Crossing the Cult Page 2

  “Good, and thank you … McGee. I wish I could just ignore this, but sometime this will blow up if serious changes aren’t made. I am hoping to get in head of the problems.

  Devon is sitting in a back booth when Caitlin comes into the restaurant. McGee gave her a good description of the young man; so, she is able to pick him out in a couple of minutes. Both of them are strictly punctual and no-nonsense workers; so, they take to each other immediately.

  “Devon, I presume?” Caitlin says.

  “And you’re Caitlin, I presume?” he says.

  “I am.”

  She slides into the booth, facing him.

  “Have you eaten here before?” she asks.

  “Never. Is it any good? I’m starving.”

  “They make a mean burger and a great pastrami on rye.”

  “Pastrami sounds great. What’ll you have?”

  “I have to watch my girlish figure; so, I have to choke down another salad.”

  They laugh and eat their lunches before getting down to business.

  Passing on dessert, Caitlin begins the business conversation while Devon has a sorbet combo.

  “I got the general idea from McGee about what’s going on. Do you have records with you to get my accounting people going?”

  “I didn’t think it would be safe; so, I brought a thumb drive. I can tell you that it’s not complete, and there is still plenty of work to do. Here.”

  He looks around to be sure they are not being watched and slides the USB device and a burner phone under the table to her.

  She nods and slips the two items into her jacket pocket.

  “I’ll get back to you. May take a couple of days. Have your burner with you all the time—okay?”

  “I will. Have a nice day.”

  Caitlin and her executive assistant, Rosalie Hertel, and David Harger, the IT officer for McGee & Associates, and his two brilliant nerds start on the project as soon as she gets back to the office.

  David hacks into the BBH investment accounts with such ease that it would be frightening to their religious young client if he knew the details.

  Once he is in, he asks Caitlin, “Where should we start?”

  “Since greenmail is a practice that mainly involves mergers and acquisitions, we should probably start there.”

  “I agree,” she says, and four computers begin to buzz.

  Greenmail is named for blackmail and in the stock investment form of blackmail, money gets paid to an aggressor—The Only True Church of Christ, in this instance—by the victim corporation to halt acts of aggression being perpetrated against it. The accounting reveals very early on that the church has no intention of taking over other corporations on any wholesale basis. In fact, the McGee investigators only find four instances of actual takeover, and none of them were profitable. In the other two hundred eighty-six aggressive takeover attempts, the church—as corporate raider—yielded to the corporations, which retained control of their companies. On average, the church obtained greenmail payments—after all sales were finalized—of sixty-four million dollars, with a low of twenty-two million and a high of one hundred forty-six million dollars going into the investment accounts of The Only True Church of Christ annually. The investigators spend five full business days accumulating the evidence and compile it into a thick printout book and save the damning data on three thumb drives—two for Devon Carlisle and one for McGee & Associates.

  Richard Crenshaw asks the obvious question, “This has got to be illegal, is this not? Maybe we need to get our lawyers involved to protect ourselves and to give needed information to the client.”

  “I’ll get Nichols and Anderton on it. We use them pretty frequently on questions of legality when it comes to stock manipulation. Remember the Russian short sale attack on the stock exchanges a while back? We used them to gather the evidence. I am all in favor of the CYA approach of getting the lawyers involved,” Caitlin says.

  The following week, Devon joins Caitlin and Harger from McGee’s and Tom Anderton from the law firm for the legal aspects of what they have been working on. For security, they meet in Anderton’s office conference room. He has a laptop projection of a PowerPoint program of the pertinent legal points already up on the conference room screen when the others arrive.

  They all introduce themselves and get immediately down to the findings.

  Tom says, “You have found multiple legal irregularities. Some of the greenmail material is in a legal grey area and some is clearly illegal. All of the short sales are outright illegal, and they have been very artfully obfuscated in a mountain of data. I don’t know how long it would have been before all of this was discovered if Devon had not looked into it. That was good work, Devon.”

  Devon nods in acknowledgment but is none too enthusiastic about where all of this is headed.

  “So, a little legal tutorial for all of us. Let’s start with the greenmail issues with some history.

  “Paying greenmail became controversial in the eighties. Long before that, stock market critics viewed it as harmful to U.S. business interests and wanted it to be made criminal; but the courts were slow to act. The critics argued that greenmail is little more than a bribe, and bribes in the stock market are illegal. What produced progress was the litigation instituted by corporate shareholders. They protested the obvious: greenmail during takeover bids is frequently just a means of extorting profits. It wasn’t until well into the nineties that state legislatures began to take an interest. One of the examples—taught in law schools—is when a famous corporate raider used greenmail to try and take over Disney in 1984. He bought nearly six and a half percent of Disney stock before the corporation execs caught on. They almost immediately announced a nearly $400 million acquisition of their own stock to make the company less attractive and that stopped the takeover. The corporate raider gracefully accepted that he had failed and cried all the way to the bank to deposit his nearly $60 million profit.

