Mississippi Insurance Commissioner George Dale and Deputy Commissioner Lee Harrell accomplished what other state insurance regulators, the Securities and Exchange Commission, the Internal Revenue Service and the U.S. Justice Department failed to do: uncover a global insurance fraud scandal featuring a seemingly harmless nerd.
In a case that Court TV called “a sophisticated James Bond-type thriller with Woody Allen cast as Goldfinger,” the beginning of the end for Martin Frankel occurred in Jackson, at an April 29, 1999, meeting between Dale and Frankel’s gang.
“Commissioner Dale and Lee Harrell were the true heroes in this story,” said Wall Street Journal senior writer Ellen Joan Pollock, who featured Mississippi’s role prominently in Frankel’s downfall in her book, “The Pretender: How Martin Frankel Fooled the Financial World and Led the Feds on One of the Most Publicized Manhunts in History,” published earlier this month by Simon & Schuster Inc.
“Even though Frankel had been banned by the securities industry and people had complained about him to various federal entities, nobody did anything until Commissioner Dale and Lee Harrell took action,” said Pollock, in a phone interview from the WSJ. “If they hadn’t done it, the fraud would have continued.”
A native of Toledo, Ohio, and the son of a county judge, Frankel, 47, had used various aliases and had concocted complicated financial schemes for years. He hit a snag in 1991 when, based upon the Frankel Fund fiasco, the SEC barred Frankel for life from the securities business.
But Frankel soon hooked up with prominent businessman John Hackney of Franklin, Tenn., and created Thunor Trust to acquire financially distressed insurance companies. Frankel believed he could manipulate the reserves required by state regulators without drawing attention.
By the end of 1998, the companies had amassed assets of $434 million. Meanwhile, the “looted” reserves funded an increasingly lavish lifestyle for Frankel, who became known for his eccentricities and peculiar sadomasochistic sexual practices.
Frankel’s outrageous plan to involve the Catholic Church in his bogus charity and money-laundering scheme was only one of the issues that caught Dale’s and Harrell’s attention. In the chapter “A Summons To Mississippi,” Pollock wrote that Harrell noticed that Thunor Trust had been sold to the St. Francis of Assisi Foundation, but a required change of control form had not been filed.
Harrell notified Dale, who called Hackney, president of the three insurance companies domiciled in Mississippi — Franklin Protective Life Insurance Company, Family Guaranty Life Insurance Company and First National Life Insurance Company of America.
“We never could get John Hackney to establish where the money was,” said Dale. “We told him to show us the money and he couldn’t. We discovered all of their investments were being handled through one investment firm, Liberty National Securities, an investment firm supposedly located in New York. We asked Mr. Hackney why he put all of the investments of three insurance companies in one investment firm and his answer was, ‘because we get good service and a great rate of return’.
“But what really blew the whistle was when one of our examiners called New York and asked a friend to check out the location of the address of this investment firm. The next day, the friend called back and said it was nonexistent. I told my staff to round up anyone who had anything to do with the insurance companies to gather on a particular date and figure out how they were trying to snooker the Mississippi Insurance Department. That’s when we set up the infamous meeting in April, and that’s when the beginning of the end started.”
After Frankel, using the alias David Rosse, was unsuccessful in halting the meeting, he ordered Father Peter Jacobs and Monsignor Emilio Colagiovanni, both Vatican representatives, Hackney and others, including the real David Rosse, to meet him in Jackson.
Pollock described the scene in a WSJ article dated July 16, 1999: “As Frankel associates from Rome to Los Angeles descended on the Hilton Hotel in Jackson, chaos reigned. Computers and fax machines that employees had carted all the way from Greenwich (Conn.) were on the fritz and people from the house were scurrying about the hotel lobby in confusion. Mr. Frankel himself never met with the commissioner, but his representatives did. They failed to placate the regulator because he ordered about $200 million of insurance assets returned to Mississippi by a Frankel-controlled brokerage firm that held them.”
Pollock described the scene where the characters assembled around a large conference table, where Jacobs and Colagiovanni tried to schmooze Dale — they have since been indicted — and a fidgety Hackney caught Harrell’s attention.
“Even though they had gone to Mississippi to meet with Commissioner Dale, Marty got nervous before the meeting and left with Thurston Little, who is well known in political circles in Mississippi and was a consultant to Frankel,” Pollock said. “When they began this meeting, no one could explain why the St. Francis foundation was going to take an interest in these companies. They started to argue that in fact, St. Francis hadn’t acquired the companies. The priests were all talking about how the St. Francis foundation was going to help charities and how they had visited Bosnia with the Pope and how they’d been helping needy children.
“The commissioner and Lee Harrell asked, ‘what does this have to do with insurance companies in Mississippi?’ It made no sense at all. After a couple of meetings that didn’t amount to much of anything, the commissioner signed orders drafted by Lee Harrell for Mississippi to take over the insurance companies domiciled in the state. After they took over, Frankel knew he had to flee because he knew it was all over.”
Five days later, Frankel fled to Italy with millions of dollars worth of diamonds and two female companions. Found at his Greenwich home: smoldering remains of documents, including an astrological chart and a to-do list topped with “launder money.” After a four-month international manhunt, Frankel, traveling with a phony British passport under an assumed name, was arrested at a hotel in Hamburg, Germany, on Sept. 4, for traveling with false passports and failing to pay duties on the diamonds.
Before his arraignment, Pollock flew to Germany to meet Frankel.
“I was overwhelmed by how nerdy he was,” said Pollock. “When I met him, he looked so unkempt. He had been in jail for a while and had a scraggly beard and long fingernails. It amazed me that here was a man who attracted not only a lot of women, but also a lot of businesspeople who were eager to do business with him or talk to him about deals. To be honest, the hardest part of my book was to explain why someone who, on the outside, looked so unappealing, could be appealing to so many people.”
Pollock introduced herself and told Frankel she was writing a book about him. When asked if he would write to her, Frankel told Pollock, “Send me money.”
“I said I’d send stamps, so I sent him four or six, but I didn’t hear from him,” she said.
Except for Pollock’s experience with Frankel, he was, with everyone else, simply an excellent con man.
“He persuaded people that he was smart and knew what he was talking about,” Pollock said. “And he would figure out what people wanted to hear and he would say it. Lee Harrell and Commissioner Dale didn’t fall for him.”
Frankel, currently in a Rhode Island jail, is awaiting trial in a federal court in New Haven, Conn. His former associates have talked
s primary fear: being incarcerated in a state prison, especially in Mississippi.
“Marty Frankel has a typical northerner’s impression of a road chain gang jail in the South,” said Greg Copeland of Copeland, Cook, Taylor