentence handed down by Braun. The attorney general’s objective was to convince an appellate court the sentence was unjustified and get the case remanded to district court for a corrective sentence that included prison time.
The Kansas Court of Appeals agreed with the attorney general, writing a sentence of probation underemphasized Morley’s criminal complicity. With nothing to lose, Morley appealed to the Kansas Supreme Court. The state’s highest court affirmed the Court of Appeals in 2021.
Supreme Court Justice Dan Biles, writing for the court, said the case was an opportunity to concur with the Court of Appeals and to clarify standards of review in sentencing departures. He wrote the Supreme Court’s position didn’t suggest a defendant’s taking of responsibility could never serve as compelling reason to depart in sentencing.
“Our abuse of discretion standard necessarily allows for a departure sentence when based on valid mitigating factors supported by the evidence, and there is room for reasonable disagreement whether the proven factors are substantial and compelling under the circumstances, but Morley’s case lies outside that realm,” Biles said.
The result: Morley, 64, was sentenced Tuesday by Shawnee County District Court Judge Jason Geier to 38 months in custody of a Kansas Department of Corrections. The restitution order was affirmed.
Look of malfeasance
Assistant attorney general Stacy Edwards, who pressed the appellate cause against Morley, said the case hinged on two factors. Did the district court judge have “substantial and competent” evidence necessary to consider a downward departure from the sentencing grid recommendation of prison time? If so, did a clear reading of evidence in the case warrant leniency sought by Morley?
“The state believes the answer to both questions is ‘no,'” Edwards said. “The district court shouldn’t have granted a departure on this case because any acceptance of responsibility was minimal.”
She said a “no contest” plea allowed defendants to agree prosecutors were capable of proving guilt, but didn’t require a defendant to enter a plea of guilty. Judges, on the other hand, for practical purposes convert no contest pleas to guilty verdicts. The idea Morley agreed to pay some restitution — just $50,000 in commissions earned from the four Kansas investors, not their full losses of $845,900 — wasn’t true acceptance of responsibility, she said.
Edwards said the attorney representing Morley portrayed his client as merely a “consultant” to Summit Trust Co., which was involved in the Ponzi scheme based in Pennsylvania, and therefore his client shouldn’t be held responsible for loss of principle investments.
The U.S. Securities and Exchange Commission filed documents in 2018 that concluded Morley and his wife, Diane, took part in a Ponzi that took in $33 million from at least 130 investors from 2008 to 2014. Overall, the Morleys targeted retirees with limited knowledge of investment strategy a chance to buy unregistered securities with the promise of big returns. Overall, the Morleys earned $3.1 million in commissions in this scam.
In Kansas, Edwards said, the victims were never told by Morley he had been permanently barred in 2006 from the securities industry in Maryland. She said Morley neglected to inform these unsuspecting Kansans their investment in preferred stock in Summit Trust was a high-risk venture rather than the “safe investment” with a guaranteed quarterly dividend of 6%.
The four victims, who weren’t identified in court documents, were shaken by the financial disaster. One man, who was so ashamed he asked his family not to attend the sentencing hearing, said the loss of $352,000 inherited from his parents meant his child’s college fund was vanquished by Morley. Separately, a pair of siblings both lost $120,000 inherited from parents on sale of the family’s farm.
“This was a loss of blue-collar worker generational wealth,” Edwards said. “The harm here is significant.”
Topeka criminal defense attorney James Heathman said it was difficult to understand why a no contest plea would be viewed as anything other than acceptance of criminal responsibility.
“He admitted his role,” Heathman said. “He admitted he didn’t give information that he should have to the individuals. He admitted he made statements that were misleading. He allowed them to be misled.”
Morley knew one result of pleading no contest to the two charges was that he could be sent to prison, Heathman said. That wouldn’t be the proper resolution, Heathman said, for someone who expressed sincere remorse and was prepared to pay restitution.
“It was his desire to pay these people back and make them whole,” Heathman said.
In addition, Heathman said, Morley avoided a guilty plea because that would have meant loss of his license to sell insurance in Maryland. The defendant made a “significant income” on life and health insurance that could be applied to restitution, Heathman said.
At the original sentencing in Shawnee County, Morley vowed he would work hard to repay his debts. Here’s what he said: “I will take my last dying breath making certain that you get every dime of your money back. The only way that I can do that is to stay in the insurance business and enable my experience to be applied to my obligations.”
Despite a troubled history in the securities industry and the lifetime ban in Maryland, as of 2020, he was still trusted enough by regulators there to sell insurance.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: firstname.lastname@example.org. Follow Kansas Reflector on Facebook and Twitter.