  “Of course, that was a very expensive alternative for the Disney board, even with their vast resources. Then the stockholders weighed in. Later that same year, the stockholders sued the directors of the corporation and the corporate raider and won an injunction—one of the very few judgments which pointed the legal finger at greenmail practices themselves as constituting unjust enrichment. The poor raider had to return all but about twenty million dollars. Strange as it may seem, he was not all that upset at losing the suit. Disney got a wrist slap and had to promise not to do it again. There were those who charged that Disney’s caving in to greenmail was the equivalent of embezzlement by the directors and out-and-out blackmail by the corporate raiders.

  “Other states—including Ohio and Pennsylvania—came to view greenmail the same way the Disney judge did and passed stringent laws which required corporate raiders to return all of their greenmail profits. You may be surprised to learn that there are doubts about the constitutionality of such laws, and the issue has stagnated. The question of legality of greenmail remains far from settled.”

  “Caitlin and David and their people have found some pretty clear-cut instances of short sales which were never properly dealt with and stockholders and corporations took it in the shorts without any comeuppance so far. Can you tell us where we are with what has been learned about shorting by the church?” Devon asks.

  “Another tutorial is in order,” the attorney says. “First, a little lawyerly disclaimer. The evidence is incomplete with only a few days of work into the issues, and the legal requirements to prove illegality on the part of the SEC are quite complicated and stringent. With that caveat, here goes….

  “Short sales are legal, and short sellers are allowed to profit from price declines by replacing borrowed securities at a lower price. They are not allowed to profit from insider information. SEC rules are written to ensure that trades settle promptly, thereby reducing settlement failures. There is an SEC regulation called SHO which has quite tight requirements for short sales of borrowed securities. SHO require
s short sellers who fail to deliver securities after the legal and contractual settlement date to close out their position immediately. The exception to the SHO rule is for sellers who qualify as bona fide market makers for a limited amount of extra time to close out—and none of the presently investigated short sales appear to qualify.

  “My assistants and I have had the new SEC OCIE [Office of Compliance Inspections and Examinations] Risk Alerts reg books open to be sure that any and all of the trades we are studying do not constitute options trading that circumvent SEC short sale rules. From your work and ours, we found seventy-seven instances over the past twenty years of options trading that seemed to have been executed for that very purpose, which is illegal. Many only gave the impression of satisfying the OCIE SHO close out requirement. These suspect trades—in my opinion, in effect by evading the rules—are sham close-outs. The only reason I can see that they did not come to the attention of the NYSE MSD [Market Surveillance Division] agents of the exchange and the NYSE Regulation’s Enforcement Division is that they were so cleverly spaced over the decades with only a few a year, and none of them reaping huge profits by themselves. However, accumulatively, the profits garnered by The Only True Church of Christ totaled somewhere north of $3 billion. It isn’t my responsibility to report these crimes; but, in my opinion, someone should let the NYSE and the SEC see this evidence. I am pretty sure that the Regulations Enforcement Division and the FBI would take a serious interest.

  “There are some really worrisome ones that have been buried over the years, including truly abusive naked short sales—out-and-out securities fraud in which stocks were sold without ever being borrowed and without any apparent effort to borrow on the part of the church or its surrogates. We see quite a few short-and-distort false information to drive down stock prices artificially, with fairly large losses by some of the Forbes 500 and DOW-leading companies getting bilked.

  “Sometimes, serious attackers create misinformation that looks superficially like intra-company communications that hint at a severe bear market for their stocks because of expected failing year-end mandatory reports. I’m not sure we can prove that the church and its surrogates really did that. If it were true, we would be looking at serious and pretty widespread insider trading. If the church has been responsible for what amounts to an advertising whisper campaign which proves to be false, it is a felony with multiple counts.

  “There are some rather obvious instances of trading exclusively in hard-to-borrow securities and threshold list securities; some trading in near-term listed options on such securities, and some large short positions in hard-toborrow securities or threshold list securities. Only a few of the transactions amount to large failures to deliver positions in accounts, and most of them involve multiple securities. At last count we have identified at least sixty-two counts of continuous failure to deliver positions, a few counts of using buy-writes, married puts, deep in-the-money buy-writes or married puts, to satisfy falsely the close-out requirement. Our internet investigations at the law firm have revealed a regular practice of internet “pump and dump” schemes, trading in customizable FLEX options in hard-to-borrow securities and/or threshold list securities—including more than a few with very short-term FLEX options. We can identify collusion among traders to make trades only to take advantage of the option mispricing. Many of the names are outright phonies, and that should have been a red-flag raiser.

  “I know that a lot of this is pretty arcane, but the long and the short of it is that several somebodies working for—or in cahoots with—the church are running a long-standing criminal enterprise; and that is the most important set of crimes because it allows the government to raise RICO statute issues and to seek up to life sentences for people involved in the ongoing criminal conspiracy. It’s up to you what you do with the information you have, but our advice is that you distance yourselves from that very rich church as far as you can and as soon as you can.”

  Devon Carlisle feels as if he has been poleaxed and feels very sick. His spiritual, moral, ethical, and social core is under attack. Everything he has believed in since adolescence is crumbling away. With the attack on his faith, for the first time in his short but clear-cut life, he is at a loss for what to do.

