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Maher Obagi

Other Federal Exonerations from California
On January 4, 2013, a federal grand jury in U.S. District Court for the Central District of California indicted six persons on fraud and conspiracy charges involving an alleged mortgage-fraud scheme based in Orange County, California.

Federal agents arrested five of the defendants on January 9, 2013. They were Maher Obagi, Aref Abaji, Jacqueline Burchell, Mohamed Saleh, and Mohamed El Tahir. The sixth defendant, Wajieh Tbakhi, had fled to Jordan and was not arrested. Obagi and Abaji were brothers; born in Syria, they used different English spellings of their Arabic last name.

According to the indictment, the defendants negotiated with housing developers in California, Florida, and Arizona to receive kickbacks in the form of “marketing fees” for condominium units they bought for themselves, their relatives, and other investors. To obtain mortgages, the government alleged, the defendants created fraudulent W-2 forms and bank statements.

In addition, according to the indictment, they submitted false closing statements that omitted the marketing fees, which in some cases exceeded $100,000. The alleged crimes, according to the indictment, occurred between November 2007 and June 2009.

Many of these borrowers defaulted. According to the government. The lenders lost at least $6.2 million, and the federal agencies that had purchased many of these mortgages lost about $2.4 million.

The government’s investigation began in 2010, after the 2008 housing collapse. A review of records and interviews with borrowers had led them to a company called Excel Investments, which had closed in mid-2009.

In early 2011, Heather Campbell, an agent with the FBI, interviewed a former employee of Excel. The employee then contacted her former boss at Excel, Ali Khatib. On February 9, 2011, Khatib, entered into a proffer agreement with the government and agreed to cooperate with federal prosecutors. As part of that cooperation, he secretly recorded conversations with several former Excel employees.

Campbell and Agent Mark Matthews interviewed Obagi in January 2012, meeting him at a Starbucks in Huntington Beach. Because Obagi was not in custody, the agents did not need to advise him of his Miranda rights. During the interview, according to notes taken by Campbell, Obagi acknowledged that the loan applications contained incorrect or inflated information. Obagi also said, according to the notes, that he knew that the mortgage company engaged in illegal transactions. The report did not specify when Obagi became aware of the alleged fraud.

Khatib was indicted on a single count of bank fraud on June 25, 2012. He pled guilty to that count on September 24, 2012, with his sentencing delayed until after the resolution of the case against the six defendants.

Burchell, who acted as the escrow agent on several of the transactions, pled guilty to a single count of conspiracy to commit bank fraud on June 13, 2013, and also agreed to testify against her codefendants. Tbakhi remained a fugitive. El-Tahir pled guilty to conspiracy on November 5, 2013, and also agreed to testify. Salah and Obagi went to trial in March 2015; Salah had successfully petitioned Judge Andrew Guilford of U.S. District Court for the Central District of California to sever their trial from Abaji’s.

Khatib was the government’s key witness. He testified how Excel learned about marketing kickbacks and then created straw buyers to secure financing to buy the condos. He testified that Obagi, who had the title of office manager at Excel, was an essential player in the fraud, contacting lenders, trying to find buyers for units, and taking care of accounting and other functions.

Khatib testified about an incident between Obagi and an escrow agent named Halime Saad. According to Khatib, Obagi became upset after Saad mishandled several loan applications by including the marketing fees on the documents, which caused the lenders to reject the deals. Saad was fired, replaced by Burchell.

Khatib also testified that Obagi arranged for the purchase of prepaid cellular phones, which Excel employees would use to impersonate borrowers if a bank called to confirm details of a loan application.

Khatib testified that after he agreed to cooperate with the FBI, he began recording conversations with Salah, Burchell and El-Tahir. He did not record any conversations with Obagi. Because many of these conversations took place in Arabic, several translators took part in the trial, and jurors were given translations of the conversations.

Obagi’s attorney, Craig Wilke, cross-examined Khatib for two days in an attempt to show that Khatib had falsely inflated Obagi’s role at the company to reduce his own culpability. Wilke walked Khatib through his own financial crimes, his apparently illegal transfer of money to Jordan, and even his false statements on a student visa back in the 1980s.

