United States v. Obagi
| Decision Date | 17 July 2020 |
| Docket Number | No. 18-50171,No.18-50170,18-50170,18-50171 |
| Citation | 965 F.3d 993 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Maher OBAGI, aka Maher Abaji, aka Mahir Abaji, aka Mike Abaji, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Mohamed Salah, aka Mohamed Ismail, aka Mohamed Morales, aka Ahmed Salah, aka Mohamed Ahmed Salah, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Maher Obagi and Mohamed Salah appeal from their convictions for federal mortgage fraud. We have jurisdiction under 28 U.S.C. § 1291, and we reverse.1
Obagi and Salah worked for Excel Investments ("Excel"), a mortgage broker that engaged in widespread fraud. To make a long and complicated story short, Excel approached condominium developers and offered to purchase unsold inventory in exchange for kickbacks. Excel would then use part of these kickbacks to make the initial down payments on properties, pocketing the rest. To cover up its activities, Excel created false "marketing agreements" that purportedly reflected Excel's work in advertising the units, when in fact Excel did nothing to promote these sales.
To make this scheme work, Excel also recruited individuals to pose as buyers on the mortgage applications. These "straw" buyers required extensive false paperwork, including bogus employment, income, and asset documentation. At times, Excel staff impersonated the straw buyers (and their supposed employers) when lenders attempted to telephonically verify information listed in the mortgage applications.
Obagi began working for Excel in late 2007 and, according to the prosecution, quickly took a leading role in the operation. He supervised the creation of fraudulent loan documents, communicated with banks, and recruited straw buyers. He also supervised other Excel employees who impersonated the buyers in phone calls, and he pocketed large sums from the scheme.
Salah played a smaller role at Excel and, unlike Obagi, was not part of the management team. But, as the government alleged, he assisted in forging tax records and similar documents to ensure that banks would approve the mortgage applications. He also helped facilitate the bogus straw buyer phone calls by Excel employees and concealed payments to straw buyers by converting Excel checks into cashier's checks.
In January 2013, an indictment charged Obagi and Salah with conspiracy to commit wire and bank fraud, and Obagi with an additional six substantive counts of wire fraud. A number of other individuals involved with Excel were charged as well, several of whom pled guilty and agreed to cooperate with the government. Others testified in exchange for immunity.
At trial, the government introduced the fraudulent records that Obagi and Salah allegedly created for Excel. The government also called several cooperating witnesses with significant credibility problems, including escrow officer Jacqueline Burchell. Burchell testified that Obagi directed her to conceal the kickback payments, among other things. In addition, Burchell told the jury that she overheard a conversation between Obagi and Salah explaining why they had developers send kickbacks to Excel instead of reducing the prices of properties. But Burchell pled guilty in this investigation, participated in a separate mortgage fraud scheme, and perjured herself in a civil deposition. So to bolster her credibility—as well as that of other cooperating witnesses—the government also presented three Excel witnesses who purportedly never had cut a deal to avoid prosecution. One such witness was Halime "Holly" Saad, another Excel escrow officer. Saad, like Burchell, testified that Obagi instructed her to conceal the kickback payments. The prosecution later described Saad's testimony as going "right to the heart of what was happening at Excel during all the events set forth in the Indictment."
After the close of evidence and during the opening portion of its closing argument, the government highlighted the testimony of Burchell, the cooperating escrow officer. And to blunt the upcoming defense attack on Burchell's credibility, the government relied heavily on Saad. The prosecution acknowledged that the jury should "treat cooperating witness testimony more skeptically than you would the average witness," but emphasized that "on all major points, these witnesses’ testimonies are corroborated from independent witnesses," as well as by documents and the defendants’ own statements. The prosecutor reminded the jury that Saad had "no agreement[ ] wherein there's any representation about ... [her] sentence[ ] being reduced or non-prosecution, et cetera." Indeed, Saad testified that she had not "entered into any agreement" with the prosecutor's office or received immunity in exchange for her cooperation.
Unfortunately, one of prosecution's key tenets during closing—that the jurors could trust the culpable cooperators because they could trust Saad as an independent corroborating witness—was false. During a break between Obagi's and Salah's defense closings, a different prosecutor from the U.S. Attorney's Office who just happened to watch the closing arguments recognized that Saad had in fact received immunity in a separate mortgage fraud investigation and alerted the trial prosecutors to the enormous oversight. The prosecution then notified the court and defense counsel about Saad's June 2014 immunity agreement, immediately disclosing both the agreement and two investigative reports.
The introduction of this new information in the middle of closings placed defense counsel and the trial judge in an impossible position. The parties discussed various options, including granting a mistrial, reopening the case to recall Saad to the witness stand, or instructing the jury about Saad's undisclosed immunity agreement.
After extensive discussion, the trial court decided to proceed with the remaining closing arguments, and to instruct the jury as follows:
Immediately after crafting the instruction, the trial court told counsel:
In addition to the three documents disclosed during closings, the government disclosed 3,750 pages of materials the next morning and another 1,000 pages in the month after trial. The defense did not have the opportunity to review any of these materials before the case was submitted to the jury. These documents revealed that Saad was a culpable participant in the separate mortgage fraud scheme, had taken a bribe to falsify escrow documents, lied to law enforcement about her participation in the scheme, admitted to her actions only after receiving limited use immunity from the U.S. Attorney, and remained under investigation by a state agency in connection with her fraudulent activities.
The jury deliberated for three days, then returned guilty verdicts on the conspiracy charge for both Obagi and Salah, convicted Obagi on three substantive counts, and hung on the three remaining substantive counts.
Obagi and Salah moved for a new trial. After extensive briefing and two days of post-trial hearings, the district court denied the motion. The court found no evidence of intentional misconduct2 and concluded that the government's failure to disclose did not deprive Obagi or Salah of a fair trial. The court sentenced Obagi to 78 months’ imprisonment with $10,042,638 in restitution, and sentenced Salah to 57 months’ imprisonment with $7,487,163 in restitution.
The district court recognized the difficulties caused by the prosecution's failure to disclose Saad's immunity deal and related discovery. Urging Obagi and Salah to preserve their objection for appeal, the court stated, "The Ninth Circuit is going to have a look at this." After sentencing, the court allowed Obagi and Salah to remain on release status pending appeal because of the disclosure issue.
We review de novo whether the government violated its discovery obligations. United States v. Stinson , 647 F.3d 1196, 1208 (9th Cir. 2011). Where, as in this case, the district court has sanctioned the government for its discovery violations, we review the choice of sanctions for abuse of discretion. United States v. Garrison , 888 F.3d 1057, 1064 (9th Cir. 2018).
The government violates its discovery obligations under Brady v. Maryland , 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), if it suppresses material evidence that is favorable to the accused. Strickler v. Greene , 527 U.S. 263, 281–82, 119 S.Ct. 1936, 144 L.Ed.2d 286 (1999). Evidence favorable to the accused "includes evidence that would help the defendant impeach a witness." Sanders v. Cullen , 873 F.3d 778, 802 (9th Cir. 2017) (citing Giglio v. United States , 405 U.S. 150, 154–55, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972) ); see also U.S. Dep't of...
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