SANTA ANA,California– A federal jury today convicted an Orange County man for leading a “builder bailout” real estate scheme that resulted in the fraudulent purchase of more than 100 condominium units around the country with mortgages that mostly went into default, resulting in foreclosures and millions of dollars in losses.
Momoud Aref Abaji, 34, of Huntington Beach, was convicted this afternoon in United States District Court of conspiracy to commit bank fraud and wire fraud, five counts of wire fraud, and two counts of tax evasion. Five of Abaji's co-conspirators have already been convicted, and one, Wajieh Tbakhi, remains a fugitive.
“Abaji's fraud cost these financial institutions millions of dollars and put taxpayer funds at risk,” said United States Attorney Eileen M. Decker. “The Department of Justice is dedicated to protecting the public fisc from this type of fraud.”
Abaji and his co-conspirators operated the scheme through Excel Investments and related companies in Santa Ana and then Irvine. In the scheme, Abaji and his co-conspirators identified condominium developments in which the developers were struggling to sell units and then arranged with the developers to purchase the units in return for large commissions. The developers benefitted by making it appear that their condos were selling and maintaining their value, while Abaji and his co-conspirators benefitted from the hefty commissions that they received, which were concealed from the mortgage lenders. The defendants recruited a number of straw buyers to purchase the properties as “investors,” and ensured that they qualified for financing by filing false loan applications on their behalf.
Abaji and his co-conspirators negotiated with condominium developers in California, Florida and Arizona to purchase condominium units in exchange for a hefty commission, which they often misleadingly referred to as “marketing fees” and did not disclose to the lenders. The defendants bought units for themselves, their relatives, and on behalf of “investors” with good credit scores who served as “straw buyers.” They recruited the straw buyers by presenting the scheme as an investment opportunity that required no down payment and would generate income through rental payments.
To obtain mortgages for the properties, Abaji and his co-conspirators prepared loan applications with false information about the straw buyers – inventing fake employment, income and assets for these individuals to qualify them for loans. They also submitted fabricated and altered W2 forms, pay stubs and bank statements in support of those applications, and they concealed the huge commissions from mortgage lenders by submitting false and misleading purchase and sale agreements and fake HUD-1 settlement statements. Based on these false statements, mortgage lenders funded more than $21 million in loans
Many of these loans went into default, and mortgage lenders lost millions after foreclosing on the properties, with current losses estimated at approximately $9 million. The Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) purchased dozens of these loans on the secondary mortgage market and suffered losses of at least $2.37 million as a result of delinquencies, defaults and foreclosures on the properties.
“Whether you call it a marketing fee, commission, or kickback, all forms of income are taxable,” stated IRS Criminal Investigation's Special Agent in Charge Erick Martinez. “As today's verdict shows, the law is clear on the issue of taxable income and who is required to file and pay taxes.”
United States District Judge Andrew Guilford, who presided over the trial, set sentencing for May 23. At his sentencing, Abaji faces a statutory maximum sentence of 190 years in prison.
In addition to the guilty verdicts today, the jury found Abaji not guilty of one count of wire fraud.
This case is the result of an investigation by the Federal Bureau of Investigation, the Federal Housing Finance Agency's Office of Inspector General, and IRS Criminal Investigation.
USAO – California, Central Updated February 5, 2016
Central District of California DOJ / 16-025 / February 05, 2016