Investigators say he did not attempt to make a quick getaway. In fact, Atwater's top cop thinks he may have actually passed him.
"He did walk out of the area, and he walked through town. If we'd had a better description, I might have caught him," said police chief Michael Salvador. "He walked right by my position as I was driving to the homicide scene."
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After nearly eight weeks of intense digging and following leads, investigators still don't know why Ethan Morse was killed or whether he ever knew Penaloza. They won't even say whether he was targeted or if the crime was random.
"We don't know why him and Morse came together," Salvador said. "We don't know why Mr. Penaloza was at that intersection at all, that's the stuff that needs to be sorted out."
The victim was well known in the Merced area. In 2014, Ethan was arrested for a murder at a house party, but the charges were dropped when a judge determined he was factually innocent. Atwater investigators don't know whether the incident has anything to do with his brutal murder.
Ethan's father is also longtime former Merced County District Attorney Larry Morse.
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Right now, investigators don't know exactly where Penaloza could be hiding. He's a landscaper by trade and travels throughout Northern California to work. He's worked in Red Bluff, Modesto and the Bay Area.
Investigators say Penaloza is also wanted for a 2017 Thanksgiving attempted homicide in Menlo Park which is 30 miles south of San Francisco. There is an $11 million warrant out for his arrest in connection to that crime. He has no other significant criminal history.
There is currently a $1 million arrest warrant out for his arrest. Police say if you see Penaloza, do not approach him, he is considered armed and dangerous.