Back in prison, Russell Erxleben sees himself more victim than con man

June 07--BEAUMONT -- BEAUMONT --

There was a sense of promise the day Russell Erxleben walked out of the dark glass doors of a Beaumont federal prison in June 2005.

In his maroon Suburban, as he and his wife drove out of the sprawling complex of brick and metal, trimmed green grass and coiling barbed wire, she asked him to turn around and take one last look. After nearly five years of incarceration, the former University of Texas and NFL kicker was free.

"I told her no way, I am looking forward," he wrote in an email last month. "One thing I was thinking was I am never coming back here again."

Almost nine years later, he did, as inmate No. 04048-180.

The government calls Erxleben a classic con artist, a liar who bilked investors out of hundreds of thousands of dollars in a series of foreign trading ventures that went nowhere. Federal judges refused to set bail for him, describing him as a savvy manipulator who could run deals even from behind bars, and his clients are seeking their money back in a state lawsuit that accuses him of fraud.

Erxleben has pleaded guilty to fraud twice. But in dozens of letters to the American-Statesman and in an interview at the same corrections institution to which he swore he would never return, he says he was only a trusting salesman used for his charm and targeted for his celebrity.

All of his life he had stood out for his athletic abilities. He reveled in the limelight as his talent took him from stellar high school quarterback and kicker -- one of the best football players ever to rise from his small hometown of Seguin -- to record-setting punter at UT and later to a top pick in the NFL draft.

But when his star fizzled at the highest tiers of the sport and the pressures broke him, he sought riches in the banking and investment world. There, he wasn't ready for the big leagues either. Yet he was good at peddling pipe dreams he badly wanted to believe in himself.

That, according to his family, friends and even Erxleben, has always been his downfall.

On a humid day in April, Erxleben settled into a plastic chair in a small visitation room, a towering man in a tan prison uniform and clean white Reeboks. He feels ashamed, he said, with a huff. Embarrassed. Many of the inmates he left behind are still here. Staff members remember him.

In his prime, Erxleben, now 57, had been known for how far and high he could boot the ball. He was a three-time All-America punter at UT in the late 1970s and played six seasons in the NFL. But in the early 1990s, he had declared personal bankruptcy, had left unpaid debts for several bungled businesses and had been indicted for writing bad checks.

Nothing, though, would bring him more infamy than the crumbling of his foreign currency exchange firm, Austin Forex International.

At its pinnacle, the company, which he founded in 1996, managed tens of millions of dollars, trading in the highly unregulated and volatile market of world money speculation. Its executives thrived, frequenting posh nightclubs, coasting in luxury vehicles and watching Longhorn football games from an impressive skybox at Royal-Memorial Stadium.

But Internal Revenue Service investigators soon discovered that the firm was not making the huge profits it claimed. It was covering losses in what regulators with the Texas State Securities Board labeled a massive Ponzi scheme -- one of the oldest scams in the industry, where earlier investors are paid off with money from new investors, rather than supported returns.

The ventures flourish in prosperous times, financial experts say, driven by a culture of risk, the hope for quick payoffs and the insatiable pursuit of more. But their success is often short-lived.

Austin Forex was abruptly shut down in September 1998. An estimated 500 clients, many of them small-time investors, including friends and former college and NFL players, lost about $35 million in college tuition, retirement plans and other savings. When Erxleben was sentenced in 2000, they had recovered nearly all but roughly $5 million in settlements from three law firms and an accounting firm.

The investors alleged that the firms knew Erxleben was committing fraud and either assisted or failed to stop him. He has long denied any involvement in a Ponzi scheme. His business was legitimate, he says, and its crash attributable to many partners and advisers, not just himself.

He was handed a punishment of seven years in custody, two of which he served under supervised release. He wanted to do right, "to be a better person," he recalled of his move to a halfway house on June 3, 2005. But he was an ex-con with a felony record and little hope of employment.

The package

Luck, he said, seemed to come in the way of Fred Gladle.

Erxleben's wife, Kim, had met the former California security broker through her church in Lakeway, just as he had been recruiting investors for a "family funplex," a planned shopping center with an arcade and bowling alleys. Russell Erxleben went to work lining up vendors for the development soon after leaving the Beaumont prison.

But Gladle knew he had the charisma of a born salesman and wanted him to join another enterprise, Erxleben said. About two weeks before his release, he recalled, a package had arrived for him in the mail from Gladle with several brochures, letters and a book by Las Vegas financial adviser Jeffrey Weston, "The German Financial Time Bomb."

