Chasing Phil

by David Howard

  “You have to comply with the federal law.”

  “Uh-huh.”

  “We comply,” Kitzer added. “Not going to do anything wrong.”

  Wedick pondered this. He hoped Kitzer might give him something to show intent to commit fraud. Instead, he was doing the opposite. Kitzer seemed to be playing Howard, trying to convince the old con man he’d gone straight.

  “Uh-huh,” Howard said. “In other words, this is checkable….See, here’s the thing about it. I don’t want to take this guy’s money and he screams. You get his money, I want him to be satisfied.”

  Kitzer reassured him about everything. Before leaving, Howard said Carbone might pay by cashier’s check. Kitzer shook his head: cash only.

  “You told me he’s Italian, right?” Kitzer said.

  “Yeah.”

  “So why don’t you tell him to get a crooked banker?”

  Howard laughed.

  Kitzer added, “Tell him we’ll meet in a phone booth.”

  “Okay, all right,” Howard said, chortling. “We’ll get it done.”

  They agreed to close the deal soon after that. Howard would bring Carbone to a Holiday Inn just off the Chicago Skyway in Hammond, Indiana.

  Wedick felt pleased that things were coming together so quickly—but now he had to make this happen. He only had a few days to find someone to play the part of Nick Carbone.

  4

  The Shell Game

  OCTOBER 27, 1976

  Jim Wedick scanned the grim, shag-carpeted interior of room 130 at the Holiday Inn and, for the hundredth time, ran through the mental checklist he’d built over the preceding four days. Kitzer would arrive soon, and Wedick had game-planned every scenario. Norman Howard would wear a concealed tape recorder. Playing the part of Nick Carbone would be Dean Naum, the undercover specialist from Indianapolis. Wedick had requisitioned the $5,000 that “Carbone” would pay Kitzer. Running the undercover operation gave him the chance to learn its intricacies.

  To round out the cast, Wedick—using one of Brennan’s connections from a previous case—had recruited the help of St. Joseph Bank in South Bend. A senior vice president, Dan King, had manufactured Carbone’s $50,000 loan application by changing some of the numbers in a dead file. A document showed Carbone’s net worth at $56,600, most of it restaurant equipment.

  King wrote in the loan-rejection letter, “Nick, in looking at your financial statement, a copy of which is attached, it is apparent that once you borrow the $50,000 your net worth will be reduced to approximately $6,600. Traditionally, restaurant equipment carries little collateral value and as a consequence, it will be necessary to request additional collateral.”

  Wedick had scrambled to get all of this lined up. Within the hour, he would know whether he’d done enough.

  —

  The weather was unseasonably cold for late October, winter creeping into the Upper Midwest, and Kitzer was late. When finally he arrived, wearing a suit and accompanied by Paul Chovanec, Kitzer said that they’d encountered the season’s first snow on their two-hour drive from Milwaukee.

  “Christ,” said Carbone. “I couldn’t believe the weather. It’s gonna be a bad winter comin’ up this year.”

  “Oh yeah, well, last one was too easy,” Chovanec said.

  After dispensing with the small talk, Carbone broached the topic of the letter of credit. He said he had a friendly banker named Dan King who would help smooth the way for the bank to accept it. “Did Norm tell ya I was talking with this banker up there?” he asked.

  “He’s your pal?” Kitzer asked.

  “Our wives went to school together,” Carbone said, “and I’ve known him for about ten years now, I guess. I’ve had a little bit of problems tryin’ to get some financing and I’ve been talkin’ to him up there…tryin’ to work something out with him, and from everything he says, we can do something here today.”

  Kitzer made sure Carbone understood that acquiring the letter of credit was not the same as obtaining $50,000, and that if he was issued a loan, he would still have to repay it. “The reason I say that point-blank to you like that, Nick, is ’cause a lot of people that receive these, they think they don’t have to pay.”

  Carbone assured him that he understood. “There’s no problem about repaying or anything like that,” he said. “I’m not gonna try and walk away from it.”

  Kitzer assured Carbone that he wouldn’t have any problems. King, he said, “can confirm it for the bank, the whole shot, no problems. At that point he should give you the money. If he doesn’t give you the money, then he never wanted to to begin with.”