Burchell testified and described how Obagi had told her to omit the marketing fees from closing documents. Under cross-examination, she acknowledged telling the FBI at an early interview in 2011 that Obagi took orders from his older brother, Aref, and she gave vague responses about who other than Khatib ran the Excel offices. She also admitted to lying in a deposition in a civil lawsuit and acknowledged that it was her idea to use cashier’s checks to mask the use of the marketing fees as down payments on the loans.

Burchell also testified that Obagi sent her 50-100 emails each week, but the government only introduced a handful of this correspondence, and none of these messages contained instructions on the fraud alleged in the indictments.

Saad testified about the six loans she helped close at Excel on a condo development outside of Orlando, Florida. She testified that she worked with Obagi, Abaji, and Khatib, each of the men instructing her to apply the marketing fees to the down payments. She testified that Khatib, not Obagi, fired her after a deal fell through.

On redirect examination, Assistant U.S. Attorney Christopher Pelham asked Saad a series of questions.

Q. Do you have – or have you entered into any agreement with my office or any of the prosecutors in this case?

A. No.

Q. Are you, to your mind, receiving any benefit in exchange for your testimony?

A. No.

Q. Has anyone promised you immunity or – or non-prosecution in exchange for your testimony?

A. No.

Matthews testified about his interview with Obagi in 2012. He said that Obagi told Matthews and Campbell, according to their written report of the unrecorded interview, that he inflated incomes on loan applications and submitted other false records. Under cross-examination, Matthews said that Obagi never said that he knew his actions were illegal at the time he did them, although “that was throughout the interview inferred by our questions and his responses.”

Matthews also said that the FBI didn’t consider Obagi a suspect in the investigation at the time of the interview, which meant he had no obligation to inform Obagi of his Miranda rights. “I wasn’t legally required to, so no, I didn’t.”

During his closing argument, Pelham told the jury that Obagi played a central role in the scheme, directing others to falsify documents to keep the kickbacks flowing. He acknowledged that much of the testimony against Obagi and Salah came from cooperating witnesses, including Burchell and Khatib, but that others who had not been charged, including Saad, corroborated this testimony.

Wilke told jurors that Khatib had used Obagi as a scapegoat to limit his own exposure. He said that at the time that the government said the fraud was being committed, Obagi was 21 years old, with limited proficiency in English, having come to the United States from Syria in 2004. He worked at Target prior to joining Excel.

“There is nothing wrong with working at Target, but it does not prepare you to run a multi-million-dollar mortgage company as the government has tried to convince you my client was doing,” Wilke said.

He took aim at Obagi’s statement to the FBI, which he said the agents twisted into a confession.

“The testimony from Agent Matthews is, ‘Oh, it was clear from the context.’ It’s what Agent Matthews understood because he wanted to understand it. It's what … the agents set out to get. They got what they wanted and that was good enough. If we had a recording, we could get to the bottom of this, but they didn't record it. They purposely didn't record it.”

During Pelham’s closing argument, another federal prosecutor was listening in the courtroom. He recognized Saad’s name. She had entered into a cooperation agreement with the federal government in an unrelated mortgage-fraud case. During her interviews in that case, Saad made false statements to investigators. This information hadn’t been disclosed to Wilke or Salah’s attorney, Dean Steward.

After Wilke and Steward finished their closing arguments, the prosecutor told Pelham, who informed Wilke, Steward, and Judge Guilford about the disclosure issue. At a bench conference the next day, Pelham said the appropriate remedy was to instruct the jury that Saad’s testimony had been stricken and to not use it in deliberations. He said the instructions should not include any indication that the government committed misconduct.

Wilke and Steward argued for stronger language that would allow the jury to infer that the government might have failed to disclose other information that went to the credibility of witnesses.

Judge Guilford said that the violation appeared to be accidental, like “ships passing in the night” He attributed the mistake to the size and scope of the U.S. Attorney’s Office for the Central District, the nation’s largest, covering nearly 20 million people in seven counties in southern California.

He gave this added instruction to the jury: “It has come to my attention that the United States Attorney's Office and the FBI failed to disclose evidence that the witness, Halime Saad, previously received immunity from the United States attorney in a separate case, and thereafter, she may have knowingly made false statements to the FBI. This information is relevant to the witness’ credibility in this case. The failure to disclose this information implicates defendants’ rights to due process of law. For these reasons, you should disregard the testimony of witness, Halime Saad, and not consider it for any purpose, nor should you consider any arguments made by the government concerning Ms. Saad.”