  Chapter Four

  2015

  Devon’s conscience shifted from hot indignation, to deep sympathy, to a sort of drifting ennui for his church and for his belief in the church. For the better part of two years he vacillates. At times—as he delves into the church’s accounts at BB&H—he takes the stance that his beloved Prophet, the Council of Prophets, and the ardently faithful believers in Heart of Eden and around the world are the victims of some nefarious criminal conspiracy. At other—more sober times—he is beset with the niggling notion that the church’s leaders are, in fact, the perpetrators; and he strives to keep such thoughts at bay. Most of the time he goes about his work in a minor mental fog, unable to decide what to do.

  No decision affords real release from his tension or a satisfactory solution: on the one hand, if he reports his findings to the SEC and the FBI as a good citizen of the United States should, he will bring shame and unwanted negative attention on his family, the holy leaders of Christ’s true church, and destruction of all he holds sacred. On the other hand, if he lets things slide—and they are getting demonstrably worse—who is he? What is he?

  Devon is not so befogged by indecision that he is almost entirely inert. Literally the day after the fateful meeting with attorney Tom Anderton, Devon chooses a cautious wait-andsee course. He begins diverting some of his own funds on a regular basis into stocks and bonds with the help of a friend, Lindon Wright, a vice president of Merrill Lynch. An investment genius, Wright steers Devon on into a highly successful set of stock investments that take advantage of the increasing stock market indicators following the 2008 Great Recession. By 2015, Devon’s holdings have quietly increased to two million dollars in stocks and another million in REITs [Real Estate Investment Trusts]. He knows he needs the cushion, but exactly for what he is unsure.

  Events of early 2015 decide the matter for him. In that year, his father is called to fill the vacancy on the Council of Prophets when the elderly Winston Cartwright dies. Since joining The Only True Church of Christ in 2001, that honor is the crowning achievement of his otherwise humble life. Harold has done everything right and has been rewarded handsomely for his piety. His income has risen to $145,000 per year; the church moves him into a home twice the size of the one he and Martha and the four children have occupied since 2001; and, most importantly, he has taken on three more wives—a singular largesse from the church fathers. The Harold Carlisle nuclear family now numbers eighteen, and his extended family—including sons and daughters-in-law and grandchildren—numbers twenty-five.

  Of all of those close family members, the one Devon loves the most outside his wife, Katrina, is Ruth Miriam—his youngest sister, named for two Old Testament heroines. In 2015 Ruth turns thirteen. Becoming an adolescent creates problems for Ruth and eventually for the entire family. By some near-miracle of hormones or genetics, Ruth goes from a skinny, gangly, awkward child into a remarkably beautiful and physically mature teenager almost overnight, it seems to the family. She is still an innocent, giggly, vivacious, and difficult thirteen-year-old; but she now has the body of a voluptuous Mediterranean goddess and the face of an angel. Her peers suffer with pimples and painful shyness. Ruth has clear, almost translucent white skin. She has lustrous curly black hair that shines with highlights. The youthful child/woman turns heads wherever she goes.

  One of the heads she turns—unbeknownst to her—is that of Prophet Elias Hiram Richland, age sixty-eight. He is the financial director of the church, and the husband of four wives. Richland determines to make Ruth Miriam Carlisle his fifth—and, by far, the youngest—wife. Prophet Richland goes about his courtship quest in all of the correct ways. First, he seeks the permission of Prophet/President Erasmus Jessen who is quick to grant the privilege because Elia
s Richland is a miracle worker who regularly brings in wealth beyond the dreams of the Prophet/President when he first assumed the mantle of God’s true representative on earth. He would have been happy to grant his financial counselor almost anything because Prophet Richland achieves his economic miracles without Jessen ever having to bother with the arcane details of the process.

  Second, Richland obtains the permission to take on another wife from his first wife, Rebecca. That is only a pro forma requirement, since Elias is the patriarch and Rebecca only a wife. Obtaining permission from the other wives is not necessary. Third, he approaches Harold Carlisle—his co-prophet on the council—and asks for his blessing. He knows that Harold could harbor doubts about such a union for his beloved daughter; so, he sweetens the pot with the offer of interceding with the Prophet/President to grant Harold the right to take a new, younger wife as well. Harold has no real choice since he is junior to Elias on the council; and he gives in, albeit with some reluctance. Finally, in June when all permissions are in order and Ruth Miriam is three months past her thirteenth birthday; Elias Hiram Richland, age sixty-eight—august member of the church’s highest governing body—approaches beautiful and virginal early teenager Ruth Miriam Carlisle.

  The approach takes place after Sunday testifying and glorifying services.

  Ruth makes it easy and emboldens the older man. She flashes him a sunny smile as she does to everyone else she greets during the exodus from the chapel. He knows she has given him a personal signal.

  “My dear,” he says, “how lovely you look today.”

  “Oh, thank you,” the guileless girl responds and begins to float away into the crowd.

  He stops her with a gentle touch on her bare arm that she hardly notices but which enlivens him.

  “Ruth … isn’t it?”

  “Yes, sir,” she says with a mildly quizzical look on her face.

  “Oh, don’t call me ‘sir,’ please, just call me ‘brother,’ or maybe even ‘Elias’ which is my first name.”