by Rabon, Don
An Endless Stream of Lies
Copyright © 2015 by Don Rabon
All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means without written permission of the author.
ISBN 978-0-9903367-0-9
Published by:
Highly Motivated, Inc.
Hendersonville, NC
CONTENTS
Preface
Introduction
A Rip Tide of Human Actions
The Search for the Source of Fraudster
Alex and the Fraud Triangle
Three Atoms to Form Water –
Three Requirements to Form Fraud
Alex Met the Investors at the Well
He Took Their Water and the Well Ran Dry
The River Turns and Turns Once Again
Alex Leaks to the FBI
Alex’s Double Knavery
He Looked into a Pool
He Fell in Love
He Wasted Away
Oil and Water
Differing Testimonies
No Longer at Life’s Helm
Into the City of Woes
Uncharted Waters
PREFACE
The stage is the federal courthouse in Asheville, North Carolina. The date is February 24, 2011. The scene is a sentencing hearing before the Honorable Richard L. Vorhees, United States District Court Judge. Before Judge Vorhees stands a well-educated, highly intelligent young man (thirty-three) named Alex Klosek. Alex is slated to be sentenced for his part in the illegal diversion of over seven million dollars from over one hundred people.
In Alex’s fraudulent wake are ruined lives, dreams that will never be realized and the evaporation of lifetimes of savings made possible by extraordinary personal sacrifices. People who had scrimped, saved and done without in order to be able to pass onto their children and grandchildren the opportunities for better lives, now had little or nothing left. Victims were present in the courtroom that day for Alex’s sentencing. Some would speak, and others would remain silent. All were waiting for some remnant of justice as it remained for them. Many victims, those there, those choosing to stay away and those whose lives limited them to a nursing home, would be disappointed.
At his sentencing, Alex asserted:
I’m truly sorry for everything that has happened here, for the losses the clients have experienced, the life change, and everything that has happened. I know there have been serious negative repercussions. And it was never my intent to lose anyone’s money or divert anyone’s money or scheme anyone out of anything.
Is that really the case? Does Alex indeed find himself facing a federal judge ready to impose sentencing for nothing more than a series of unintentional actions on his part? Why would Alex plead guilty if he had never intended to “lose anyone’s money, divert anyone’s money or scheme anyone out of anything”?
Approximately four months later on June 30, 2011, Alex reported to federal prison in Memphis, Tennessee. June 30, 2011, is significant in that it was five years ago to the day that Alex had deceptively relayed his initial account to federal authorities of his own and his partner’s (Bryan Noel) fraudulent diversion.
On that last day of June, 2011, Alex walked through a life portal. With a single step he crossed a threshold. The door on that threshold would lock behind him and would not unlock for seven years. While admittedly at a country club of the federal prison system, Alex’s confined life would not be his own. For seven years he will be told when to get up, go to sleep, eat and work. At the end of that seven-year period, when they return his clothing and personal belongings to him, they will hand him one more item to carry with him—a ten million dollar restitution.
An email Alex had sent to a friend was read into the transcript during Alex’s cross examination. Alex was quoted as follows:
The idea of starting our own hedge fund sounds like a great idea. Talk about looking forward to getting up in the morning, to know that millions of dollars rests in our hands. The decisions we make could move markets. In addition, we’ll have a team of people under us who do the b---s--t work, feed us the information, and then we make the decisions about where to put the money.
How enthusiastically would Alex be “looking forward to getting up in the morning” for the next seven years? Who would be making “the decisions” in Alex’s life? Who is it that would be doing “the b---s--t work”? Where was the “team of people” destined to be under Alex?
How did this all come about? A young man with no intention of doing wrong is faced with seven years’ imprisonment and ten million dollars of restitution. Is this a gross miscarriage of justice? Perhaps, but not in the way you might expect. Want to find out what happened to bring this all about? Pick up a paddle, get in the boat, and let’s go.
INTRODUCTION
“In mighty torrents foams the ocean
Against the rocks with roaring song—
In ever-speeding spheric motion
Both rock and sea are swept along”
—GOETHE (TRANSLATED BY WALTER KAUFMANN), FAUST
A DEAL WITH THE DEVIL
Fraud is inherently a matter of incentives. In Goethe’s “Faust,” a deal is made with the devil—Mephistopheles—who offered an incentive, a soul traded for an opportunity. A short term, temporal gain is exchanged for an eternal loss. Faust exchanges his eternal soul for the brief period of a life, yet a life lived just the way he wanted it. He opted for the prelude in lieu of the symphony.
Fraud is inherently a deal with the devil—an illegal asset transfer having inexorably high penalties for such a shift. In “Faust,” the moment wherein the deal was agreed upon is easily identifiable. The devil proposed to Faust:
“Still, if through life you’ll go with me,
In that case I’ll agree
With pleasure to accommodate
You, on the spot belong to you.
