Defense attorneys outraged as terror case switches to fraud

Joe Snapper and Justin Engel

BAY CITY — Lawyers for three Texas men once accused of plotting to blow up the Mackinac Bridge claim the government is bailing out an overzealous prosecutor by bringing unprecedented charges.

Until Wednesday, even the FBI said the business of buying and altering cell phones — as the men claim was their only motive — was a legal enterprise, and that the only issue was whether proceeds end up in terrorist coffers.

But now, the FBI and U.S. attorneys in Bay City say the entrepreneurial behavior of three Americans of Palestinian descent amounts to fraud, not terrorism.

“Our research shows us that this prosecution is the first of its kind under these circumstances,” the trio’s Dearborn defense attorney, Nabih H. Ayad, and his team said. “This is absolutely out of the realm.

“They’re just trying to get out of the hole they dug for themselves,” he added, referring to a judge’s dismissal Wednesday of the state terrorism charges brought by Tuscola County Prosecutor Mark E. Reene.

“It’s unfortunate for a credible agency like the FBI and the U.S. attorney to bail out a buddy because they goofed.”

Assistant U.S. Attorney Janet Parker from the Bay City office declined comment. She is charging Adham A. Othman, 21, his brother, Louai A. Othman, 23, and their cousin, Maruan A. Muhareb, 18, each with two identical counts of conspiring to traffic in counterfeit goods and money-laundering.

Taking on an industry?

Their arrests Friday with 999 cell phones and digital photos of the bridge didn’t just play on fears of terrorists.

It also drew the media spotlight to the trio’s alibi: They made a living driving around the country buying prepaid cell phones in bulk, converting them and reselling them, a criminal complaint claims.

Andrea Kinzig, a certified public accountant and special agent with the FBI office in Bay City, apparently broke new ground in a criminal complaint dated Tuesday. In it she says the three men defrauded cell phone manufacturers TracFone Wireless Inc. and Nokia Corp. by buying the phones cheap, then removing software that unlocks the devices so buyers may use them with any cellular provider.

The trio’s practice is not isolated. Wireless phone manufacturers and providers are steamed over a growing black-market industry. Many have filed civil lawsuits and taken other steps to stop exactly what the government claims the Othmans and Muhareb were doing.

“It’s a huge problem,” said Roger Entner, an analyst for Ovum, a London, England, technology, research and consulting firm. “It can bankrupt wireless carriers.”

But there apparently are no publicized criminal prosecutions of the practice, which appears loosely regulated and legal. FBI statements this week backed the practice’s legality.

Bureau spokesman Stephen Kodak told The Associated Press in a Wednesday story about the business of altering and reselling cell phones that the only concerns are over whether the money generated ends up funding terrorism.

“We haven’t seen any nexus at this time,” Kodak said, speaking generally of the practice.

The three men told FBI agents they believed their buyers sold the phones to California, New York, and Miami middlemen, who reprogrammed the devices and sold them overseas.

Miami, Fla.-based TracFone sells Nokia-made phones with a limited number of minutes, profiting once buyers purchase additional minutes from the company. The company loses with unlocked phones that let buyers purchase minutes from any provider.

Kinzig further alleges that the altered phones no longer are genuine Nokia products even though they appear like them. That makes them counterfeit, she says.

Consumer advocates contend locking the phones is illegal in the first place, and say there are no court rulings about the legality of removing the phones’ software.

Courtroom maneuvers

Ayad said he will ask Federal Magistrate Charles E. Binder at a Friday pre-trial hearing to release his clients on a personal recognizance bond. Monday he will file for dismissal of the case in the Eastern District of U.S. District Court in Bay City.

“I’m hopeful this federal magistrate steps up to the plate,” Ayad said. “This should never have been brought.”

Parker will ask Binder to deny bail at Friday’s 2:45 p.m. hearing. Binder ordered the men held but did not set bail.

Tuscola County District Judge Kim David Glaspie dismissed terrorism charges about 1 p.m. Wednesday. Three hours later, the three faced the same hard time in federal prison that the state terror charges carried — up to 20 years.

