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Seven years ago, David Novak cast his lot with this generation’s crop of robber barons, tax cheats, market manipulators and a host of other briefcase bandits. Novak holds their hands as they traverse the federal justice system, doing whatever he can to finagle the best deals possible. These days, though, the sentencing guidelines are so tight that the most he can usually muster for a client is a 15-percent sentence reduction for good behavior, a few months off for substance-abuse treatment, or a preferred prison, close to loved ones. But upon request, he’ll go so far as to drop his clients off at the prison gates.

By Shane Johnson

Since he launched into his now-booming line of work, Novak has found that the white-collar breed of criminal, by and large, doesn’t set out to pilfer any and everything not bolted down, as some would like to think. Instead, theirs is an insidious progression that starts out with cutting an innocent corner somewhere.

Of the thousand or so clients he’s served to date, there was one exception a few years back who proved that rule.

“There was no cutting of corners,” Novak says, because “it was never a square to begin with. They lived circular lives.”

“They” were a hundreds-strong pack of young and brash Wall Street wannabes under indictment for running a “boiler room,” the pump-and-dump stock scam made somewhat famous by the Hollywood film of the same name. Novak’s client, whom he likens to the film’s Ben Affleck character, was the ringleader.

“This guy was probably as close to sociopathic as I’ve ever seen,” Novak says.

The scam starts off with a falsified initial public offering. Then, slick-talking brokers drum up action on the worthless stock by cold-calling and cajoling unsuspecting investors across the country. By the time Grandma Mildred realizes she’s bought into a lame duck, the “brokerage house” has dumped the inflated shares and made off with the loot.

Novak’s client was held personally responsible for $296 million in losses. And to the bitter end, when he was sentenced to eight years, he didn’t think there was anything wrong with what he’d done.

People who bought Krispy Kreme lost a lot of money too, he rationalized to Novak.

After one exceptionally long day, leaving the lawyer’s office, Novak took Affleck’s alter ego to task. “If this was such a good deal, why didn’t you get your parents into it?” he asked.

Keeping seedy company: David Novak, white-collar-criminal consultant. Photo by: Chris Jameson

The client, who was quite close with his parents, didn’t appreciate Novak’s repartee. In fact, “I thought he was going to punch me,” Novak remembers.

But even scarier to Novak was that he saw a bit of himself in this client.

“To be real honest with you, it’s a very negatively seductive group of people to be around,” he says. And, so as not to tempt fate, Novak had to permanently scratch “the boiler room” contingent from his Rolodex.

See, what makes Novak so well-suited for the job is, as one current client puts it, he’s “been there, done that.” But unlike the soda-pop commercials, he crashed and burned.

When Whitey goes to prison, he usually “fishes in” harboring one of two misguided notions: He’ll be taken as a sex slave by some hulking, ethnic man, or he’ll coast through the stretch playing golf at a weekend resort for wayward paper pushers.

A significant part of Novak’s time is spent dispelling such myths for white-collar offenders queasy at the imminent prospect of federal prison. His clientele, mostly made up of high-stakes hucksters, may or may not include the likes of ImClone insider Sam Waksal, his domestic-diva crime partner Martha Stewart, and the blue-blooded plunderers at WorldCom, Tyco, Adelphia, Dynegy, Arthur Anderson, Global Crossing, Enron, and the list goes on. Confidentiality constraints prevent Novak from disclosing exactly who has commissioned his services, but he assures us he’s been called in on several high-profile cases. For his famous-cum-notorious clients, that confidentiality is a comforting reprieve from the scorn and scrutiny of outraged stockholders, pensioners and working stiffs.

For Novak, there was no manual on how to become a white-collar criminal consultant—he learned the trade firsthand. And in so doing, he was able to write the book, so to speak, on the U.S. government’s thriving “hospitality” industry. Downtime: A Guide to Federal Incarceration is Novak’s 169-page “how to” on doing time, drawn from his own experiences while serving a year-and-a-day sentence for mail fraud.

Before showing up to prison—wearing jeans and an Oxford shirt, no less—Novak had no idea what he was in for. His attorney was even more clueless, and exhorted Novak to write him a letter chronicling life on the inside so he could share it with future clients.

Therefore, with nothing but prison melodramas like Escape From Alcatraz and The Shawshank Redemption to go on, Novak fished into Eglin Federal Prison Camp in 1996. The minimum-security pen on the Florida Panhandle was once aptly coined “Club Fed” for its country-club-like ambiance. But that was the ’80s, Novak says. And it’s his aim to dash any persisting rumors that prisoners of privilege are shipped off to cushy sleepaway camps, only to emerge rested, tanned and trim.

