An Endless Stream of Lies (3 page)

Noel is separately charged in counts two through twenty-six with 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

1. 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?
   
2. Why would Alex continue to deceive and divert resources after having made a deal with the federal prosecutor?
   
3. Why would Alex, a highly intelligent, educated individual, involve himself in a situation that he knew could potentially have profound, adverse consequences to his life?
   
4. What questions could have been asked of Alex on the day he first met with federal authorities?
   
5. At what point would someone come to trust an individual who is an admitted fraudster?
   
6. 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.

1. What might be the commonalities of circumstances that we have reviewed in Alex’s circumstance and the ex-fireman?
   
2. What might be the differences of circumstances between the two?
   
3. How does the dynamic of trust others (clients, partner, federal authorities) placed in Alex factor into the entire circumstance?
   
4. How does the dynamic of trust others (fire department and place of employment) placed in the ex-fireman factor into the entire circumstance?
   
5. What questions would you pose to this individual?
   

CHAPTER TWO

THE SEARCH FOR THE SOURCE OF FRAUDSTER

Time is a sort of river of passing events, and strong is its current; no sooner is a thing brought to sight than it is swept by and another takes its place, and this too will be swept away.

—
MARCUS AURELIUS

NAVIGATION POINT AND HEADING
Nothing happens in a vacuum. There is no coincidence in life. Events, like rivers, have a beginning—a starting point from which there is an increasing flow toward the middle and onward to a precise finality. Identifying the end of the river or the event is not especially difficult. It is discovering the beginning that proves to be most challenging. Where exactly does the river begin? Likewise, at what precise point did Alex launch on his voyage into the abyss? More importantly perhaps is “Why?”

WHERE DID IT BEGIN – WHERE IS THE SOURCE?

The beginning of a river is known as the “source.” In the 1800s, there was a great undertaking to find the source of the Nile. A prize was offered for the explorer who made the discovery. Some of the famous explorers participating in the quest were Richard Burton, John Hanning Speke, Sir Samuel White Baker, Henry Morton Stanley, James Augustus Grant and Dr. David Livingstone. For their times, the task was much more daunting than what we might think of today with satellite technology allowing for a look at the world from an all-encompassing perspective. There was, and continues to be today, a complex, geographical set of circumstances that made the search to find the beginning of the Nile no easy undertaking. With regard to Alex, our search for the headwaters as the source of his fraudulent machinations is a similar challenge. In order to work our way back up river to the source, we have to begin with the first step.

IT IS A LONG WAY BACK

In the beginning of our exploration, we will utilize as our map the “
Complaint For Permanent Injunction And For Other Relief
Case 1:07-cv-00306, filed September 24, 2007,” in The United States District Court for the Western District of North Carolina. The complaint was filed by the United States Department of Justice. As you read through the complaint, you will gain an appreciation for the complexity of investigating and prosecuting crimes of this nature. Concurrently, gain and maintain an appreciation for those responsible for the investigation and prosecution thereof.

As we progress through this and the subsequent chapters, we will incorporate other sources, including Alex’s own testimony, to gain understanding.

Step by step, throughout the text we will endeavor to trace back through Alex’s course of activities, to examine what transpired. Along our way, we will discover specific junctions—individuals coming together, forming companies, advertising, meeting with perspective clients, gaining their trust, taking their money and using it for their own purposes. Each of these junctions serves as an additional branch flowing into the larger stream of Alex’s life. Like any explorer, our collective goal is to “know” and ultimately, “understand.”
Knowing
tells us
what
.
Understanding
tells us
why
. In this case also, we want to know “when” and “how” the seemingly still waters of Alex’s life took on a destructive undercurrent that did, in fact, run treacherous and deep.

The complaint discloses:

Alex had been preparing tax returns since 1999 (49). He was “neither a licensed nor registered tax return preparer” but rather what is termed “an unenrolled tax return preparer” (12).

In 1999, Alex’s co-conspirator, Brian Noel, incorporated Certified Estate Planners, Inc. The company was designed to allow him to sell trusts. Brian was the president of Certified Estate Planners, Inc. (7).

NOTE
:
“What Does Trust Mean?

A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. The assets held in the trust can include, but are not limited to, a business, investment assets, cash and life
insurance policies
“ (
www.investopedia.com
)

In September, 1999, Noel founded Pinnacle Advisors, LLC. “Pinnacle Advisors was set up as a trustee company to provide trustee services (i.e., managing assets, securities, annuities, insurance contracts, etc.) for the irrevocable trusts of Certified Estate Planners, Inc.’s customers” (14).

NOTE
:
“What Does Irrevocable Trust Mean?

A trust that can’t be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust.

The main reason for setting up an irrevocable trust is for estate and tax considerations. The benefit of this type of trust for estate assets is that it removes all incidents of ownership, effectively removing the trust’s assets from the grantor’s taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets. While the tax rules will vary between jurisdictions, in most cases, the grantor can’t receive these benefits if he or she is the trustee of the trust.” (www.investopedia.com)

Alex “began working with Noel in May, 2000” (11). The merging of these two streams—Alex and Noel—marks a significant connection. Pause here a moment, look around and contemplate. Without Alex, the possibility of the fraudulent activity involving the same victims occurring still existed. But, what could have been the course of events in Alex’s life had he not met Noel and subsequently began to work with him? How differently would the current of his life have flowed had these two streams never intersected? Would it have flowed differently but reached the same destination?

TWO DROPS OF WATER

That day in May, 2000, when Alex began working with Noel was not the source of the fraud but rather a contributing factor, making it possible to happen. In Henderson County, North Carolina, Highway 64 East runs from Hendersonville to Bat Cave. Along the way, it passes through the picturesque, apple-farming community of Edneyville.

