by Rabon, Don
What he had to say then and other times we met over the course of five years, on an irregular basis, varied from personal issues to particulars about the case and the ongoing investigation. He did not ask for advice, and I offered none. When we met, I purposely avoided asking investigative-related questions. I did not need to. After the phatic phase of our communication transpired, off he went without any prompting on my part. I listened and responded as his Bible study teacher. I did note, however, that at no time in all of our meetings did Alex express remorse for the grief and loss he and his business partner had inflicted upon so many people. The conversation always flowed to him and the prevailing circumstances, acting upon him, as he perceived it.
Shortly after the initial meeting, the details of the case became public and served as the area media’s item of choice with each new revelation, accusation or new stage of the proceedings. Hendersonville is a small, mountain community in western North Carolina with a disproportional amount of wealthy retirees—local and transplanted. While the diverted funds’ range of seven to ten million dollars might not seem like a great deal of money in comparison to the billions Bernie Madoff had stolen, in Hendersonville, each meeting of the irate investors was good for front page, above-the-fold material, as well as the area’s electronic media’s “this just in” moments for those reading from the teleprompters.
Alex had seemingly revealed to the federal investigators the fraudulent activities that he and his co-conspirator had undertaken over the course of several years. Their scheming drained the resources from over one hundred people. Additionally, the harm to the government as a result of their activities in this case was valued at fifty-five million dollars. Alex appeared to assist the federal authorities by wearing a body mike during conversations with Noel in addition to recording some of their subsequent phone conversations.
For his cooperative efforts, Alex was given a deal. He would be allowed to plead to one count with a maximum sentence of five years and a fine of up to $250,000. The federal government’s press release regarding Alex’s plea agreement read as follows:
“DEPARTMENT OF JUSTICE
Acting United States Attorney Edward R. Ryan
Western District of North Carolina
FOR IMMEDIATE RELEASE
FRIDAY, JUNE 12, 2009
CONTACT: Terry Wilkinson
704.344.6222
Fax: 704.344.0629
ETOWAH, NORTH CAROLINA MAN SIGNS PLEA AGREEMENT IN FEDERAL CRIMINAL CASE INVOLVING CERTIFIED ESTATE PLANNERS, INC. ASHEVILLE, NC. — Alexander Klosek, 31, of Etowah, North Carolina, was charged today in a federal bill of information filed in U.S. District Court in Asheville, with one count alleging conspiracy to commit mail and wire fraud. Klosek has agreed to plead guilty to the charge pursuant to a plea agreement with the government, also filed today. Dates have not yet been set for the formal entry of Klosek’s guilty plea or for Klosek’s sentencing.
Acting U.S. Attorney Edward R. Ryan is joined by Owen Harris, Special Agent in Charge of the FBI in North Carolina, in making today’s announcement. The charge against Klosek arises out of an alleged conspiracy in which he participated and which took place from in or about January 2003 through about June 2006 in Henderson County, involving Certified Estate Planners, Inc. The bill of information filed against Alexander Klosek alleges that he, together with B.N. and others, solicited over 100 investors to invest large sums of their retirement savings with Certified Estate Planners, Inc. (“CEP”) by promising a conservative investment strategy. Today’s charging bill of information also states that Klosek and B.N., without CEP clients’ knowledge, diverted several million dollars of the clients’ assets to B.N.’s start-up lumber composite company, thereby significantly decreasing the value of the clients’ investments. The bill of information states that Klosek and B.N. then continually misrepresented the value of the clients’ assets on the quarterly statements mailed to clients so that they would not know the true diminished value of their assets. Based on this scheme, the CEP clients were defrauded of approximately $7 million.
The Federal Bureau of Investigation led the investigation that resulted in the filing of today’s bill of information and in the filing of a related bill of indictment, filed June 3, 2009, alleging that Bryan Noel also participated in the above-described conspiracy. The government has also been assisted in this investigation by the North Carolina Secretary of State’s Office.
The government is represented in this matter by Assistant U.S. Attorney Melissa Rikard of the U.S. Attorney’s Criminal Division in Charlotte. Also today in federal court in Asheville, Bryan Noel was afforded a detention hearing before U.S. Magistrate Judge Dennis L. Howell. Noel was ordered detained.
A copy of the bill of information charging Alexander Klosek is provided along with this press release. Klosek faces a maximum penalty of five years’ imprisonment, a $250,000 fine, or both.
ALEXANDER KLOSEK
Age: 31
Etowah, North Carolina”
Noel had been arrested, placed in jail with no opportunity for bail and scheduled for trial. The federal government’s press release regarding his charges and arrest read as follows:
“Department of Justice Press Release
United States Attorney’s Office
Western District of North Carolina
Contact: (704) 344-6222
For Immediate Release
June 4, 2009
Bryan Noel Indicted for Conspiracy and Mail Fraud
Former Owner of CEP, Inc. Charged in 28-Count Federal Indictment
ASHEVILLE, NC—Bryan Noel, 39, of Hendersonville, NC, has been indicted and arrested on one count alleging conspiracy to commit mail fraud, 25 separate counts alleging mail fraud, and two separate counts alleging making a false oath in connection with a bankruptcy proceeding, all in connection with an investment scheme which resulted in losses of approximately $7 million. Noel made his initial appearance before a U.S. Magistrate Judge today and was detained pending a hearing. That hearing is scheduled for Friday, June 5, 2009, at 12:00 p.m.