“The myth is that because they’re not in a place with razor wire and gun towers, they’re playing bocce ball all day,” says Novak. “Minimum security, low security, medium security: Every federal prison is run by the exact same policies and procedures. The difference is whether or not there is perimeter security, because the people inside either do or do not pose a risk to the public.”

Make no mistake, corporate kingpins are in store for a series of rude awakenings once they land in the clink, says Novak. Before arriving at Eglin, he figured he’d be doing time with a more refined criminal element. That is to say, white-guy yuppies like him. But go figure. Novak’s “bunky” was a 34-year-old African-American crack dealer who’d spent half his life in a maximum-security penitentiary in Atlanta before earning his way into the prison camp.

“I expected to be surrounded by Caucasians, doctors, lawyers, Congresspeople,” Novak confesses. To his surprise, “Eighty percent of people in federal minimum security facilities, ‘Club Fed’ type facilities, are there as a result of the War on Drugs.”

And, he notes, most of them are nonwhite, with only about 1 percent of federal inmates serving time for white-collar offenses.

Any lingering doubts Novak had about Eglin’s authenticity were quashed when another convict was refused a furlough to attend his son’s funeral. That display of powerlessness cemented for him the fact that he’d been ostracized, found unworthy to walk the streets.

Novak tells his clients to find socially redemptive uses for themselves to ease the tension, and to kill time, while locked up. For him, it was tutoring younger inmates for their high-school equivalency exams. But anything more significant than that is hard to come by because, within the Federal Bureau of Prisons, advanced educational opportunities are virtually nil, which Novak feels is a shame. Novak thinks his clients’ talents could be put to better use rather than letting them languish.

“Take somebody like Sam Waksal, who is obviously a brilliant physician and researcher. . . . As opposed to have him mow the lawn or work in the laundry during the day, why don’t you have him indentured to the National Institutes of Health for 87 months?”

Under the looming threat of transfer to more restrictive digs, minimum-security inmates are fairly well deterred from random acts of violence. However, Novak reminds his charges: “If you break certain rules of etiquette within the four corners of inmate society, you’re going to get beat up.”

Those rules of etiquette form the cornerstone of Downtime. In short: Don’t rat, don’t cut in line, don’t reach at chow time lest you get stabbed with a fork, don’t ask what your buddy’s in for, don’t touch his stuff, don’t whine about how rough you have it because invariably he’s got it worse, pay your debts, and mind your business.

And the handbook has served Novak’s clients well. To date, not one has reported being assaulted while incarcerated.

And while no time is easy time, Novak says some fears are overblown. He learned as much his first day. After an hours-long intake process—some paperwork and a strip search—guards led Novak to a deserted 60-man dormitory, roughly the dimensions of the posh downtown loft he now calls home. It was a Friday afternoon, and most of the other convicts were out working their menial jobs at Eglin Air Force Base, the camp’s host and namesake. One straggler, a giant oak of a white man, affably introduced himself as Jim, then ran it down:

“You’re not going to be able to get to the commissary until next week, so here’s a pair of shower shoes, a toothbrush, some deodorant, soap and toothpaste. You just pay me back.”

Novak was thinking to himself, “‘Oh god, he wants me to be his bitch.’”

As it turned out, Jim wasn’t hankering for a pretty-boy cuddlebunny at all; he was just being kind. And since his 1997 release, Novak has been paying the favor forward—at a $165-an-hour premium, of course.

Before becoming an unwitting expert on the finer points of prison life, federal sentencing guidelines and the criminal mind, Novak was busy carving out an upper-middle-class niche for himself in the Pacific Northwest.

Six weeks shy of graduating, he dropped out of a prestigious Catholic high school in Connecticut, hooked up with a telecommunications firm and moved out West. Then, it was a yearlong jaunt around the globe before landing a position with Seattle-based Boeing Defense and Space. For five years there, Novak managed contracts with international governments and various branches of the U.S. military. One perk to be had at the world’s largest aircraft manufacturer was free flying lessons.

“I got bit bad by that bug and went out on my own,” Novak says.

By 1996, he was supplementing a semi-successful aviation company by assisting Microsoft’s development of flight simulation technology. For all outward appearances, things were looking up.

“It was at that point and time that I staged the aircraft accident and ended up going to prison,” Novak says, not mincing a word.