Before the rise of Adolf Hitler and the outbreak of World War II, the German government issued a number of gold bearer bonds to help pay reparations from the First World War. According to the material, holders of these so-called "instruments of indebtedness" were now owed billions by the German government and the banking institutions that handled them.

"I wasn't biting at first. It sounded too good to be true," Erxleben said, but Gladle, an ex-football player for the University of Southern California married to a Playboy model, told him he was making a killing buying and selling the bonds.

His office walls were decked in Bible scriptures, Erxleben remembered. So respected seemed the investors and so substantial the sums of their checks that Erxleben said he began to wonder whether this bond deal was, perhaps, too big to pass up.

Football ups and down

Erxleben had always been stubborn, his friends and relatives recall. On the field and off, he was confident, somewhat of a showoff and unafraid to battle the odds, despite the consequences. He had a powerful leg but had been rough around the edges, retired UT football coach and former UT place-kicker Billy Schott said.

"'You see that tall son of buck down there?' " Schott recalled assistant coach Spike Dykes telling him before one of his first encounters with the freshman in 1975. "I said, 'Yes, sir.' I recognized him as Russell, and he said, 'He's all yours.'

"And I said, 'Well, what's the deal?'

"He goes, 'You'll find out,' as he just waved over his shoulder and walked off."

Schott learned that Erxleben did not like to stretch and was not used to practicing. He wanted to be a quarterback, but he was such a force as a punter and place-kicker that his other skills were overshadowed.

He had excelled at basketball, baseball and golf growing up in Seguin but became serious about football after making it to the semifinals of the NFL Punt, Pass and Kick, a national skills competition for students.

He remembers he was 9 when he crammed into an old Crown Victoria with his then best friend, Barry Dietert, and their families. They made the trip to the Cotton Bowl in Dallas, where they met players from the Cowboys. "It was a child's paradise," Dietert recalled one day in January from behind his desk at his Seguin auto shop.

Erxleben came back determined to become an NFL player.

"It wasn't just a dream," he wrote. "I expected it. Everything I did was to prepare."

Erxleben later returned to the Cotton Bowl as a UT football player. His most legendary moment came in 1977, when he boomed a 67-yard field goal against Rice University, the longest in NCAA history.

Yet, along his ascent into the ranks of professional football, Erxleben lost his edge. In 1979, the New Orleans Saints made him the 11th pick overall in the NFL draft, rare for a kicker. With that followed intense public scrutiny, especially after he missed a few crucial kicks.

His career sputtered, out the Saints released him in 1983. After several years out of the game, he tried a comeback with the Detroit Lions, but he retired for good in 1988.

Erxleben said he had been living in a bubble. "People put you on a pedestal, and you start to believe that you really are up there," he said. "And then, when it's all said and done, and you come down and function in the real world, it's tough."

He did not want to work for a bank or hold an 8-to-5 job, he said. He wanted a jet-setting lifestyle, like one of his employers in college, an insurance agent who introduced him to sales.

"Businessmen, the way they keep score is with a bank account, and if you want to play in division A, class A of the sport, the way you do that is you have to hit a big deal," he said. "And sometimes, it just doesn't work."

Schott, who had finished his career as a UT kicker a year before Erxleben arrived, says he wishes he could have been there for his old friend before the financial woes started. He likes to believe he could have kept the football player in line just as he did as his coach on the field.

He tried reaching out to Erxleben over the years. "But my letters probably ended up in unread fan mail," Schott said.

Another Ponzi scheme

After he began working for Gladle, there were no fancy cars or other luxuries.

Erxleben said he started small, buying pre-World War II bonds from him in 2005 and selling them to a few friends and neighbors, who in turn brought in more investors. The initial $75,000 he poured into the deal, he said, was borrowed from longtime friend Derrich Pollock, a Lakeway investor who was killed in a plane crash in Lago Vista in 2007.

But Erxleben was not the grand mastermind, he said. Records filed this year as part of a 2012 civil lawsuit parallel some of his claims. They state that Weston enlisted the help of Gladle and California security dealers Josh Pendley and Kevin Scannell to cheat hundreds of investors across the country.

The men claimed they were going to create a trust backed by German bonds, luring in clients with vows of great returns, but in reality they were operating a multimillion-dollar Ponzi scheme, according to the allegations detailed in a Travis County court complaint.