The absence of terrorism counts is in step with Monday statements from the FBI and state police that the trio had no link to known terrorism interests. But the federal felony counts clash with the FBI’s statement that no evidence existed that they broke any laws.

Reene said of the FBI’s statement: “I was deeply troubled by the press release. It was a very peculiar development.”

Another first

Reene’s state charges — of collecting materials to aid terrorism and surveillance of a vulnerable target with intent to commit terrorism — marked the first use of Michigan’s terror statute, enacted in 2001, a legal expert says.

What’s more, Reene’s move also may have marked the first time any state prosecutor has leveled terrorism charges in the United States, said David A. Moran, associate dean at Wayne State University Law School.

“I’ve not heard of any,” Moran said. “Terrorism is, after all, a federal activity, that which goes across state lines. It’s really not an activity that you would expect to be prosecuted in state court. It would be kind of strange. That ought to send a red flag up.”

Crying wolf

Moran, who teaches criminal law and procedure, said the case against the Texans reminded him of the so-called Detroit Four.

In that case, the government arrested four men shortly after 9/11 on terrorism charges to great political fanfare only to have the charges reduced to document fraud, then later dropped completely.

“We’ve seen a number of these cases post-Sept. 11 where the government thinks they’ve caught some terrorists and it turns out they haven’t.

“There’s real suspicion on my part, when you get these other charges, that you get this face-saving, ‘Well, we’ve locked them up and we’ve got to charge them with something.”‘

Moran said the FBI’s announcement Monday rejecting a terrorism link in the Caro case reflected the government’s growing sophistication: Agents made no knee-jerk announcement about terror suspects after the Friday arrest.

But when Reene charged the trio 15 hours after police took them into custody, that apparently forced the bureau to declare its contrary findings publicly.

Moran also said the government’s duty both to heightened vigilance and prosecutorial accuracy is not an easy one, but its post-9/11 tendency to cry wolf is nevertheless damaging.

“It’s a bad thing,” Moran said. “Days ago, I was telling anyone who would listen that I didn’t believe (the terrorism charges). There are probably a lot of people like me that when they hear of an arrest of the terrorists, they think the government has overreached.”

Racial motives?

Imad Hamad, regional director of the Arab-American Anti-Discrimination Committee in Detroit, said he fears the government is bailing out Reene by going after the three over a business practice no one has said is illegal.

Swapping state terror charges with federal commercial fraud charges on the same day, he added, is suspect too.

“People believe that a deal was struck between the county and the U.S. attorney’s office in that area to shield the county from liability if they had these people on false charges,” Hamad said.

“Why at this moment and why this way? It raises serious concerns that this case is becoming more a political case and a racially motivated case.”

Ayad said the men are innocent entrepreneurs who drove across the country, buying as many phones as they could to make a living.

Police in Wisconsin and the FBI in Arkansas briefly detained them but let them go, he said.

But Caro police arrested the three Friday in possession of 999 cell phones and digital photos of the bridge after a graveyard shift Wal-Mart clerk tipped off police to their unusual purchase of 30 to 40 phones.

Asked about allegations of racial profiling, Reene seemed to deny the charge, saying: “Some statements that are made were bothersome.”

The trio’s cache

Meanwhile, the nine-page complaint revealed more information about the accused trio’s cross-country trek and subsequent arrest.

Kinzig reported Muhareb’s pocket was stuffed with 18 $100 bills.

Her complaint described their interview with FBI agents shortly after the arrests: The accused separated batteries from some of the phones because purchasers said “they were easier to count and ship in that condition.”

Since leaving Texas in early August, the three men spent more than $20,000 buying prepaid phones from stores such as Wal-Mart, Kmart and Dollar General.

Kinzig believes the laptop — which had Internet access — gave them the ability to remove TracFone software on the road.

None of the men admitted to using it for that purpose. v

Joe Snapper and Justin Engel are staff writers for The Saginaw News. You may reach Snapper at 776-9715 and Engel at 776-9691. The Associated Press contributed to this report.