by Rabon, Don
Bryan Noel is presently in local federal custody where he has remained since June of 2009. Noel will remain in local federal custody until he is sentenced by Judge Voorhees. A date for the sentencing hearing has not yet been determined.
It is important to note that any sentence received upon conviction will be influenced by the Federal Sentencing Guidelines, which the Court consults in order to determine the defendant’s actual sentence. Sentences are based upon a formula that takes into account the severity and characteristics of the offense and the defendant’s criminal history, if any.
Following an investigation conducted by the FBI, Noel was indicted federally in June 2009 on 27 criminal counts. In October 2009 six additional criminal counts were added to the charges, which included money laundering conspiracy, bank fraud, making false statements to a bank, and money laundering. Noel is currently facing a maximum sentence of 20 years in prison on each of the conspiracy and mail fraud counts, alone. Each count further carries a maximum fine of $250,000.
The case was investigated by the FBI, and the prosecution was handled for the government by Assistant U.S. Attorneys Melissa Rikard and Matthew Martens of the Charlotte U.S. Attorneys Office, Western District of North Carolina.
But as he testified, Alex’s machinations did not stop at the point he went to the FBI. While “cooperating” with the FBI, he continued with his deception. In his words:
A. There were portions of the story that I did not relay and there were portions of the story where I lied about the extent of the knowledge that Bryan Noel had.
Q. You lied to who?
A. I lied to Drew Grafton.
Q. Of the FBI?
A. Yes, I did.
There are two broad taxonomies of deception—concealment and falsification. The first form is relatively easy, because it is passive. The second form is much more difficult in that it is active. Alex utilized both forms in his dealings with the federal authorities: Concealment—“There were portions of the story I left out”—and falsification—“I lied about how much Bryan knew.” Additionally, Alex referred to his narrative to the FBI as a “story.” Alex told the FBI a story. It was a story comprised of concealment, falsification and some truth.
In Shakespeare’s Macbeth, Banquo advises most appropriately with:
“And oftentimes, to win us to our harm,
The instruments of darkness tell us truths,
Win us with honest trifles, to betray’s
In deepest consequence”
More to the point, the prime directive given to any newly appointed investigator is always “never trust an informant.” Once again, someone had placed their trust in Alex, and once more that trust was proven to be misplaced. As Assistant U.S. Attorney Martin acknowledged during Noel’s trial, “It isn’t a happy time when you learn your cooperating co-conspirator isn’t cooperating.” All cooperating co-conspirators tell the truth . . . until they don’t.
At this point, deception was not a new tactic for Alex. He had concealed the trading losses from his partner for the previous four years and he deceptively sent out false quarterly statements. But why deceive now? Now that Alex had ensured “everything” was not going to fall on him, why would he deceive those in the position to help him the most? Once again, we must look to the self-interest principle.
Once Alex met with the agents of the FBI, his cooperation included wearing a hidden microphone while conversing with Noel and recording several of their subsequent phone conversations. His deceptive, manipulative tactics did not end with his initial meeting with the FBI, but rather flowed onward for years. Within the packaging of his agreement to cooperate, the determination to continue with his deception was concealed.
Q. Now, you testified earlier that you began making some recordings as part of your cooperation back in 2006. Is that correct?
A. That is correct.
Q. Mr. Klosek, what are you discussing with Mr. Noel at this point?
A. What rate of return to show the clients for that quarter.
Q. At this point, what had you been telling the government that — at this point, being in July of ‘06, what had you told the government about what Mr. Noel knew about the rate of return on the client reports?
A. That he was directing those rates of return.
Q. And was that true?
A. That was not true.
Q. And so what are you trying to do here with Mr. Noel?
A. I’m trying to get him to state a rate of return, which is why he is perplexed.
Q. Because he hadn’t done that before.
A. He had not done that before.
Q. Did the FBI know that at the time?
A. No, they did not know that at the time.
Don’t lose the significance of what Alex has revealed in the above: He is making a recording of a conversation with Bryan for the FBI. Within this conversation, he is “trying to get him [Bryan] to state a rate of return” that he had never stated before. Within the conduct of one recorded conversation, Alex is endeavoring to manipulate Bryan into putting forth a rate to imply that he had previously set the rate. Additionally, he is striving to underpin his deception to the FBI, with regard to having told them that Bryan knew and had known for some time, that the financial statements were reporting false information. Literally, he was playing both ends from the middle. Is this what Shakespeare had in mind, when he wrote, “In double knavery – How? Let’s see”?