There, by the roadside, the traveler will find a sign indicating the point of the eastern continental divide. To the east of the sign, rain water will flow to the Atlantic Ocean. West of the sign, rain water will find its way to the Gulf of Mexico. Whether the rain falls to the east or the west of the divide is determined by a set of variables over which the drops have no control. These variables include but are not limited to wind, humidity, gravity, temperature, cloud type and barometric pressure. It is possible for two raindrops to begin their fall from the cloud to earth side by side; however, due to the actions of the variables, one drop falls east of the divide and the other falls to the west. While on the journeys to their respective destinations, one drop could serve as part of a lifesaving drink of water, while the other drop could be part of the water that fills the lungs of a drowning victim.

That day in May, 2000, Alex was the drop of water leaving the cloud. What were the factors which would ultimately place him on the deceptive side of the divide? How did he come to land on the wrong side of the divide between right and wrong that carried him downward to fraud, deception and ultimately—to the abyss?

In Shakespeare’s
Hamlet
, scene III, act III, the concept of small events resulting in dire consequences is presented when Rosencrantz speaks:

“To whose huge spokes ten thousand lesser things
Are mortised and adjoin’d; which, when it falls,
Each small annexment, petty consequence,
Attends the boisterous ruin. Never alone
Did the King sigh, but with a general groan.”

When Alex met Noel and subsequently began working with him, it was—in the daily course of human interactions—a seemingly “lesser thing.” Such connections happen multiple times on a daily basis. It is possible that on a number of levels—personally, socially and economically—those who were previously strangers can form a relationship, go forth and, through their financial undertakings, legitimately benefit themselves and others. For example, somewhere along the line Ben met Jerry, and many of us enjoy their ice cream. Mr. Harley joined Mr. Davidson, and it made for the world’s best motorcycle.

But when Alex met Noel, a prosperous and legitimate outcome was not to be the case. From this meeting, the downstream consequences were indeed “boisterous ruin.” At the point when they met for the first time, the over one hundred people destined to be washed over by the “annexment” of one small stream uniting with another did not cry out with a “general groan.” Their lamentations would only be heard years later. And while they were affected collectively, they individually felt the pain personally. Like a tsunami pouring over hundreds of people at once, they all would be drowned individually. Ultimately, Alex, in his own manner, would be drowned also.

On the day Alex and Noel met, none of the destined-to-be victims of their fraud felt as if someone had walked over their grave. Were it the case that they all futilely consulted a horoscope that day, they would have found no financial caution in the stars applying to a multitude of different birthdays. No, it was but one of a multitude of “lesser things” that, in the aggregate, proved to be disastrous. The companies were formed and the positions were appointed—all lesser tributaries leading to tribulation. These tributaries had names such as Certified Estate Planners, Silverado Financial Group, Pinnacle Fiduciary and Trust, International Titanium Corporation, and International Mineral Exchange.

“In 2000, Noel was the subject of an IRS audit. During this audit, the revenue agent informed Noel that the trust he was using personally was not valid and the agent made substantial adjustments to his income taxes. During the audit, Noel stated that he now understood that the trust was invalid for income tax purposes. After the audit, Noel continued to market and create substantially similar ‘trusts’ for his customers” (45).

“Alex and Noel founded the company Silverado Financial Group, Inc. in February 2001. The purpose of the company was to facilitate the preparation of returns for the trust customers. They founded Silverado as equal partners. Alex was listed as the registered agent for Silverado (11). Alex conducted business as Silverado while he prepared tax returns for the trust customers” (17).

“In March 2001, Noel and Alex formed Pinnacle Fiduciary and Trust as an ‘irrevocable’ trust for the purpose of managing all of the clients’ assets. Alex served as the trustee for Pinnacle Fiduciary and Trust” (15).

“On September 5, 2001, Alex became the registered agent of Certified Estate Planners, Inc. (11). On that same day Alex became the registered agent for Pinnacle Advisors and began performing trustee services and preparing income-tax returns for customers” (14).

“Alex’s activities included preparing customers’ trust returns and managing customer’s investments by transferring the funds to various accounts and conducting short-term stock trades. Alex was neither a licensed nor a registered tax return preparer” (12).

“Alex was operating as an unlicensed broker and was not registered with the Securities Exchange Commission to sell securities. Neither was Alex a Certified Financial Planner” (13).

“In 2002 the IRS began audits of Alex and Noel’s customers who had purchased “irrevocable living trusts” (28). “After this investigation commenced, they ceased selling the ‘irrevocable living trusts.’ That same year they began selling ‘revocable asset management trusts’” (29). “Alex and Noel had marketed the revocable asset management trusts to their customers as a way to avoid taxes on their investments” (30).

Note
:
“What Does Revocable Trust Mean?

“A trust whereby provisions can be altered or canceled dependent on the grantor. During the life of the trust,
income
earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. Also referred to as a “revocable living trust”. This type of agreement provides flexibility and income to the living grantor; he or she is able to adjust the provisions of the
trust
and earn income, all the while knowing that the estate will be transferred upon death.” (
www.investopedia.com
)

“In 2002, Noel received a letter from an investor’s attorney detailing the invalidity of the trust and threatening suit against Noel and Certified Estate Planners, Inc. Specifically, the letter detailed that the customers were not properly advised about the consequences of the transfer of assets to the trust, nor was the trust an appropriate estate planning, income tax, or asset protection strategy. Noel showed the letter to an attorney” (46).

“After receiving and reading the letter Noel had shown to him, the attorney warned Noel about the trusts he was promoting. The letter caused the attorney to question the validity of the trusts. As a result, the attorney conducted his own research on the validity of the trusts and was unable to find any legal or tax information to support these types of trusts. The attorney informed Noel of that finding in writing” (47).