United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER DENYING MOTION TO VACATE
Honorable David M. Lawson, Judge
a jury trial, petitioner Hussein Nazzal and his co-defendant
(and former attorney) Edward Schneider were convicted on
multiple charges of bank fraud, bribery, and creating false
records. The convictions were based on Nazzal’s
orchestration of a “loan jumping” and mortgage
fraud scheme over the course of several years involving
numerous commercial loan transactions. He received a
below-guidelines sentence of 110 months in prison and was
ordered to repay more than $1.9 million in restitution. The
convictions and sentence were affirmed on appeal. United
States v. Nazzal, 607 Fed.App’x 451 (6th Cir.
2015). On September 9, 2016, Nazzal filed a motion to vacate
his sentence under 28 U.S.C. § 2255, in which he argues
that his trial counsel was ineffective by failing to
investigate potential witnesses, coming unprepared for trial
and presenting no defense, “coercing” him not to
testify, and failing to file a brief in support of a
mid-trial motion for judgment of acquittal on one charge.
Because none of his claims justifies the relief that he
seeks, the Court will deny the motion.
Facts and Proceedings The Sixth Circuit included the
following comprehensive recitation of the factual and
procedural background of the case in its opinion affirming
the petitioner’s convictions:
several years, Hussein Nazzal and his attorney, Edward A.
Schneider, conspired with others to defraud Detroit-area
banks using fraudulent financial documents. They also bribed
a bank officer to approve loans for unqualified third parties
and took steps to conceal their crimes. The jury convicted on
all counts, and each received a below-Guidelines sentence. .
Factual & Procedural History Nazzal was a Dearborn,
Michigan businessman who facilitated bank loans for others
and also made his own “hard money loans” - i.e.,
high-interest loans to borrowers who could not otherwise
obtain them. Over a six-year period beginning in 2003, Nazzal
orchestrated three wide-ranging bank fraud schemes in the
metropolitan Detroit area. To accomplish his frauds, Nazzal
conspired with several people, including his attorney
(co-defendant Edward Schneider), a title company vice
president (co-defendant Ross Carey), and a bank loan officer
who later became a witness against the defendants
(co-defendant Eric Morton). Nazzal also recruited borrowers
and directed others to procure loans on his behalf. During
the conspiracy, these individuals obtained millions in
fraudulent commercial loans from several banks.
Fifth/Third Bank Frauds (Counts 1–3)
prohibited payment of broker’s fees from loan proceeds.
To circumvent this prohibition, Nazzal regularly bribed loan
officer (and testifying co-defendant) Eric Morton to approve
loans for unqualified borrowers. In these “straw
buyer” transactions, Nazzal would then submit
fraudulent payoff letters for mortgages and pre-existing
liens - when none existed - so that he or one of his
companies could obtain payments at the respective closings.
Only some of these transactions were presented at trial as
examples. Those relevant to this appeal are discussed below
and referenced by street address.
Wyoming In this straw buyer transaction, Nazzal engineered a
loan for Mountif Zeaiter, a sporadically employed and
otherwise unqualified borrower. In order to get
Fifth/Third’s approval for this $345, 000 loan, Nazzal
gave Morton false tax returns greatly inflating
Zeaiter’s income. Schneider prepared the paperwork and
was present at the meeting when Zeaiter signed the documents.
Schneider also prepared a purchase agreement (that was faxed
from his law office) falsely stating that Zeaiter had given
the seller $5, 000 in earnest money.
was also present at the loan closing. Although the documents
required Zeaiter to pay approximately $18, 000 at closing, he
later testified that he never paid anything. Nazzal also
submitted a fraudulent payoff letter for $12, 000 - in
reality just a disguised fee for his brokering the loan.
After the closing, Nazzal paid Schneider with a $500
cashier’s check and gave Morton $3, 500 cash.
Livernois Nazzal again brought a straw buyer to Morton and
again obtained a “brokerage” fee at closing in
violation of Fifth/Third policy. The closing on this $320,
000 loan took place at Minnesota Title Agency, whose
president (and co-defendant) Ross Carey later testified that
Schneider was associated “whenever there was a closing
involving [Nazzal].” In this deal, Schneider served as
a “witness” on the purchase agreement, which
falsely indicated that the borrower was making a $100, 000
down payment on the property. Nazzal obtained nearly $15, 000
at the closing.