I’ll be your comrade true
And if to your liking I behave,
I’ll be your servant, be your slave!”
Faust, in seeking the additional information he needed to make his decision, asks,
“And what in turn am I to do for you?”
The devil replies,
“Here to your service I will bind me;
Beck when you will, I will not pause or rest;
But in return when yonder you will find me,
Then likewise shall you be at my behest.”
Once their negotiations reached agreement, the devil seals the deal with simply, “Done!” It was a fait accompli—a done deal. The devil’s incentive brought about his desired goal—Faust’s very soul.
But in life, it is not quite so easy to delineate the exact point wherein a person—not a literary character—makes a deal with the devil. In Reality 101, perhaps the devil does not so much appear in our private study, as in the case of Faust, but rather sits patiently at a table found within an anteroom of a human heart. He sits and waits for circumstances to draw someone into the room. The individual just happens to idly wander in as if looking for some misplaced item. He sees the devil and now must make a choice: leave the room or sit down, just to have a little talk, you see, and explore some options—check out the incentives, kick a couple of moral tires. Where’s the harm in that?
An Endless Stream of Lies is not about a person that turned on their heels and immediately walked out of the room. Rather, this narrative is about someone who walked over to the table, pulled out the chair, sat down, examined the incentives, looked the devil in the eye and asked, as did Faust, “And in return, what do you want out of this
?” For this person, whatever the cost, it was worth the deal—financial fraud by a modern day Faustian fraudster. In this exploration we will come to know both the fraud and the fraudster.
WATER UNDER THE BRIDGE
Finances are habitually linked to water related terminologies. For example, we may say or hear:
“His resources dried up.”
“He had a good deal of liquid assets.”
“She wanted to float a loan.”
“The revenue flowed in on a regular basis.”
“The vehicle manufacturer received a bailout.”
Parenthetically, our examination of this reality-based, Faustian character and this set of circumstances will orientate toward water-related terminologies. That metaphorical conceptualization is just the manner in which I process circumstances and events. I see the representational frame of a situation, in a specific circumstance, and that is how I conceptualize it from then on. Bear with me. Consequently, in our assessment, we will seek to follow this stream as it relates to Alex’s deal with the devil, in order to find its source, adjoining tributaries and journey’s end.
One other note I continually recommend to those whose profession necessitates investigation and interviewing: read and study classic literature. Shakespeare, Dickens, Poe and the like provide great insight into human motivations and cognitions. To me, the classics are psychology books sans the footnotes and more illustrative. Toward that end, throughout this study, we will often compare the cascading circumstances we encounter to relevant examples within literature. Once more, bear with me.
My goal, for this book, is broad based in the extreme. For those responsible for investigating and apprehending fraudsters, my wish is for this case study to serve as a resource, providing insight into the flow of precipitating events with the words, thought processes and subsequent actions of a fraudster. As a result, hopefully, it will assist in their future investigations and success in bringing other fraudsters to justice.
Additionally, for those having an interest in the human psyche, the dual nature of man, a person’s actions and the consequences that follow, my hope is this will serve as opportunity to look deeply within the humanity of a specific fraud case and a unique fraudster.
As you journey along you will find:
At the top of each chapter: “NAVIGATION POINT AND HEADING ”. This element is designed to summarize our location at this point on our journey. We are venturing into a complex set of circumstances that, at times, flows back upon itself. In like manner, there will be times in which we will have to trek back a bit in order to gain a more knowledgeable perspective of the situation. Knowing where we are helps a great deal in making the determination as to where we are going as we push off once again.
At the end of each chapter there will be a section titled “THOUGHTS, COMMENTS AND ANALYSIS.” This template is designed to allow the explorer to process their assessment of the current status of the voyage, formalize their thoughts by writing them down and identify options for moving the inquiry forward. I encourage those wishing to maximize their experience to concentrate on this portion, in order to utilize their own abilities to conceptualize, evaluate and transition the inquiry forward.
Following that exercise, there will be a section titled “POINTS TO PONDER.” This segment is comprised of a series of (hopefully) thought provoking questions that I provide, related to the chapter. This alternate set of questions is designed to simulate the advantages of having someone else to toss around information, thoughts, questions and action steps. Two heads really are better than one, even if one of them is mine.
Lastly, there is a “CONTENT – CONTEXT APPLICATION” exercise. This device is designed to provide the explorer with an opportunity to examine an additional fraud-related circumstance. The examination serves to guide the explorer towards thinking through the information provided into a more expansive application.
Those explorers, not responsible for fraud investigations, may choose to drift on past the end-of-chapter exercises; however, anyone who appreciates a cognitive challenge may find the exercises most informative.
While providing investigative assistance to a law enforcement agency, I conducted an analysis of a homicide-related, hand written narrative that began with “Once upon a time.” The homicide was related to the theft of weapons. Our current inquiry involves the theft of over seven million dollars of assets from over one hundred people. Accordingly, let us begin in likewise manner: Once upon a time . . .
