Ben Laurance and Ed Vulliamy
In many ways it was a very 1990s crime. The suspected perpetrator was a loner who dressed in baggy jeans and T-shirts. He worked from home and rarely went out. The technologies of cable and satellite allowed him to surround himself with more than 100 TV sets and computer screens burbling out a constant stream of financial news.
And, fully in keeping with an end-of- millennium approach to business which worships that which is global and that which is huge, this was a crime that straddled national borders and eclipsed anything ever seen before. How much money is missing?
It could be $1-billion. It could be three times that. Quite simply, nobody knows.
The curious tale of 44-year-old Martin Frankel – a nerdy American high school dropout now being sought by the FBI and law enforcement agencies after he siphoned off huge sums from investors – also provides a vivid illustration of one of the recurrent themes of financial fraud. Frankel, like so many of his predecessors who dealt in mere millions or hundreds of millions, believed in magic.
When police raided his $3-million house in Greenwich, Connecticut, they found the smouldering remains of a bonfire of files. Among those were notes showing he had consulted astrological charts on matters such as “Will I go to prison?”
Further investigation shows that Frankel’s strange obsessions go back years. Last year a business consultant, John Yednock, found himself on the telephone to a David Rosse of the charitable St Francis of Assisi Foundation. Why, Yednock demanded, were certain papers late?
Because, he was told, they could be signed only on a certain day of the zodiac. This was not the reply Yednock expected – particularly from an organisation which he believed was run by a Catholic monsignor in Rome. As it transpired this month, David Rosse was Frankel – the name had been borrowed from the man who fitted the burglar alarm at Frankel’s Greenwich home – and the foundation was his creation.
Go back further, and there is evidence of Frankel’s obsession with pagan gods. In the late Eighties he was managing the Frankel Fund from a bedroom in his parents’ house. To do so he had to create a holding company. He called it Donar – the ancient Germanic god of thunder.
Frankel was banned from trading after it was discovered he had been less than open with his clients about what happened to their money. When he resurfaced in Greenwich in the Nineties, he again called upon the gods of thunder. With some old associates from Toledo he founded Thunor Trust in Tennessee in 1991. It was named after another thunder god, this one Anglo-Saxon.
Frankel’s obsessions followed a well- established path for those involved in financial wrong-doing. When Barings collapsed in 1995, it emerged that the account used by Singapore trader Nick Leeson to attempt to hide his huge losses was numbered 88888 (for the Chinese, eight is a lucky number).
In the late Eighties, a London financial trader who never crossed the line of illegality but nevertheless managed to lose a great deal of money for his employer, declared that it was not he but the teddy- bear mascot next to his computer which had made all his trading decisions.
But Frankel’s antics have put him in a new league of financial skulduggery. The scale of his alleged theft is breathtaking. The chutzpah he showed in setting up bogus foundations and creating aliases is no less astonishing.
The Thunor Trust, set up in 1991, quickly took over 11 insurance companies in five southern states. Records suggest that by March this year, Thunor had insurance company assets of around $400-million. Most of this was invested through a bond trader known to executives of the insurance companies as Eric Stevens, who worked for broker Liberty National Securities. They never met Stevens, and that was hardly surprising. He was in fact Frankel, working out of his home in Greenwich.
When “investing” in bonds, Frankel/Stevens was actually laundering money through a Swiss bank account, according to federal authorities now hunting him. An Internal Revenue Service affidavit says that during a single week in April, Frankel transferred $3- million into accounts under such names as Fausto, Fausti and American Operations Corporation.
Alarm bells began to ring in May. Robert Guyer, who runs Liberty National Securities in Michigan, received a fax from a number of insurance companies asking about the $950- million they had on account at his firm. Guyer had never seen the money.
Mississippi insurance regulators closed in. They discovered that Thunor was owned by the St Francis of Assisi Foundation, set up by David Rosse (Frankel) last year in the tax haven of the British Virgin Islands.
Frankel/Rosse had persuaded a New York priest, two businessmen and a Catholic monsignor who edits a law journal in Rome to lend their names to the foundation. The fund chose as its attorney Robert Strauss, a former United States ambassador to the USSR and a Democrat party heavyweight. All had been persuaded that the foundation had almost $2-billion to spend on good works.
Because Frankel’s web of deceit was so complex, investigators aren’t sure how much money is missing. It may be as little as $350-million, but the FBI thinks up to $1- billion is missing.
What is certain is that Frankel spent freely. Financial records show that in March – little more than a month before his disappearance – he spent 39 000 at the jewellers Harry Winston in New York and Bulgari in Rome, 28 000 at Saks Fifth Avenue and 13 500 at Tiffany. He ran up a 300 000 fuel bill for a private jet, although the FBI can find no record of him owning an aircraft.
No one knows where the missing money has gone. George Dale, the state insurance commissioner in Mississippi, said: “We’ve never seen anything this big. It makes a John Grisham novel seem boring.”
And no one knows where Frankel is. Authorities – particularly in countries such as Brazil and Israel where Frankel had investigated the chances of avoiding extradition – have been asked to help in the hunt. So far, though, the guidance Frankel received from the stars has clearly been proved right.