& 9701 Van Dyke Nazzal directed Morton to falsify the
borrowers’ financial statements for a $612, 000
commercial loan secured by the 9701 property. Schneider
signed a fraudulent payoff letter as the
“Treasurer” of Alter Investments, falsely stating
that the company had a prior mortgage on the property. This
letter was faxed from Schneider’s law office. At the
closing, Fifth/Third paid Alter Investments $22, 000 to clear
title and Schneider received $2, 588 in attorney’s
fees. Nazzal also paid Morton over $1, 000 for assisting with
$550, 000 loan on the 9700 property, Nazzal provided another
fraudulent payoff letter for $48, 000 - again, where no prior
lien existed. The transaction resulted in a payment of nearly
$28, 000 to G&S Development with an additional payment of
$500 to Schneider.
12803 Hamilton Two brothers had fallen behind on a
construction loan for a gas station. During court
proceedings, they happened to meet Nazzal and Schneider, who
were at the courthouse that day on another matter. The
brothers eventually obtained alternate financing from Nazzal.
When this loan came due, they planned to sell their gas
station and pay Nazzal with the proceeds.
the sale fell through, one owner agreed to buy the property
from his brother so that Nazzal would get paid out on time.
This last-minute deal also required an emergency payment to
Morton, who had spent considerable time getting his superiors
at Fifth/Third to approve the transaction. In advance of the
closing, Schneider gave Morton a $1, 000 check drawn from his
law firm’s trust account. Morton falsely wrote
“payback previous personal loan” in the memo line
of the check. He later testified unequivocally that he
received this payment as a bribe.
brothers and Nazzal disputed various payoffs and fees prior
to closing. Schneider signed one fraudulent payoff letter for
$549, 000 as the “Treasurer” of G&S
Development. The parties also disputed payment of $1, 750 in
purported “attorney’s fees” to Schneider.
Both brothers later testified that they “never
hired” Schneider for the closing; they believed he
Comerica Bank Fraud (Count 5)
defrauded Comerica using a so-called “lien
jumping” scheme. Hours after closing on a $1 million
loan with Comerica for a gas station, co-defendant Majed
Tawbe executed a fraudulent, handwritten $500, 000 mortgage
on the same property in Nazzal’s favor. Nazzal then
managed to record this bogus mortgage several days before
Comerica recorded its legitimate one. After Tawbe defaulted
on his loan and fled the country, Comerica attempted to
foreclose and learned of Nazzal’s prior recorded lien.
Comerica and its title insurance company, First America
Title, were thus required to initiate legal proceedings to
quiet title. Eventually, First America Title agreed to pay
Nazzal $135, 000 to release his fraudulent lien.
Standard Federal Bank Fraud (Count 7)
March 2004, co-defendant Farouk Harajli obtained a $3 million
loan from Standard Federal. Because part of this loan was
secured by a gas station he owned, he promised not to obtain
any secondary financing on that property or borrow any
additional funds without Standard Federal’s consent.
that spring, Harajli was involved in a contested divorce and
turned to Nazzal for a short-term $100, 000 loan. Because
Harajli’s wife co-owned most of his businesses, the
court required her consent for all financial transactions -
but she refused to sign off on the loan from Nazzal. To solve
this problem, Nazzal proposed to falsify a Power of Attorney
permitting Harajli to sign various business documents on his
wife’s behalf. Schneider prepared the document, Harajli
forged his wife’s signature, and Nazzal loaned him the
Harajli approached Nazzal for another loan, Nazzal performed
a title search on Harajli’s properties and discovered
that Standard Federal had not recorded its $3 million
mortgage on the gas station. Nazzal then took steps to drain
the equity from the property by recording two bogus mortgages
totaling $750, 000. Schneider prepared both documents, which
were notarized by his wife.
eventually defaulted on his $3 million loan from Standard
Federal. When Nazzal falsely claimed to have no knowledge of
this loan, Standard Federal was forced to file an action to
quiet title. Under Michigan’s recording statute, any
prior knowledge of Standard Federal’s mortgage would
have been fatal to Nazzal’s claim to be first in line
on the property. Nazzal therefore testified falsely - and
also arranged for Harajli to testify falsely - that he had no
knowledge of this preexisting mortgage. In a further effort
to make his claims seem legitimate, Nazzal arranged for
co-defendant Carey of Minnesota Title Agency to backdate a
check showing Nazzal’s “prior” acquisition
of a title insurance policy with respect to his bogus
mortgages. Nazzal also encouraged Carey to testify falsely to
the same during a deposition and at trial.
eventually prevailed in the quiet title suit and was awarded
$750, 000 - undoubtedly due to the perjured testimony.
Between paying the judgment and attorney’s fees,
Standard Federal Bank (by then Bank of America) and its
commercial title company lost nearly $1 million.