After three days of deliberation, on March 27, 2015, the jury convicted Obagi of a single count of conspiracy and three counts of wire fraud. It did not reach a verdict on the three other counts of wire fraud. It convicted Salah of a single conspiracy count.

Wilke moved for a new trial, arguing that the disclosure violation was not as innocent as the government claimed. Documents turned over by the government said that Campbell had talked in 2013 with the FBI agent assigned to the other Saad case. Campbell then searched the FBI’s database for Saad’s name, but confined the search terms to her case only. “Despite being on actual notice of Saad’s involvement in an unrelated fraud investigation, Agent Campbell appears to have deliberately avoided obtaining information about Saad which the government had a duty to disclose,” the motion said.

Judge Guilford rejected the motion for a new trial. On June 5, 2018, he sentenced Obagi to 78 months in federal prison and ordered him to make restitution of $10 million. Salah received a sentence of 57 months and was ordered to make restitution of $7.5 million.

Khatib received a sentence of 27 months in prison and was ordered to make restitution of $10 million. Burchell received a sentence of four months in federal prison. Although El-Tahir had entered into a plea agreement, he died in 2016 and his charges were dismissed. Aref Abaji was convicted on February 5, 2016 of wire fraud and tax evasion, and sentenced to 108 months in prison and ordered to pay $10 million in restitution.

Obagi and Salah did not have to report to prison while their attorneys appealed Judge Guilford’s order.

On July 7, 2020, the U.S. Court of Appeals for the Ninth Circuit, reversed Judge Guilford and threw out the convictions for Obagi and Salah. The court, in a 2-1 decision, said that the disclosure violation, while inadvertent, still violated the rights of Obagi and Salah to receive a fair trial. It noted that the government’s case wasn’t particularly strong; jurors deliberated for three days and still failed to convict Obagi on all charges, the court said.

“The government used Saad to bolster the otherwise dubious credibility of its cooperating witnesses,” the court wrote. “Saad’s impeachment substantially weakened the credibility of those witnesses and the strength of the government’s case.”

Obagi and Salah went to trial again in August 2022. Judge Guilford had retired, and Judge Douglas Carter now presided. Prior to the trial’s start, Obagi had moved unsuccessfully to sever his case from Salah’s. As part of the government’s case, prosecutors intended to play conversations between Khatib and Salah and give jurors transcripts of those conversations translated from Arabic. Based on what is known as the Bruton rule, it had to redact any mention of Obagi by Salah, since Salah was not testifying and open to cross-examination. Khatib did not testify at the second trial.

But that didn’t happen. Obagi’s name was included twice in transcripts that jurors saw on the third day of the trial. Wilke moved for a mistrial, which Judge Carter granted on August 24, 2022.

Wilke then filed a separate motion to dismiss the indictment. The motion noted that the prosecutor realized the Bruton violation while the jurors were reviewing the transcript and the recording was being played as a government witness testified. But she waited until Wilke was done cross-examining that witness to disclose the problem, because she did not want to draw the jury’s attention.

Judge Carter granted the motion to dismiss on August 29, 2022, writing that it would be wrong to allow prosecutors a third chance to convict Obagi.

“Mr. Obagi was first indicted almost ten years ago for conduct that took place almost fifteen years ago,” Judge Carter wrote. “Now, Mr. Obagi – at no fault of his own – faces a potential third trial on conspiracy and wire fraud charges. This Court is persuaded that the cumulative prosecutorial misconduct across Mr. Obagi’s two trials has resulted in substantial prejudice that cannot be remedied through further trials.”

Salah’s trial continued without Obagi, and he was convicted of conspiracy to commit bank fraud on August 26, 2022.

– Ken Otterbourg

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Posting Date: 12/19/2022
Last Updated: 12/19/2022
Most Serious Crime:Fraud
Additional Convictions:Conspiracy
Reported Crime Date:2009
Sentence:6 1/2 years
Age at the date of reported crime:21
Contributing Factors:False Confession, Perjury or False Accusation, Official Misconduct
Did DNA evidence contribute to the exoneration?:No