CHAPTER ONE
A RIP TIDE OF HUMAN ACTIONS
The writer, like a swimmer caught by an undertow, is borne in an unexpected direction. He is carried to a subject which has awaited him—a subject sometimes no part of his conscious plan. Reality, the reality of sensation, has accumulated where it was least sought. To write is to be captured—captured by some experience to which one may have given hardly a thought.
—ELIZABETH BOWEN (1899–1973), Seven Winters
NAVIGATION POINT AND HEADING In the flow of events, our lives intersect constantly with others. In some cases, we pause and pass on as before—nothing of significance has changed. In other circumstances, however, that intersecting results in a life-course shift that can be observed and articulated. The ripple effect of a life touching a life and each in turn touching other lives, and so on, is a driving force in the course of human proceedings. Nothing happens in a vacuum. That being the case, when Alex Klosek—the central figure of our examination—and I found ourselves at an intersection, it was not a starting point for either of us, but rather, a point along a continuum. My life had unfolded along its way. His life had transitioned along its course. Now our lives were about to intersect. Ultimately, that crossing would result in a most intriguing mystery and the writing of this book.
NOTE: Fraud Defined: “Intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right” (www.merriam-webster.com).
THE INTERSECTION OF TWO LIVES
To put it directly, I have spent over thirty years working my way into and around the minds of people who deviated from the norms of society. I have investigated and interviewed murderers, kidnappers, pedophiles, fraudsters and most crimes in between. People, what they do and why they do it, have been and continue to be a continual source of intriguing study for me.
Having the ability to develop a rapport with people whose behaviors flow against the tide of acceptable behavior, and learning how “things” operate in their world, has allowed me to pass along insights, skills and understanding to thousands of investigative and other related personnel who must deal with aberrant behavior on a daily basis as a function of their profession.
The journey has carried me around the world providing interview and investigative training and assistance to a variety of organizations and individuals. I have published other books, all directed toward questioning, detecting deception, persuading, and understanding another’s cognition. That portion is the work side of my life, and it is a source of never-ending interest and challenge.
In my separate, though equally satisfying, personal life, the interviewing, investigative and discourse analysis related skills lie dormant. I enjoy my family and friends, never thinking of parsing their words, looking for subtle changes in behavior or evaluating their veracity. I like people, and I want them to feel comfortable being with me. My 2004 Road King Custom Harley Davidson motorcycle, scuba diving, classical literature, and writing provide ample opportunities to meet and interact with others all the while just being me.
But in 2006, a passageway connecting the two distinct dimensions of my life suddenly opened. Alex Klosek, an acquaintance and member of the Sunday Bible study class I teach, asked me to meet him at Kelsey’s Restaurant in Hendersonville, North Carolina, for lunch. At the time I was serving as Deputy Director for the Larry T. Justus Western Campus of the North Carolina Justice Acad
emy, a division of the North Carolina Department of Justice, and was a year away from my thirty-year retirement. For twenty years prior to my promotion to Deputy Director, I had been privileged to be the manager of the Investigations Center for the Academy. That was the best job I ever had.
In the course of our lunch, Alex informed me he had recently met with representatives of the Federal Bureau of Investigation with an admission to his own, as well as his business partner, Bryan Noel’s, fraudulent activities. This fraud had taken place over a number of years through their operations—Certified Estate Planners, a local investment firm—as well as a multitude of other companies and financial entities they had formed as vehicles to divert monies.
Immediately, my “focus on behavior” antenna began to go up. Concurrently, the interviewer–investigator dial in my head started toward the “on” position like a compass arrow moving toward magnetic north. In the opening moments of a professional communication event, commonly referred to as an “interview,” I, like most interviewers, transition into “the zone.” At this point, the attention given to the interviewee’s verbal, vocal and nonverbal behaviors goes to the highest level. His words and mannerisms are evaluated in context. Each response is framed and leads to the next elicitation option. An interview-based outcome is identified or modified accordingly, and all of the interviewer’s stimuli are directed toward that goal. Once underway, it is like a large, ocean-going exploratory vessel—very difficult to stop on a dime.
“Wait a minute.” I reflected, “This is not your case. This is a member of the Sunday Bible study and he is talking to you as such.” Consequently, through no small effort on my part, the antenna retracted most of the way, the investigator dial was reset close to the “off” position, and my mental engine order telegraph was set at “slow ahead.” I would be less than honest if I intimated that all capabilities had been shut down. Even in the conversational mode, my investigator knowledge that there is no coincidence in life caused me to reflect. I wondered, “Was Alex in my Sunday Bible study because of who I was and the position I occupied with the North Carolina Department of Justice?” Later, when he asked for a letter of reference for the judge to consider during the sentencing phase (which I did not submit), the dots were connected—at least in my mind.