by Rabon, Don
Alex had testified that they did meet and fabricate a story for the FBI (positive). Alex’s father contented such a meeting did not take place (negative), inferring Alex was either mistaken in his testimony or deceptive—Polarity 101.
THE ISSUE REGARDING SELLING STOCKS
Let’s focus our inquiry with the senior Klosek’s revelation that he had traded stocks for Certified Estate Planners. How did he come to be in a position to do so? Did Alex approach his father, and if so, for what reason? There are a number of possibilities we can formulate for consideration:
In the first scenario, we can postulate that Alex went to his father with the idea of offering him the opportunity to buy and sell stocks with the investors’ money in order to give his father something to do.
In our second theory, Alex’s stock trading activities were going well, but he wanted them to do even better, so he brought in his father, with his decades of experience, to increase the gains even more.
The third case could be that Alex’s stock selling endeavors were producing negative results, and Alex brought in his father to bail him out and get the project back on course.
In the last setting, Alex’s father came to him and asked to be allowed to buy and sell stocks with the money investors had entrusted to Certified Estate Planners.
In his testimony, Alex provided an answer to our inquiry as to how the elder Klosek became involved:
Q. Did you seek any help with regard to the AmeriTrade account when you started sustaining trading losses?
A. Yes, I did.
Q. Whose help did you seek?
A. I went to seek the help of my father, who had traded stocks for much longer than I had, to see if there was something he could do with that account to maybe turn it around.
Q. Did he try?
A. He did.
Q. How did that work out?
A. I do not think that was successful. Initially it was, but with the ultimate result it was not successful.
Q. Were monies from the Carolina First loan that were traded lost?
A. Yes, they were.
Q. How much?
A. I don’t know the exact figures, but I would approximate somewhere around $200,000.
So, we learn that it was Alex who initiated the process that resulted in his father trying his hand at trading stocks.
Regardless of the circumstance in which the senior Klosek began to trade, the relationship between father and son would seemingly, at a minimum, had to have been civil. In any case, Alex’s father was, at that point, on board and performing Certified Estate Planners stock transactions for his son.
THE SOURCE OF ALEX’S STOCK TRADING ENDEAVORS
Back tracking a bit to regain perspective, we wonder, “How did Alex come to be responsible for trading stocks for Certified Estate Planners?” When Alex went to work for CEP in 2001, he had no stock trading experience. He had developed a stock trading program in college but had never tested the system. After the attacks of September 11, 2001, Alex “took over the management of Bryan’s accounts because” he “told him about his ‘stock trading system.’”
What do we know? The September 11 attacks produced an adverse effect on the stock market. Alex “told” Bryan about his untested stock trading system. “Told” means “to make known by speech or writing (a fact, news, information, etc.); communicate” (Dictionary.com). In one case, Bryan could have asked Alex, “Say, would you happen to have a stock trading program that you developed in college?” More likely, Alex may have initiated the idea when he “told” him about his system. In any case, Alex “took over” the “management of Bryan’s accounts because . . .” “Because” is an explanatory term. An explanatory term is used to give the reason for or cause. It allows for the explanation of cause and effect.
The reason why Alex took over the management of Bryan’s stock accounts was “because” he had told Bryan about his system. After Alex had made the information known, Bryan made the decision to turn the management of his own stock accounts over to Alex. Again referencing to the “best interest principle,” Bryan now believed it was in his best interest to do so. This undertaking would be the first instance that “real money” would have been utilized in Alex’s college-developed, stock trading system.
In his testimony, Alex reported, “In early 2002, Bryan was impressed with the results and thought it could be offered to clients of CEP.” Apparently, the results of Alex’s stock trading activities from late 2001 to early 2002 were positive as determined by the revelation that “Bryan was impressed” and “thought it could be offered to clients of CEP.” Consequently, Alex testified, the clients of CEP were told “that their money would be invested into the stock market.”
Alex testified that his stock trading continued to produce until June of 2002, at which point the investments started to result in losses. The investors were not informed that they were losing money. Alex prepared quarterly reports keeping the investors “up to date” with false information. During the trial, in an irony of ironies, Alex disclosed that he was sending falsified client reports to his partner, Bryan Noel, regarding the status of his personal investment, as he too was a client.