The airplane was insured for $80,000 and needed a $20,000 engine replaced. Novak just did the math. At first blink, he explains the impulse to cheat the insurance company as a “flight of stupidity,” motivated by greed. But, like many of his clients, Novak’s fall from grace was more nuanced than that.

Growing up the son of a career Marine Corps officer, Novak attended 13 different schools before opting for the workaday life. His tendency of trying to stack up to his peers at each new post, and the shame of dropping out of high school, left a pang in his gut to succeed at any cost.

“Because I moved around as much as I did . . . and chose to leave school and never went back and got credentialed, I think I always had a sense of inadequacy,” he explains. “So I was always attempting to outpace my peers. I simply could not allow myself to fail at anything. That was really my shortcoming, not being able to admit that this business isn’t working . . . and walk away.”

Today, Novak recognizes the trait in some of his clients.

“They put themselves under such pressure to perform that they often win Pyrrhic victories,” he says. “They might keep the company going, but in order to have done that they lied on an SEC quarterly report. Two years later, the company folds, everybody’s out of work, and they go to prison.”

In about a third of the cases he’s worked, including his own, Novak’s clients stand to lose much more than their dignity and freedom. They can also lose those closest to them.

Novak’s crime so disgraced his parents that they essentially disowned him.

“I brought tremendous shame to my parents,” he says, elaborating cautiously, “I broke their hearts, and they thought they taught me better.”

Chasing after the lost relationship caused Novak no small amount of anguish. And for that reason, as difficult as it can be to pull back, he advises his clients against pressing the issue with estranged friends and loved ones. “It’s up to the person who they hurt . . . to decide whether or not to open back up.”

On paper, it’s Novak’s astute understanding of federal sentencing guidelines, which most defense attorneys haven’t the time to keep abreast of, and his institutional knowledge of the Federal Bureau of Prisons that have won him his niche market. But his true knack is in relating to his clients.

Carolyn Ryberg, a corporate headhunter and interior designer living in the upper Midwest, hired Novak in February when the civil litigation that she and her husband were embroiled in started heading in a criminal direction. Ryberg is not at liberty to disclose the nature of the offenses, but the 35-year-old mother of two teenage daughters is growing more certain that she and her husband will soon be off to prison. Since he came on board with the defense, Novak has been a godsend, Ryberg says.

“White-collar offenses are what I like to call ‘affluenza,’ ” she says. “It’s an insidious disease that has struck right at the core, right at the heartland of America. It’s a dark road to walk, and David brings some light to it.

“He’s very candid. He does not pull punches. He does not suffer fools gladly. And he makes one really take ownership and responsibility of one’s actions.”

Ryberg credits Novak with helping her come to terms with a misguided value system, and she praises him for being the example she’ll need to endure prison if it comes to that. “I can really say I’ve had the honor and privilege of meeting a true genius with the passion of Gandhi.”

One of Novak’s biggest challenges—not so much with Ryberg—is to disabuse his clients of their hubris, making them realize by the time they go to prison that they are, in fact, criminals. At times, it’s been a hard sell.

Novak recalls being called on for one particularly high-profile case, which he bowed out of when it became clear the client wouldn’t benefit from his advice.

“I found myself in a conference room surrounded by people best described as sycophants,” he says. “Everybody in this room was telling the potential defendant what they wanted to hear.”

Namely, the defense team insisted to the client that a jury would never convict. “And my comment was, ‘People hate you.’

“There’s a very peculiar thing in American society: We like people who achieve a certain level of success. But there’s this invisible line, and if you cross that line, à la Bill Gates, we love ripping you apart. And I just knew that this person had crossed that line.”

Novak was adamant that the person dive at a plea agreement offered by the prosecution, which would have guaranteed probation, a fine and no jail time. But in the end, the case went to trial, the jury did convict, and the defendant now awaits sentencing.

In response to the latest scourge of corporate crime, in 2002 Congress passed, and President George W. Bush signed into law, harsher guidelines that double and quadruple sentences for some white-collar offenses. With so much more at stake, and given federal prosecutors’ indomitable penchant for winning, Novak advises his clients to avoid trial like the plague.

The federal government wins more than 97 percent of the criminal jury trials it participates in, which is “statistically impossible in a fair system,” Novak points out.

If a client is still unconvinced, and insists on committing legal suicide, Novak drills them on what he calls the trial tax.

“If you have the audacity to go to trial with the federal government, and you are found guilty, and statistically you will be, you’ll receive a sentence 300 percent longer than if you had accepted the plea that was offered.”