Concurrently with his having gone to the FBI with his deceptive “story,” as well as his self-serving machinations—all the while appearing to cooperate—Alex diverted and hid assets belonging to the clients of Certified Estate Planners. In his words:
Q. Was there a safe at CEP where cash was kept?
A. Yes, there was.
Q. And can you tell the jury about that.
A. There was a safe where cash was kept.
Q. During what time period?
A. During the 2005-2006 time frame, sometimes investors would bring in cash, not in the form of a check but actual cash, and Bryan stated that that really should not be deposited in the bank account for fear it might raise some kind of suspicion with the IRS. So there was a safe that was placed in CEP’s office that I had a key to and Bryan had a key to, and that is where the incoming cash would be placed.
Q. And who had access to the monies in that safe?
A. I did and Bryan Noel did.
Q. What happened to the money in that safe?
A. The money in that safe was used by both Bryan and me personally.
Q. Well, what did you do with the money you took from the safe?
A. In some cases that money would be taken and it would be used to try to get credit for some type of account gains. In other cases it would be stored at my parents’ house.
Q. What do you mean stored at your parents’ house?
A. There were times where some amounts of cash, maybe 2 to $3,000 at a time, were stored at my parents’ house for safekeeping.
Q. When did you first tell the government that you were storing cash from CEP in your parents’ house?
A. Sometime within the past two weeks.
Q. The past two weeks?
A. Yes.
Q. Had the government asked you repeatedly whether your parents had any involvement in this matter?
A. Yes, the government had.
Q. Had I specifically asked you that?
A. Yes, you did.
Q. What did you tell me?
A. I said no.
Q. Was that true?
A. That was not true.
Q. Did you ultimately tell the government that the money was at your parents’ house?
A. Yes, I did.
Q. Then what happened?
A. Then that money was returned, the balance that was theirs, as well as some silver that was their
s as well.
Q. Anything else hidden at your parents’ house in addition to the cash?
A. No.
Q. Any silverware?
A. Well, yes. As I stated, there was some silver there.
Q. What was used to purchase silverware?
A. Client funds were used to purchase that.
Q. Why were client funds used to purchase silverware?
A. During the time of 2005 and 2006, in an effort to try to diversify some of the funds, there were some purchases that were made of silver coins and silver flatware.
Q. Were there some silver bars as well?
A. There were silver bars as well.
Q. This was all stored at your parents’ house?
A. Yes.
Q. Why?
A. At some future point I hoped that I could sell some of these things and maybe use some of that money to get back on my feet somehow. But that money did not belong to me.
Q. Had the government repeatedly asked you whether there was anything involving your parents concerning this matter?
A. Yes, the government had.
Q. And did you — and did you tell us that there was silver and cash and silverware at your parents’ house?
A. Not until two weeks ago.
We don’t want to lose this revelation within Alex’s testimony:
He kept client’s money at his parent’s house.
Over the years that he had been cooperating with the government, he did not reveal the existence of these resources.
When he was asked about any existing resources, he lied.
He had also hidden silverware, silver coins and silver bars.
At some future point he hoped to sell some of these things and maybe use some of that money to get back on his feet somehow.
It was only two weeks prior to his testimony that he had revealed the existence of the hidden assets.
Are you wondering what had happened two weeks ago that brought about Alex’s sudden fountain of honesty? Stay in the boat; we’ll find out.
Alex, who had swept the financial legs and feet out from under so many people, had hoped to use what they had earned, to get back on his feet. Is this the mindset of someone who stood before the court and all who were present and declared, “And it was never my intent to lose anyone’s money or divert anyone’s money or scheme anyone out of anything”?
MISDIRECTION
Alex, in his deception of the representatives of the federal government, utilized a most subtle deceptive ploy—misdirection. While Alex had the government focused on Noel, he utilized that diversion to convert assets to himself. After all, it was just easier to blame everything on Bryan.
It was not enough for Alex that now everything was not going to fall on him. He wanted more. He wanted to do more. He wanted more and he did what he had to do to get it, as represented by his testimony regarding his plea agreement:
Q. Did you have a plea agreement with the government?
A. Yes, I did.
Q. Directing your attention to the summer of 2009, did you sign a plea agreement?
A. Yes, I did.
Q. I’m going to show you Government Exhibit 45O. Do you recognize that document?
A. Yes, I do.
Q. What is it?
A. That is the plea agreement that was entered in June of 2009.
Q. Was that the plea agreement or is that the bill of information?
A. The bill of information.
Q. What does the bill of information charge you with?
A. Conspiracy to commit mail fraud.
Q. Now, this is the bill of information that was filed against you when?
A. This was filed in June of 2009.
Q. And did you agree to plead guilty to that bill of information?
A. Yes, I did.
Q. Let me show you Government Exhibit 45P. What is that?
A. That is the plea agreement for that bill of information.
Q. And did you sign that document?
A. Yes, I did.
Q. When was this plea agreement filed?
A. This plea agreement was filed June 12, 2009.
Q. And the plea agreement required you to plead guilty to that bill of information, correct?
A. Correct.
Q. And what was the maximum amount of jail time that you were looking at under that plea agreement?
A. Five years.
Q. Five years in prison?
A. Yes.
Q. Were you required to do anything under that plea agreement?
A. I was required to cooperate and provide truthful testimony.
Q. Looking at page 7 of the plea agreement, what does paragraph 24(a) require you to do?
A. “The defendant will provide truthful information about the subject charges and about any other criminal activity within the defendant’s knowledge to any United States agent or agency that the United States designates.”
Q. As of the time you signed that plea agreement in the summer of 2009, had you been providing entirely truthful information to the government?
A. I had not been providing truthful information to the government at that point.
An article published in the Henderson Times-News on March 3, 2010, titled “CEP Fraud Case Takes a Twist,” reported that during Noel’s trial, Alex’s father testified that Alex told him he was proud of what he did in assisting the FBI and seeing the search warrants executed. Proud? Of what could Alex have possibly been proud? How could Alex be proud, while knowing that his deceptions and diversions of assets were still in play? Can assisting in bringing a fraudster to justice serve as a source of pride, while, at the same time, one continues to be a fraudster? Could it be the pride came from the game of playing both ends from the middle?
As Alex testified succinctly, “I had worked out a plan.”
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
Compare and contrast Alex’s words from his sentencing below, to his testimony we have just read.
And it was never my intent to lose anyone’s money or divert anyone’s money or scheme anyone out of anything.
Can Alex’s statement above be reconciled with his continuing to keep assets that did not belong to him?
Can that same statement be reconciled with his continuing deception of the FBI?
Could it be that in Alex’s world, the statement and his actions were not mutually exclusive?
Explain.
What questions would you pose to Alex at this point?
CONTENT – CONTEXT APPLICATION
The owner–operator of a home building company pled guilty in federal mortgage fraud case. Eleven individuals had previously pled guilty for their involvement. Those eleven people included other builders, lawyers, a loan officer, a real estate agent, a paralegal and a notary public. In the case, involving expensive subdivisions, individuals would purchase the house from the builder at one price. The next step involved arranging for buyers for the property at a higher price. Finally, deception was involved in getting the mortgages to a higher level. The inflated prices ranged from $200,000 to $500,000.
With regard to the twelve individuals (who pled guilty) referenced in the above: how would a network of collaborating fraudsters develop?
If we were to frame the concept of fraud as a virus, how would it spread from one individual to another in order to form this network?
Could it be that others exposed to the metaphorical
virus (the opportunity to participate in the scheme for personal gain) had a moral resistance to infection? If so, why are some susceptible and others resistant?
What questions would you pose to this individual?
CHAPTER SIX
HE LOOKED INTO A POOL
HE FELL IN LOVE HE WASTED AWAY
NAVIGATION POINT AND HEADING At this time, we want to back up just a bit and examine still another tributary and its subsequent flow into the larger stream of lies. The setting is February 2010. The location is federal court in Asheville, North Carolina. The trial for Alex’s partner, Bryan Noel, is set to begin. Alex is slated to testify as to their criminal activities. Alex’s first deal with the federal prosecutor has been taken off of the table because of their discovery of Alex’s continued deception and theft.
AND THE DECEPTION BAND PLAYED ON
In his subsequent testimony, Alex articulated his continued machinations after his initial meeting with the FBI in addition to his providing similar, false information in his testimony in previous civil proceedings:
Q. Mr. Klosek, I think when we left off at lunch we were talking about your original plea agreement and your cooperation under that agreement. Do you remember that?
A. Yes, I do.
Q. And I think you testified that you were not being truthful with the government under your terms of your plea agreement.
A. That is correct.
Q. Let me show you Government Exhibit 35X, which is already in evidence. Do you remember that e-mail?
A. Yes, I do.
Q. I think you testified before lunch that you were sending this e-mail under the direction of the FBI; is that correct?
A. Yes.
Q. And the direction that the FBI was giving you at that time was based on what?
A. Based on the information I had provided.
Q. And had you provided accurate information at that point?
A. No, I had not.
Q. Did the FBI know that at that point?
A. No, they did not.
Q. Now, did there come a point at which your false statements to the government became known?
A. Yes, there was.