Q. Well, we’ll come to that. How was the trading going in 2003?
A. It was not going well.
Q. What do you mean?
A. There were trading losses that were being generated above the trading gains.
Q. So first quarter of 2003, were there net gains or net losses in the trading accounts for Pinnacle?
A. I do not recall the exact figures, but most quarters during that time frame had more net losses than net gains.
Q. During 2003, was Mr. Noel aware of the trading losses?
A. No, he was not.
Q. Why not?
A. I had not made him aware of those losses.
Q. Had you done more than simply not make him aware?
A. Yes.
Q. And what’s that?
A. I had continued to send out client reports showing rates of return that were positive.
Q. And how were those client reports sent out throughout 2003?
A. They were sent out via the Postal Service.
Q. Now, during 2003, were you meeting with anybody with regard to your trading progress?
A. Yes, I was.
Q. Who would you meet with?
A. I would meet with Bryan and —
Q. How — I’m sorry. Go ahead.
A. I would meet with Bryan and update him with trading progress.
Q. How frequently were you meeting with him in 2003?
A. On a weekly basis.
Q. And during these meetings, were you providing Mr. Noel with truthful information about how the trading was going?
A. I was not.
Q. What do you mean by that?
A. I was not telling him that there were trading losses being generated.
Q. Let me show you Government Exhibit 45B, which is not yet in evidence, and ask you if you recognize it.
A. Yes, I do.
Q. What is that?
A. This is a client account statement for Wild Kingdom
Trust.
Q. And how do you recognize it?
A. This would have been among those prepared during that time, with figures that I used.
Q. You mentioned that this is for Wild Kingdom Trust?
A. Yes.
Q. And what’s the date on this document?
A. The date is December 31st, 2002.
Q. So for what time period is this account statement?
A. This would have been the fourth quarter of 2002.
Q. And who is Wild Kingdom Investment Trust?
A. That was Bryan Noel’s irrevocable trust.
Q. Well, why was he receiving a client account statement in late 2002?
Q. And how much had he invested?
A. He had invested approximately 10 to 15,000 initially, and then there were subsequent additions to that during the course of 2002.
Q. So as of the end of 2002, what does this client report reflect was the opening balance on Mr. Noel’s investment in Wild Kingdom Trust?
A. $46,729.61.
Q. Now, there’s a column that says “performance”; is that correct?
A. There is a column for that. And that performance figure is not correct.
Q. It’s not correct?
A. No, it is not.
Q. What do you mean by that?
A. The interest earned would not have been that amount.
Q. Would it have been more or less?
A. It would have been less.
Q. Would it have been positive or negative?
A. It could very well have been negative at that point.
Q. Did you send this to Mr. Noel?
A. Yes.
Q. Why did you send this false account statement to Mr. Noel?
A. Because all clients that had funds invested in Pinnacle got account statements during the final quarter of 2002, and Bryan Noel did have money invested in Pinnacle.
Q. Well, why didn’t you tell him the truth about how his account was doing?
A. I was terrified to tell him about what was really going on for fear of the consequences of losing my position.
Q. Let me show you Government Exhibit 45C. Do you recognize that document?
A. Yes, I do.
Q. What is it?
A. This is the account statement for Wild Kingdom Trust for March 31st, 2003.
Q. And how do you recognize it?
A. This would have been a statement that I had prepared with the figures that were being used at that time.
Q. What’s the date on this report?
A. March 31st, 2003.
Q. What time period did this report cover?
A. The first quarter of 2003.
Q. See the Performance column?
A. Yes, I do.
Q. Does it show that the performance has been positive or negative?
A. It shows it as being positive.
Q. Was that accurate?
A. That was not accurate.
Q. Did you continue to send out false account statements to Mr. Noel for 2003?
A. Yes, I did.
Q. And throughout 2003, did you continue to send false account statements to all of the Pinnacle clients?
A. Yes, I did.
Q. And throughout 2003 up through the end of November, were you doing this on your own?
A. Yes, I was.
Alex’s relationship with his father is one tributary, and Alex’s relationship with his partner is still another tributary. A commonality within the two relational tributaries is Alex.
Alex, in his relationship with his partner as shown by his testimony, was willing to manipulate things—the investor financial reports, for example. Additionally, Alex was willing to manipulate people—he concealed from Noel the continual investment losses. Additionally, he deceived the FBI with regard to the extent of Noel’s knowledge.
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
If Alex was willing to manipulate all that he did in his relationship with his partner, to what extent might he do so in his relationship with others, to include:Clients,
Federal prosecutors
Representatives from the Federal Bureau of Investigation
His father
Others?
What questions would you pose to Alex at this point?