After the U.S. Securities and Exchange Commission shut down Weston in 2006, Gladle and Erxleben, who managed LT Entertainment, continued to take instructions from Pendley and Scannell, who were running companies with addresses in Las Vegas and the Bahamas, the records state.

Erxleben was instrumental in raising at least $80,000 in bond sales, probably falling for a complicated investment that carried an air of legitimacy, said Austin lawyer Chris Cagle, who is representing the more than half a dozen Central Texas investors who filed the lawsuit.

"He did not come up with this plan himself," Cagle said. "He does not have the background to do it. I think he is out of his depth in this."

But San Francisco attorney Robert Meshel, who is representing Pendley and Scannell, said the lawsuit is based entirely on falsehoods fabricated by Erxleben. Pendley and Scannell were victims of Erxleben, the lawyer says.

Investigators and regulators say Erxleben was the only one responsible for defrauding his investors.

All Ponzi schemes evolve and are difficult to unravel because authorities must trace transactions from the latest investors to the earliest, separating the deceivers from the deceived. But financial experts say the hustlers with the most success tend to have similar characteristics: a high tolerance for risk, tendencies to see people as commodities and to deflect blame, and an addiction to the rush of the trade.

"They can't control it," said Tamar Frankel, an author and law professor at Boston University School of Law. "When you look at some of the disasters in the banks, you will find that these were traders who were winning in the beginning and then started to lose but couldn't stop."

Unlike common perceptions, studies show their victims are often educated and financially sophisticated.

But law enforcement officials say there is no question Erxleben belongs in the con man category. He should not have been dealing in securities or stock, which went against the conditions of his supervised release.

Yet he had more than 50 bank accounts under the names of other people and entities, investigators said, and was using the money that came in from clients to support his family and to fund two other "investment opportunities" -- the appraisal of a 19th-century French painting purported to be by Paul Gauguin and the trading of Iraqi dinars.

State and federal court records show he had a pattern of entanglement in get-rich-quick enterprises and that even in prison he had been recruiting inmates to invest in a day trading business he says was run by Pollock. Multiple times when deals failed, Erxleben said he was not the only one at fault and threatened those who went to police, the records show.

'A great salesman'

His closest friends and relatives say they want to believe he never meant anyone harm but was duped by others and prey to his own greed. "He is a great salesman. That was the problem," said San Antonio businessman Ray Cevallos, a friend who did not invest in gold bonds.

Erxleben's son, Ryan, says his father is not the crook people claim. "God is working on him," said the 23-year-old, who punted for Texas Tech. "Hopefully, my dad can learn from this and come out a better man."

When Russell Erxleben was sentenced in February to more than seven years in prison, he stood before a federal judge and apologized for putting himself in a position to handle other people's money. But in interviews and letters since, he angrily contends that the government concocted lies and tarnished his name.

He was the target of selective prosecution, he says, and the victim of men who swindled him. He argues that he was not selling securities.

"If Weston and Pendley would have done what they represented, I would not be where I am today," he said. "I honestly felt this bond deal was going to change people's lives. Plus, it was going to put Russell back on top, and that was important to Russell nine years ago. Is it important now? Not as much."

Only Erxleben was charged in the bond venture, but Gladle -- who was sued after his funplex plan fell apart -- is serving time for a foreclosure scam out of Los Angeles, and it was discovered just after Pollock's death that he headed a separate major Ponzi scheme.

And yet, of all the risks Erxleben has been willing to take, going to trial was not one of them, he said. The judge could have allowed evidence from his previous case into testimony, and he said that was likely to have led to greater punishment and more time away from his wife and four children. Jurors would not have given him the benefit of the doubt, he said, though he argued that investigators raided his office, took his briefcase and tapped his phones and emails, never finding proof that he ever assailed anyone.

He tends to wake up early these days, likes to read the Bible and spends long hours in the library, researching defenses for his appeal and working on what he says will be a book about his life. He runs laps around a track in the evenings and plays on the prison softball team.

"It is not just all full of criminals in here," he says. "There are guys in here doing 20 years for something so minor. But then again, who knows if they are telling the truth? You never know in here."

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Behind the story

American-Statesman reporter Jazmine Ulloa spent five months trying to unravel the reasons a former professional football player would twice turn to financial fraud. She analyzed hundreds of court records and jail letters from Russell Erxleben, sat through his hearings in Austin federal courts and conducted interviews with his friends, relatives and former coaches. In April, she visited a Beaumont federal prison to interview the former University of Texas and NFL kicker.

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