  Chovanec opened his briefcase and began filling out paperwork for Carbone to sign. He produced a Seven Oak brochure and some paperwork, including a promissory note, with copies for the bank’s records. Kitzer explained that Seven Oak required a postdated $50,000 check made payable to the bank, and that Carbone should write “In payment of letter of credit #1078” on it. He asked Carbone to date it October 20, 1978—the day Carbone’s two-year loan from the bank would be due. This was to protect Seven Oak in case Carbone defaulted, Kitzer said—but Carbone shouldn’t worry about any of that. If he paid back his loan, Seven Oak would tear up the check.

  Howard knew this was bogus—one of Kitzer’s defense mechanisms. If some FBI agent tried to claim the letter of credit was worthless, Kitzer would hold up the check: See? If it was fraudulent, why would someone give me $50,000 for it? Kitzer knew he could never cash the check; he sold his documents to people who needed money. If Carbone had $50,000 in his bank account, he wouldn’t need the letter of credit in the first place.

  “Oh, you know damn well the check ain’t worth a shit, is it now?” Howard said.

  Kitzer ignored him.

  Carbone filled the silence by asking, “How you want that made out, now?”

  “Made out to Seven Oak Finance,” Chovanec said.

  When they were finished, Carbone took out the $5,000 and asked Kitzer to count it. “Now, yeah, you can draw the drapes,” Kitzer said, and everyone laughed. He flipped through the bills and nodded. Carbone said he would have more business for Seven Oak if this deal worked out.

  With that, it was done. Kitzer and Chovanec said good-bye and asked Howard to step out with them. They went to the men’s room in the hotel lobby, and Kitzer handed Howard his $2,500 commission. Then they were gone.

  Wedick mostly felt relieved as the team reconvened and he took the $2,500 from Howard. The meeting had gone smoothly. He still had work to do, but Kitzer had stepped right into the trap.

  —

  Wedick’s next task was to prove that Kitzer had defrauded Carbone and St. Joseph Bank. He asked Dan King to telex England to see if the $50,000 in the letter of credit actually existed. What followed was a series of telexes over a period of weeks that traveled between South Bend; Kitzer’s home in tiny Ellendale, Minnesota; and National Westminster Bank, a third-party institution in London that Kitzer claimed held the money.

  Predictably, King couldn’t find any trace of the fifty grand. National Westminster claimed to know nothing of the Seven Oak document. In his correspondence, Kitzer omitted a key piece of information in one telex, then gave a wrong number in the next one. The idea was to frustrate St. Joseph until the bankers gave up—because Kitzer didn’t care if Carbone got his loan. He already had the $5,000.

  Naum, playing Carbone, called Kitzer on November 21 about the problem. Kitzer told him that King had made a mistake in his confirmation request.

  “Okay,” Carbone said. “There’s no problem with the letter of credit, though, is there?”

  “There is no problem.”

  “ ’Cause, you know, I’m very concerned about this.”

  “Norman explained this to me,” Kitzer said, “and I explained to Norman, I said, ‘Norman, they asked the wrong question on the telex.’ ”

  “All right.”

  “And then that is the last I heard about it, Nick.”

  Kitzer promised to c
all King the next morning. “I’ll have a talk with him and see what he has done, who he’s been in touch with,” he purred. “And I’ll try to instruct him which way to go.”

  But when he spoke to King the next day, Kitzer said there had been a miscommunication overseas and promised again that the confirmation was imminent. For Wedick, each call or telex that crossed a state or international border was another piece of evidence. By mid-January 1977, King had exchanged ten telexes with Kitzer, each deepening the conspiracy.

  By Wedick’s tally, the government could now charge Kitzer with seven counts of fraud and conspiracy—but he was sure it wasn’t enough. Even with Howard, who had insisted he could draw something incriminating out of his old friend, Kitzer had said nothing to indicate he was committing fraud. It was uncanny—as if he knew someone was listening.

  Wedick was certain that if he charged Kitzer with fraud, Kitzer’s lawyer would repeat what he’d said in Charlotte: Where’s the proof? Just as with Mercantile, Kitzer was using a legitimately chartered bank located in another country, so Wedick couldn’t get his hands on the records. A federal prosecutor in Hammond reviewed the case and confirmed Wedick’s suspicions that he didn’t have enough—a jury might be either confused or unconvinced.