Today’s announcement is made by Edward R. Ryan, Acting United States Attorney for the Western District of North Carolina, and Owen Harris, Special Agent in Charge of the Federal Bureau of Investigation (FBI) in North Carolina.
“We know that numerous victims have waited a long time for this day,” said Acting U.S. Attorney Ryan. “We believe that the filing of these allegations is the first of many steps toward seeing justice served and recouping some of their losses,” he added.
According to the indictment, which was returned by a federal grand jury sitting in Asheville on June 3 and filed under seal, from around January 2003 until about July 2006, in Henderson County, Noel and others solicited over 100 clients to invest large sums of their retirement savings with Certified Estate Planners, Inc. (“CEP”) by promising a conservative investment strategy. The indictment alleges that in about 1999 Noel created CEP to solicit investors and to offer estate planning services geared toward retirees. The indictment alleges that shortly after the initial investments were collected, without the investors’ knowledge, several million dollars of the investors’ assets were diverted, thereby significantly decreasing the value of the investments. According to the allegations contained in the indictment, those funds were diverted to Noel’s start-up lumber composite company. The indictment alleges that thereafter the value of the assets was continually misrepresented on the quarterly statements mailed to investors so that they would not know the true diminished value of their assets. In summary, the indictment alleges that by July 2006, Noel and an unindicted co-conspirator had misrepresented to investors that their assets had grown to a total of approximately $16 million, when in reality, investors’ assets had shrunk to only approximately $1 million. According to the indictment, Noel filed for Chapter 7 bankruptcy protection in August of 2007.
Noel is separately charged in counts two through twenty-six w
ith substantive violations of mail fraud alleging that he used the U.S. mail to cause false quarterly statements to be delivered to his investors for the purpose of further executing his alleged scheme to defraud. The indictment was unsealed following the arrest of Bryan Noel earlier today.
If convicted, Noel faces a maximum sentence of 20 years’ imprisonment on each of the conspiracy and mail fraud counts, five years’ imprisonment on each of the counts alleging false oaths in a bankruptcy proceeding, and a maximum $250,000 fine for each count.
The case was investigated by the FBI, and the prosecution is being handled by Assistant U.S. Attorney Melissa Rikard of the Western District of North Carolina.
The details contained in the indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.”
In the functioning of a fraud-related case of this nature, that pattern is the gold standard. Noel would be tried, Alex would testify for the prosecution regarding his and Noel’s criminal activities, and a verdict would be rendered. Following the trial disposition, Alex would be sentenced and, judicially, that would have been that. As it happened, Bryan Noel was tried and found guilty of twenty-three of twenty-four federal charges in March of 2010. The charges included “mail fraud, money laundering, conspiracy and bankruptcy fraud.” The jury took only six-and-a-half hours of deliberation after a two week trial to reach a verdict.
But for the federal authorities, this case was to prove to be anything but standard, and most assuredly not golden. Shortly before Bryan Noel’s trial was scheduled to begin, revelations with regard to Alex’s five-year continued deception of them and asset diversions after his apparent willingness to cooperate, came to the surface.
On Super Bowl Sunday of 2010, Alex asked if I would stop by his house after lunch. While at his house, Alex disclosed to me that he had deceived the federal agents and prosecutors from the beginning of his 2006 meetings and cooperative efforts with them, all while holding onto diverted assets. Noel’s defense team had discovered his continued deception and diversion, and they had made the federal prosecutors aware. As a result of his continued manipulations, his previous deal was taken off of the table and he now faced up to twenty years.
At his house that afternoon, I said to him, “Alex, in all of our meetings over these years you have never asked me for advice. I am telling you now, nevertheless, that you had better cooperate with the federal agents and prosecutors to the fullest.” I made no effort to try and obtain a commitment on his part to do so, left, returned home and watched the game.
In the fullness of time, it became known publicly that Alex had indeed deceived the federal authorities from the beginning of his meetings with them and had subsequently kept possession of diverted resources. Far and away, his actions had certainly deviated from the “standard” of a fraud case of this category.
Now that an access between my professional life and personal life had been reopened by Alex’s most recent revelations, there was no closing it. I had to know. Of all the people I have known, interviewed, studied or investigated, Alex is one of the most enigmatic. He is highly intellectual, articulate and has a dry—one really has to look for it—sense of humor. But it was the duality of Alex’s life—the daylight “see you in church” side co-existing with the dark “continuing to deceive and steal” side—that compelled me to stay the course.
