Crime Library: Criminal Minds and Methods

Martin Frankel: Sex, Greed and $200 Million Fraud

Endgame

Assistant U.S. Attorneys Kari Dooley & Mark Califano
Assistant U.S. Attorneys Kari Dooley & Mark Califano

A federal grand jury in Connecticut indicted Frankel in October of 1999 for masterminding the fraud that looted an alleged $200 million from insurance companies in several states. While prosecutors in the U.S. built their case against Marty, the German government began its case against him for carrying false passports and customs infractions (smuggling in millions of dollars in diamonds). Marty pleaded guilty to the charges, hoping that he could avoid or delay extradition to the U.S. 

In June 2000, Marty, then 45-years old,  was sentenced to three years in jail and fined $1.6 million in diamonds for the smuggling charge. The National Post reported that Frankel considered the long prison sentence he faced in the U.S. as tantamount to a death sentence. He seemed to think that the Germans wouldn't extradite him because he faced such a long time behind bars. Continuing to imagine that the German government was interested in sparing him justice in the U.S., Marty said, "I hope that Germany will respect its commitment to human rights." 

Initially, it looked as though he would be kept in Germany until a potentially lengthy appeals had been exhausted, but there was little doubt that Marty would eventually be returned to America to stand trial.

In the meantime back in the states, a number of investigations had been immediately launched into how Frankel's audacious fraud could have been carried out over almost a decade without exposure by insurance investigators in several states.

Congress's General Accounting Office (GAO) in September of 2000 laid the blame squarely on state insurance regulators. In a letter to the National Association of Insurance Commissioners, Congressman John Dingell of the House Commerce Committee wrote:

This travesty occurred because state insurance regulators were either too blind to see, or too unwilling to acknowledge, the scam Mr. Frankel perpetrated... This fraud went on far too long, not because Mr. Frankel was clever and deceptive, but because he was operating in an environment where the regulators lacked the skill, authority, access to basic information, resources and 'healthy skepticism.'

The Tennessee Comptroller's Office agreed in its audit report, issued in July of 2000, which details the "gross breakdown" in the state's regulation of Franklin American Life Insurance Co." 

The audit report mentions the unusually structured arrangement that placed control of the insurance company in the hands of a sole trustee, Mr. Frankel. When suspicious transactions appeared, state regulators "instead of demanding explanations...decided that even though the circumstances appeared unusual, unless there was a law, regulation or policy that was clearly violated, they would take no action."  Arthur A. Hayes Jr., director of audits for the comptroller, said state examiners were snowed by the audacity of the scheme.

Insurance commissioners in four states filed a federal suit seeking $600 million in damages for the money Frankel stole from companies in Arkansas, Mississippi, Missouri, Oklahoma and Tennessee. 

In May of 2000, Marty gave his first interview since he had been captured eight months earlier. Always boldly creative, Marty told Germany's National Post "now insists his complex financial dealings were a legitimate effort to feed the world's hungry."  

"Probably the main reason that I'm here," he said, from inside the Hamburg jail where he is being held, "is that I love people too much." 

In March of 2001, facing extradition to the U.S., Marty made a desperate attempt to escape from jail. Using a piece of wire, he tried to cut through the bars of his cell, but he was caught by the security camera.

Less than two weeks later, Marty pleaded innocent to charges of stealing some $215 million from insurance companies under his control. He was also pleaded innocent to charges of racketeering, money laundering and fraud. 

While Marty was in a German jail, various state and federal charges were brought against all of Marty's accomplices, including the poor elderly Monsignor Colagiovanni, who was arrested in September of this year, when he came to Ohio to visit his sister.

When all of the state and federal agencies are finished with him, Marty will probably be in jail for a long time.

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