  But Wedick was locked in. Howard was whispering in his ear that the scams went much, much deeper—Kitzer had swindled people out of millions of dollars, and would take millions more if someone didn’t trip him up.

  Wedick sat at work late one night with Kitzer’s telexes spread across his desk, his hands wrapped around the back of his head. One thing was obvious: Pursuing Kitzer in the traditional way—by conducting interviews and gathering a paper trail—made no sense. Kitzer already seemed to know what the FBI was after. If Kitzer wouldn’t admit that he was doing something illegal, maybe Wedick could catch him doing something that was. Howard had said that Kitzer sometimes dealt in stolen bonds. What if Wedick could get Kitzer to sell him one?

  That would mean another undercover buy. Wedick liked that idea. And this time, he was doing it himself.

  —

  Getting permission to go undercover with zero training was no layup. But Wedick’s immediate boss, the gray-haired senior resident agent Orville Watts, was easy. A few months earlier, a citizen had expressed his displeasure with the U.S. government by hurling a spear at the federal building in Gary. The missile shattered Watts’s first-floor window and lodged itself, quivering, in the drywall across from his desk. After that, Watts’s primary concern was talking to headquarters about moving to an upper floor, so he rubber-stamped most anything else laid in front of him.

  Wedick’s proposal prominently featured the words “stolen bonds.” He figured that this term would make it easier to secure approvals from the bosses. The idea wasn’t to try to make another buy but, rather, to gather more intelligence on what Kitzer was doing. (It helped, too, that Wedick wasn’t asking for more money.) Wedick didn’t go into much detail about the financial intricacies of Kitzer’s operation. Better not to confuse anyone.

  When the bureau signed off, Wedick decided he wanted Brennan to come along, to increase his comfort level. Howard would introduce them as young promoters trying to get into the game.

  Wedick set out to fill in the details of their lives as embryonic con men. He researched how to create a shell corporation similar to what Kitzer had used in acquiring Seven Oak. A business name occurred to him after a few days: Executive Enterprises. The firm sounded simultaneously substantial and like nothing at all. It was a Rorschach test, and they hoped Kitzer would see an opaque entity of uncertain means and motives. Wedick ordered business cards naming himself as chief executive.

  He applied for a post office box in South Bend, using his apartment in Griffith, a Gary suburb, as a backup address, so that nothing in the paperwork linked him to the FBI. He also subscribed to an answering service in South Bend so that he could give Kitzer a phone number.

  Howard told Wedick that a telex machine would also help project a solid image of a shady corporation. Kitzer used telexes routinely to mirror the activities of a legitimate bank. A telex service was like e-mail before there was any such thing: You typed in a message and it went through instantly to the recipient’s teletypewriter. Wedick called RCA, who told him the machines cost $1,500 down and $750 a month. This would be the perfect prop, he thought. What FBI agent would go to this kind of trouble?

  Wedick couldn’t believe it when the FBI also approved this expense. Now we’re getting somewhere, he thought.

  There was one step he couldn’t take. The FBI had the capability of providing fictional identities—but only for agents who had completed the undercover training. Wedick knew he wasn’t getting into that program anytime soon, but he thought maybe he could reverse-engineer the situation. If he did the Kitzer operation without the normal safeguards in place, they might push him to the top of the list for the training. He didn’t think it would be an issue, anyway: He and Brennan would have one meeting with Kitzer, maybe two, get a stolen bond, and boom.

  By January 26, 1977, Wedick had finished creating his fictional biography. Howard called Kitzer and said he’d met a couple of young guys, J.J. and Jack, who wanted to meet about acquiring paper. Jack’s grandfather owned an insurance company in Alabama that had hit a rough patch and run short on cash. States require such companies to keep a certain amount of money on hand to cover a sudden surge of claims, so Jack needed to plump up the financial statement to forestall any trouble. They figured this story would sound appealing because Kitzer would see an opportunity to seize control of and bankrupt the business, the same way he had hijacked Seven Oak.

  Howard hung up the phone and told Wedick: He’s going to call you. Be ready.