Falsification of Records (Count 8)
also engaged in several activities to avoid discovery. Eric
Morton testified that when Nazzal feared their scheme would
be uncovered, Nazzal told him they had “to keep [their]
stories straight . . . that [Morton] was not bribed, [and
that] the loans were above board . . . things along that
line.” Nazzal similarly directed both Morton and Farouk
Harajli to create affidavits and other documents falsely
exonerating Nazzal from any wrongdoing. FBI agents recovered
these papers along with many of the false tax returns used in
the bank fraud schemes in a safe at Nazzal’s house
during the execution of a search warrant. Co-defendant Carey
later testified that after the execution of this warrant,
Nazzal told him to lie in order “to keep [their]
stories straight.” Schneider also played a role in the
cover-up. At least three of Morton’s false written
statements were notarized by employees at Schneider’s
law office. Despite Schneider’s $1, 000 payment to
Morton in connection with the 12803 Hamilton transaction,
these documents falsely stated that Morton had never been
bribed by Nazzal or any other person. Additionally, Schneider
later told an FBI agent that he had never been an officer or
partner of any of Nazzal’s companies - even though he
had signed two fraudulent payoff letters as
“Treasurer.” E. Convictions & Sentencing The
jury convicted Nazzal on all indicted counts: conspiracy to
defraud Fifth/Third, Comerica, and Standard Federal in
violation of 18 U.S.C. § 1349 (Counts 1, 5, and 7); bank
fraud against Fifth/Third in violation of 18 U.S.C. §
1344 (Count 2); corruptly giving Fifth/Third employee Eric
Morton money in connection with bank transactions in
violation of 18 U.S.C. § 215 (Count 3); and
falsification of records in a federal investigation in
violation of 18 U.S.C. § 1519 (Count 8). He received a
below-Guidelines sentence of 110 months.
jury also convicted Schneider on Counts 1 and 7. As to Count
3, the jury found him guilty of the lesser-included offense
of making an illegal payment of only $1, 000 (for his payment
to Morton in connection with the 12803 Hamilton transaction).
He received a below-Guidelines sentence of 48 months.
States v. Nazzal, 607 Fed.App’x 451, 452-56 (6th
Cir. 2015) (footnotes omitted).
appeal, the Sixth Circuit rejected on the merits the
petitioner’s arguments that (1) two notes conveyed to
the Court by jurors indicated that they were not impartial or
had engaged in premature deliberations, (2) the Court erred
by failing to hold a hearing to examine whether the jury was
subject to any bias, (3) the calculation of the loss amount
by the Court at sentencing was “purely speculative,
” (4) the Court improperly applied a four-point
sentencing enhancement for the petitioner’s leadership
role in the mortgage fraud scheme and a two-point enhancement
for obstruction of justice, (4) the Court failed to consider
all of the relevant sentencing factors under 18 U.S.C. §
3553(a) because it never mentioned the petitioner’s age
or health during its discussion on the record, and (5) the
Court erred by failing to rule on the petitioner’s
mid-trial motion for a judgment of acquittal on Count 8 of
the indictment (falsification of records), after the
petitioner passed on the Court’s invitation to file a
brief in support of the motion and did not raise any
objection to the conviction at sentencing. The petitioner
filed a petition for a writ of certiorari in the
Supreme Court, which was denied. Nazzal v. United
States, 136 S.Ct. 130 (2015).
petitioner timely filed his section 2255 motion. The
government has responded to the motion and the petitioner
filed a reply. In his motion, the petitioner raised three
grounds for relief. In each he contends that his trial
counsel was ineffective in various respects: (1) by failing
to file any post-trial brief in support of a mid-trial motion
for judgment of acquittal on Count 8 of the indictment, which
charged falsification of records, (2) by failing to object to
the Court’s curative instructions given in response to
two notes from the jury regarding their questions about the
proceedings, and by failing to insist on a hearing to inquire
about juror bias and premature deliberations, and (3) by
coming “unprepared for trial” and
“presenting no defense, ” declining the
petitioner’s urgings to investigate witnesses and
evidence, and “coercing” the petitioner not to
testify. Embedded in the third ground for relief was a list
of nine specific instances of deficient representation, which
are discussed further below; two of those points are
duplicative of and incorporate by reference the arguments in
support of the first two grounds for relief, which separately
are addressed below.
petitioner filed two supplemental briefs pointing out
additional case law and a third supplement purporting to
raise a “fourth ground for relief, ” in which he
argues that the Court improperly awarded restitution to the
banks that issued the loans, because “the loans were
phoney, ” and the banks participated in the fraud
scheme by not demanding “evidence of the financial
sufficiency of the mortgagees, ” so the ...