CONTENT – CONTEXT APPLICATION
An office manager and bookkeeper reached a plea deal with federal prosecutors regarding charges to include wire fraud and filing a false tax return. The bookkeeper reportedly took between $120,000 and $200,000 from the employer. The investigation was conducted by the Internal Revenue Service Criminal Investigation Division. The attorney for the bookkeeper described her as a “decent, lovely, wonderful person who cooperated completely with the government.”
How do the descriptors decent, lovely, wonderful relate to the referenced fraud and the filing of a false tax return?
If the descriptors had been polar opposites—decadent, ugly, awful—would they have been factors to consider toward a different outcome?
What questions would you pose to this individual?
CHAPTER EIGHT
NO LONGER AT LIFE’S HELM
INTO THE CITY OF WOES
There is a tide in the affairs of men
Which taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
—WILLIAM SHAKESPEARE, JULIUS CAESAR, ACT IV, SCENE III
NAVIGATION POINT AND HEADING Now that Alex had pled guilty, the irony of ironies would spring forth: Alex—who in his undertakings to deceive, manipulate and control the resources and thus adversely distress the lives of so many people—would now find his own life in the hands of others. In that, Alex had abdicated control of his own destiny. Those within the federal office of probation would, through a complex maze of guidelines, evaluations, regulations, rationalizations and subsequent interpretations, place their hands on the ship’s wheel of Alex’s life.
All of these undertakings are designed for making a pre-sentencing recommendation to the judge, regarding Alex’s punishment. For this voyage, others would set the sails, determine the destination and chart the course. Alex would become nothing more than cargo, to be off-loaded somewhere and for so long a time. This process would be the result of a ship’s manifest, into which Alex would have no voice. In Alex’s young life, the ship was going out with the rising tide and he was, for all practical purposes, tied to the mast.
What must it be like to know you no longer are the captain of your own fate? In Edgar Allen Poe’s, “A Descent into the Maelström,” there is an account of a man caught in an awesome whirlpool. His goal was to avoid being driven into the bottom of the whirlpool and perish. He desperately noted all that was going on around him. Like Alex, he formulated a plan. In his narrative he noted, “. . . that as a general rule, the larger the bodies were, the more rapid their descent.” Additionally, he observed that “. . . a cylinder, swimming in a vortex, offered more resistance to its suction, and was drawn in with greater difficulty than an equally bulky body, of any form whatever.” Continuing, he explained, “I no longer hesitated what to do. I resolved to lash myself securely to the water cask upon which I now held, to cut it loose from the counter, and to throw myself with it into the water.” Alex had endeavored to lash himself to the strategy of his deception with regard to Bryan’s knowledge regarding the false reports. After all, as he said, “It was easier.” The plan devised by the character in Poe’s story saved his life. Alex’s plan had not been nearly so successful.
Alex, at this time, is most certainly caught in the whirlpool of the pre-sentencing, determination functioning of the federal courts. In the cargo-weighing operation of the United States courts, how large a body would Alex’s machinations turn out to be? How rapid would be his descent?
The pre-sentencing, job-task responsibilities of the assigned probation officer are intricate in the extreme. A search of the United States Courts’ website shows over fifty pages containing a list of various documents addressing the complexities. Additionally, at the website
we find:
“The U.S. Probation and Pretrial Services System carries out probation and pretrial services functions in the U.S. district courts. Through its officers and other employees, the system works to make the criminal justice process effective and the public safe.
The system’s mission reflects its dedication to serve the community, the courts, and the people who come before the courts. The system’s Charter for Excellence states the shared professional identity, goals, and values of probation and pretrial services officers”.
The probation officer’s investigative protocol and subsequent finding are steered by an established set of ethical guidelines. The United States Probation and Pretrial Services’ “Charter for Excellence” states the following:
“We are a unique profession.
Our profession is distinguished by the unique combination of:
A multidimensional knowledge base in law and human behavior;
A mix of skills in investigation, communication, and analysis;
A capacity to provide services and interventions from pretrial release through post-conviction supervision;
A position of impartiality within the criminal justice system; and
A responsibility to positively impact the community and the lives of victims, defendants, and offenders.”
The Federal Sentencing Guidelines Manual contains the following:
“Authority: The United States Sentencing Commission (“Commission”) is an independent agency in the judicial branch composed of seven voting and two non-voting, ex officio members. Its principal purpose is to establish sentencing policies and practices for the federal criminal justice system that will assure the ends of justice by promulgating detailed guidelines prescribing the appropriate sentences for offenders convicted of federal crimes.