Castleton mystery was that it lasted

Trouble not new at personnel firm

The Castleton Group, which provided human resources services, shut down last month and left clients, employees and regulators with many questions.

The biggest question might be this: Why did Castleton last as long as it did?

At least three times in its 10-year history, the Raleigh company ran afoul of state and federal tax authorities, records show. Three times, North Carolina regulators denied it a license to operate, citing weak finances.

And Wake County court files describe internal strife, with allegations of wiretapping, personal use of business funds and cooked books.

Yet Castleton's employees and customers, mostly small and midsize businesses, were caught off guard by the company's Dec. 18 closure and bankruptcy four days later.

"We were just plugging along," said Celeste Brown, who joined Castleton seven years ago and moved into its swanky new offices in September. "We didn't know there were any problems."

Through all its troubles, Castleton maintained an image of strength and stability. It racked up accolades: Inc. magazine's list of 5,000-fastest growing private companies in America; the Triangle Business Journal's list of 50 most dynamic private companies; Business Leader magazine's "Business Champions" award.

The company's founder, Suzanne S. Clifton, 64, was lauded as one of the Triangle's most successful businesswomen. She moved among the area's elite and, with her husband, amassed the trappings of prosperity, including three homes with tax values totaling $4.2 million.

Her contacts and the awards heaped upon Castleton helped attract more than 100 clients, including some of the Triangle's better-known businesses -- Dr. Lane and Associates Family Dentistry and NCM Capital in Durham among them.

Those customers, and their more than 3,500 employees, trusted Castleton to manage payroll and retirement plans, administer health benefits and oversee other human resource matters. They were drawn by an image that proved a mirage. Castleton was in turmoil.

The State Bureau of Investigation is now probing the books.

Virgin Islands home

Clifton, a former kindergarten teacher, got into business in 1984 when she started a temporary staffing agency. Castleton spun out of that in 1997.

Through the years, Clifton and her husband, who owns a commercial janitorial business called Cenplex Building Services in Apex, collected the prizes of wealthy entrepreneurs.

There was a 168-foot yacht and a house on St. John in the Virgin Islands. The couple sold that getaway, which they bought in 1996, in 2003 for $3.3 million.

They still maintain three homes: a 6,865-square-foot estate in North Palm Beach, Fla.; a 6,885-square foot house in Wrightsville Beach and 4,254-square-foot home on Bordeaux Lane in Cary.

She's active on boards, including one for The Jimmy V Celebrity Golf Classic. Clifton, a two-time cancer survivor, has pledged at least $50,000 to the foundation.

Cancer and taxes

Castleton's troubles apparently started in 2001 as Clifton battled the disease. She found out that year, according to court records, that the company owed back taxes to the Internal Revenue Service. Clifton put up personal assets, including the Virgin Islands home, to borrow $1.5 million to resolve the issue. Castleton's attorneys reached a a deal with the IRS.

Just two years later, Clifton and her husband were summoned to an emergency board meeting. It was organized so quickly that Larry Clifton did not have time to drop off the couple's Highland terrier. The dog came, too.

Castleton was behind on taxes again, a company attorney said.