Novak was having a difficult time illustrating this point to a client in Houston. So, as they were walking back to the federal courthouse after lunch one day, he nodded toward the building and asked, “Can you write a check for this building, right now?”

“Yeah,” the client shot back, swaggering.

“OK, there are 93 more just like this in this country. Can you write a check for all of them, right now?”

“Well, no. That’s ridiculous.”

“That’s the resource you’re up against. And that’s why at the top of every document in this case, it will be United States versus you.”

Two recently publicized cases show the Justice Department as the strong arm of federal government Novak is so wary of. Jamie Olis, a midlevel financial executive at the Houston energy firm Dynegy, was sentenced to 24 years for fudging cash-flow numbers that benefited him personally to the tune of zilch, and arguably cost Dynegy stockholders in the hundreds of millions. Andrew Fastow, dubbed the “mastermind” of the Enron meltdown by the Justice Department, pleaded to two attempted conspiracy charges, got a recommended 10-year sentence and agreed to forfeit $29 million in personal, ill-gotten gains. To say nothing of the gobs of cash pilfered from employee pension accounts and stockholders’ share value, the bill for Enron’s bankruptcy proceedings alone is expected to top $1 billion. The x-factor, as it were, is that Fastow agreed to roll over on his cronies. Olis, who still maintains his innocence, would not.

When Novak sat down with us in mid-May, it appeared that Enron CEO Kenneth Lay had escaped the fate of his underlings. The major news outlets had all but forgotten the man behind the curtain. But it’s when they’re not talking about you that you can be assured the feds are building a case, Novak chuckled.

“Mark my words, any time you see a high-profile person plead, and Andy Fastow [did] and accepted 120 months . . . that sentence is predicated on full and complete cooperation with the federal government.”

“Ken Lay? He’ll be the last in line,” Novak predicted.

Sure enough, the Justice Department announced in late June that it would unveil its indictment against Lay in a matter of days.

Novak has had only one client he knew to be innocent. At least, somewhat innocent. The guy was a “mad-scientist” engineer type. He founded a technology startup that he was priming to take public, but realized he had no business sense whatsoever. So he brought in a management team, a member of which “cut some corners,” as they say. Technically, by signing the incriminating documents he was presented, the entrepreneur had violated the law. But Novak, the prosecutor and the judge knew there was no criminal intent.

The prosecution offered a year’s probation for a felony plea, to which Novak’s entrepreneur, a gritty World War II veteran, scoffed. “I fought for this country, I didn’t do anything wrong and I believe in our justice system,” was the gist of it.

“Shame on him,” says Novak. “Although I respected his belief in the judicial process, I thought he was foolish to go to trial.”

And so he was. The would-be entrepreneur is currently serving 87 months at a prison camp. To this day, though, he tells Novak that he wouldn’t change a thing if he had it to do over.

Novak doesn’t carry a particularly bright torch for any of the corporate criminals he represents. In fact, he says he’s disgusted by them, “because I see myself seven years ago.

“I, for one, don’t see any difference between white-collar criminals and drug dealers. They’re just operating in a different business model.”

And while he doesn’t condone either type of crime, neither does he believe the current “podium-pounding” crackdown on corporate desperadoes will be any more effective than the War on Drugs, which he couches as an “absolute failure.”

For one, “a lot of these companies and a lot of these individuals, as opposed to evaluating their fundamental value systems, are instead simply getting slicker,” Novak says.

Sure, the biggest rip-off artists in recent memory were flying below the system’s radar for too long, and the time had come to right that imbalance, but Novak fears that in the rush to punish, an underlying yet pervasive lapse in ethics stands to go unchallenged.

Despite the crackdown, he says, “In a strange way, there’s no accountability. Look at the number of companies that have gone bankrupt. Look at the number of companies that have laid off thousands and thousands. There’s no drive for companies to be socially redemptive or socially responsible anymore.”

Shifting the entire social paradigm is too tall an order for any individual, and Novak is content going about it one warped value system at a time.

“My goal with anyone I work with is to get them where I am now,” he says. “I will never, ever be proud of the fact that I went to prison. But I will always be proud of the changes that came about as a result of that contemplative time.”

Above all, Novak counts himself very fortunate—fortunate that he took that fateful “flight of stupidity” before the crackdown.

“My sentence was long enough to punish me, but it was short enough not to wreck my life.”

Shane Johnson is a staff writer for Salt Lake City Weekly, where this story first appeared.


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