  —

  Wedick flipped on the turn signal of his Thunderbird and exited the frosty pavement of eastbound Interstate 90 in Portage, Indiana. Moments later, he drove into the parking lot of the Holiday Inn, walked into the lobby, and asked for his phone messages. Wedick had checked into the hotel the previous day, even though he’d had no plans to stay overnight. He’d just needed a room from which to call Kitzer. The clerk nodded and handed Wedick a slip of paper indicating that Kitzer had called, with a Minnesota number Wedick recognized.

  Wedick was pleased to have missed the call. He thanked the clerk and slid back into his car. He would not call Kitzer back—not yet. He’d wait two or three days, then check into another hotel, in Indianapolis or Michigan City or Valparaiso, and try again.

  This hard-to-get routine was calculated. Wedick wanted to seem interested but telegraph that he was in no hurry to connect. He hoped to project a busyness, a sense that he had far more going on than whatever Kitzer had to offer. Wedick also hoped to discourage any suspicions that he and Brennan were in law enforcement. What FBI agent would wait three days to return a call? “Jim Wedick from Executive Enterprises calling back,” he’d say next time. “Sorry to miss you. Call when you can.”

  Wedick found that there wasn’t much of an adrenaline rush in driving around the Midwest, collecting phone messages. He pondered the irony in this—pursuing a criminal by avoiding him—as he sped back toward Gary. But the challenge of penetrating the defenses of a master criminal was compelling and, in its own way, more exciting than tracking bank robbers. In his idle moments, Wedick found his mind drifting to Kitzer, trying to think what he might be thinking.

  The agent hoped they could set up a meeting soon. After three months of stalking Kitzer, Wedick would finally sit across from him. He looked forward to that. True, this was a steep task for his first undercover venture, and he would have preferred to have taken the FBI’s training classes.

  But it was just one meeting. Wedick figured they could handle that.

  —

  Then it happened. After two more weeks of driving to hotels and leaving messages, Wedick spoke to Kitzer on February 14. They briefly discussed Jack’s grandfather’s situation and Executive Enterprises—just enough for Wedick to pile on more bait. Sl
ipping in a few Bronx mannerisms, Wedick indicated that he had numerous deals in play, some of which involved connections in Italy. Kitzer invited him to come to Minneapolis the next day, and to bring Brennan.

  After months of set building, the agents suddenly had twenty-four hours to hustle onto center stage—and there were still hurdles. First he had to obtain clearance to fly to another FBI jurisdiction. Wedick called Jim Deeghan, his immediate supervisor for this case. Deeghan had to get approval from his boss, Special Agent in Charge Frank Lowie, who, in turn, needed permission from both headquarters and the Minneapolis FBI office; this sort of procedure was standard anytime agents traveled onto someone else’s turf. The bureau under J. Edgar Hoover rarely countenanced travel in an undercover role, but the legendary director had died in 1972. A new wave of more progressive thinkers was entering the bureau—and Lowie, fortuitously, was among them. A bespectacled, slender man in his mid-forties, he was a steady, calm, and reasoned thinker. His old-school predecessor wouldn’t have given Wedick and Brennan a chance.

  As the FBI bureaucracy clanked to life, Wedick bought a bottle of Cutty Sark—Howard had told him that Kitzer loved Scotch. He tried on the Nagra microrecorder, a device introduced out of Switzerland in 1970. The machine, made from a light metal alloy with trademark Swiss precision, was the first commercially available miniature cassette recorder, and it had been an instant hit among the likes of CIA operatives and East Germany’s Stasi. Hollywood directors strapped Nagras to stuntmen to capture sound effects.

  The device fit into a pouch built into an Ace bandage–type fabric that looped around Wedick’s midsection. Two wires connected to tiny microphones, each about the size of a pencil eraser, that ran from the machine, situated on his lower back, up under his arms and around his chest to his sternum, where they were secured using surgical tape. The higher the microphones were positioned, the better they captured voices. Some agents placed them by their belt buckle to minimize the odds of discovery, but the tape sounded muddy and distant. A sharp recording was worth the risk, Wedick believed—plus, he was posing as an executive type, so he’d be wearing a suit and tie. A third wire connected to a remote-control on-off device. Wedick cut a hole in his right suit-pants pocket to thread the remote in. Each cassette could hold three hours of recordings.