THE DUALITY OF MAN
The duality of man is not in and of itself an uncommon occurrence. There is the good and bad in all of us. Even the Apostle Paul struggled with the conflict between his mindset and his actions—“For that which I do I allow not: for what I would, that do I not; but what I hate, that do I” (Romans 7:15). But with Alex, the circumstances were dramatically different. For Alex, to continue to deceive and steal after he had obtained (in light of the circumstance) a generous offer from the federal prosecutor, set him far apart from the run-of-the-mill fraudster. Here was an individual who deceived his client-investors, his partner, and continued paddling deceptively up to and right past the federal authorities. A “morbidity deceiver” is one who continues to deceive when it would be in their best interest to tell the truth. But in light of the fraud-incentive, Faustian dynamic, the question is, “In their best interest as defined by whom?”
As Alex moved into deeper water, his story unfolds in a manner not unlike a Shakespearian tragedy. Classically, we wonder, who was the “real” Hamlet? Personally, I wondered, who was the real Alex? Was Alex just a bit of flotsam pulled out to a sea of fraud by a riptide over which he had no control? Or was Alex so diabolical that he had planned and carried out a deception, within a deception, within a deception? Why was his “deal with the devil” more attractive to him than his deal with the prosecutor? What incentive did the continued deception offer that was greater than that offered by the prosecutor?
A riptide is “a strong channel of water flowing seaward from near the shore, typically through the surf line.” It occurs “when wind and waves push water towards the shore, that water is often forced sideways by the oncoming waves. This water streams along the shoreline until it finds an exit back to the sea or open lake water” (Wikipedia.com). The Greek word for riptide is anaklusmos. Its literal meaning is “to wash against (ana = against, klyzein = wash)” (Reference.com). Were there external “winds and waves” that ultimately carried Alex out on a riptide of deception? On the other hand, Alex had indeed “washed against” a variety of people sweeping their resources out to sea. Was Alex, in reality, not so much the floating debris, but rather the riptide itself?
In this theater of life drama, we find conflict between father and son and between co-conspirators. We discover deception of investors as well as federal authorities, betrayal, intrigue and more.
An Endless Stream of Lies is my search for an understanding of Alex and his actions. This is not a search to provide an opportunity to be critical of Alex. We will allow Alex’s own actions and words, as he responds to questions in open court, to define him. We will utilize segments from the transcripts from Noel’s trial and Alex’s sentencing hearing as navigational devices. I have placed the emphasis on the questions that were asked of Alex and his subsequent revelations. Who asked the questions of Alex is secondary. Alex’s answers are primary. As you move forward, examine carefully Alex’s answers to the questions that were asked. When a person tells us about “things,” they in turn tell us about themselves. Keep his answers in context to his answers to previous questions as well as his actions.
This examination of his story is a journey to know a fraudster by his actions, his words, the subsequent downstream consequences of his undertakings and the insights I can uncover and pass along to other fraud-related investigative personnel.
In his writings, Shakespeare drew from history, legends, characters from life, and the circumstances in which they were moved or drawn. In this unfolding of Alex’s voyage into the abyss, if Shakespeare were alive today he would most certainly be saying, “And then what happened?” If my grandmother, Lacy Watts Brown, who spent her life from ages nine to sixty-five standing on her feet, working in a cotton mill in Belmont, North Carolina, were alive today, she would answer him, “It’ll all come out in the wash.”
THOUGHTS, COMMENTS AND ANALYSIS
What are your impressions, to this point, with regard to this circumstance?
Exactly what do you know?
What is it that you know that you don’t know?
What questions would you ask in order to know?
What steps would you take in order to know?
POINTS TO PONDER
Why would Alex want to meet with me specifically from the time of his initial meeting with federal authorities until the revelation of his continued deception?
Why would Alex continue to deceive and divert resources after having made a deal with the federal prosecutor?
Why would A
lex, a highly intelligent, educated individual, involve himself in a situation that he knew could potentially have profound, adverse consequences to his life?
What questions could have been asked of Alex on the day he first met with federal authorities?
At what point would someone come to trust an individual who is an admitted fraudster?
What questions would you pose to Alex at this point?
CONTENT – CONTEXT APPLICATION
Ex-fireman Charged
An ex-fireman faced seventy-one counts for embezzling $226,000 from a firefighters association and a volunteer fire department. He also was charged with five counts of obtaining money by false pretense. He had previously served as the president of the association and as the assistant chief of the fire department. Additionally, through his activities at his place of employment, he was charged with taking $45,000 from three clients with the promise to invest the money into an annuity. The clients notified the company when they never received any paperwork related to their annuity purchases.
What might be the commonalities of circumstances that we have reviewed in Alex’s circumstance and the ex-fireman?
What might be the differences of circumstances between the two?
How does the dynamic of trust others (clients, partner, federal authorities) placed in Alex factor into the entire circumstance?
How does the dynamic of trust others (fire department and place of employment) placed in the ex-fireman factor into the entire circumstance?
What questions would you pose to this individual?
CHAPTER TWO