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                 06/28/99- Updated 11:43 AM ET

                  

                    Man, millions vanish as con job is
                    probed

                    By Fred Bayles, USA TODAY 

                    GREENWICH, Conn. - Neighbors knew there was 
something
                    strange going on in Martin Frankel's sprawling 
stone mansion
                    well before firefighters found piles of documents 
burning in two
                    fireplaces and the rest of the 12-room house 
ransacked and
                    empty. 

                    There had been the all-day and late-night parade 
of limousines
                    and leased Mercedes; the armed guards, 
surveillance cameras
                    and spotlights; the suicide of a young New York 
woman found
                    hanged in a nearby house leased by Frankel. 

                    Then there was Frankel himself: a reclusive man 
who bought
                    one, then another, $3 million estate on a secluded 
cul-de-sac in
                    Greenwich's Backcountry neighborhood, paying cash 
for both. 

                    Last month, he vanished along with hundreds of 
millions of dollars
                    in insurance company money. He left behind a 
smoldering to-do
                    list that included "launder money," and 
astrological charts asking,
                    "Will I go to prison?" Among receipts found in the 
mansion was
                    one for $10 million paid to a Los Angeles diamond 
broker. 

                    "This was not your typical Mr. Wilson kind of 
neighbor you'd talk
                    to over the back fence," says Philip Russell, a 
lawyer who
                    represents Frankel's publicity-shy neighbors. "It 
was very
                    bizarre." 

                    The case has only gotten more strange in the six 
weeks since
                    Frankel disappeared. 

                    As police shoo the curious from the long, hilly 
driveway to
                    Frankel's property, federal investigators are 
pulling at the many
                    threads connected to the case that may involve 
billions of dollars
                    in fraud. Those threads go in many directions: the 
Vatican, a
                    dozen Bible Belt insurance companies and past and 
present
                    Justice Department officials. 

                    "Nothing would surprise me about what may happen 
next," says
                    Bart Schwartz, former chief of the criminal 
division under
                    then-U.S. Attorney Rudy Giuliani . 

                    Schwartz heads DSFX International, an 
investigative consulting
                    firm named in a federal warrant seeking the return 
of $50,000
                    DSFX received from a charity Frankel established. 

                    Thomas Bolan, a New York lawyer, has been named in 
a warrant
                    seeking $75,000 he received for his involvement in 
a charity
                    Frankel established. 

                    Former newscaster Walter Cronkite's name was 
borrowed
                    without his permission to lend credibility to the 
charity. 

                    Two Catholic priests, including a Vatican 
monsignor, were
                    drafted in a failed attempt to convince insurance 
regulators that
                    the charity was legitimate. 

                    Stephen Robinson, the U.S. attorney for New Haven 
who would
                    normally oversee the investigation into Frankel, 
has recused
                    himself because of an unidentified personal 
connection. 

                    "This was something that has been concocted for 
some time,"
                    says George Dale, the Mississippi insurance 
commissioner who
                    helped bring down the alleged scam. "Nobody knows 
how big it
                    would have gotten if it had gone on." 

                    According to an FBI affidavit, Frankel created an 
unlicensed
                    brokerage operation on his Greenwich estates that 
drained
                    investment money from a dozen insurance companies 
in
                    Mississippi, Oklahoma, Tennessee, Missouri and 
Arkansas. 

                    The companies are now in state receivership 
because they
                    cannot account for millions of dollars invested 
with Frankel's
                    Liberty National Securities Inc., a firm not 
licensed by the
                    Securities and Exchange Commission. 

                    "Frankel systematically drained these assets 
through various
                    financial accounts and transferred them into 
accounts in and
                    outside this country under his control," the 
affidavit states. 

                    State regulators say the insurance companies are 
missing at
                    least $218 million; a lawsuit filed by several 
companies puts the
                    loss at $915 million. Also missing is as much as 
$1.98 billion
                    from the St. Francis of Assisi Foundation, a 
charitable
                    organization that the FBI says Frankel established 
in the British
                    Virgin Islands. 

                    Investigators are trying to run down a series of 
bank accounts in
                    this country, the Caribbean and Switzerland to 
determine whether
                    the charity money actually exists beyond the 
complicated shell
                    game used to obscure the money trail. 

                    Published reports say a federal grand jury in 
Bridgeport is
                    investigating and that a sealed warrant has been 
issued for
                    Frankel's arrest. The FBI and federal prosecutors 
in Connecticut
                    refuse to comment. 

                    At the heart of the case is the shadowy Frankel, a 
44-year-old
                    native of Toledo who, in efforts to impress 
investors, claimed to
                    be a genius and to have a genealogy dating back to 
King David. 

                    Not all have been impressed. According to 
Securities and
                    Exchange Commission documents, Frankel agreed to 
stop
                    investing others' money in 1992 after several 
investors sued him
                    on claims of fraud. 

                    But by then, Frankel apparently had a bigger 
operation.
                    According to the affidavit, he set up a maze of 
interlocking
                    companies, mail drops and borrowed names, 
including the alias
                    Dave Rosse, taken from a bodyguard, and Liberty 
National
                    Securities, the name of a legitimate Michigan 
firm. 

                    The scale of Frankel's operation was apparent by 
1997, when
                    Greenwich police went to interview him about the 
hanging of a
                    22-year-old woman living in a home Frankel rented 
for $15,000
                    a month. 

                    "The interview took place in an office-type room 
that had
                    numerous computer monitors displaying information 
from various
                    financial markets," the affidavit says. 

                    The death was ruled a suicide, and police went 
away. When they
                    returned on May 5 to investigate a fire, they 
found 80 computers,
                    computer servers and a sophisticated fiber optic 
network tied to
                    securities information services. 

                    "There was lots of speculation about what was 
going on in there,"
                    says Russell, a former prosecutor from the Bronx 
who was hired
                    by Frankel's neighbors to check into Frankel. "It 
turned out to be
                    this well-thought-out con." 

                    Frankel apparently had even bigger plans. He 
established the
                    Assisi foundation last August and recruited the 
help of prominent
                    people, including Bolan and the two priests, the 
Rev. Peter
                    Jacobs and Msgr. Emilio Colagiovanni. 

                    By then, the operation was crumbling. 

                    Schwartz says Bolan hired DSFX to look into the 
background of
                    Jacobs, who was punished by the Roman Catholic 
Church for
                    operating a restaurant in New York. 

                    "It was a case of due diligence. It's not an 
unusual investigation
                    for us," says Schwartz, who said he was speaking 
with Bolan's
                    permission. "We were still working on it when all 
this broke." 

                    Mississippi and Tennessee regulators became 
concerned about
                    the money flow from local insurance companies to 
Frankel's
                    unlicensed investment firm. Dale, Mississippi's 
insurance
                    commissioner for 26 years, says a congenial voice 
claiming to
                    be a financier named Rosse called late at night to 
persuade the
                    commissioner to relent on a requirement that the 
insurance
                    companies account for their money. 

                    "He wanted me to sign off on this so they could 
transfer larger
                    sums of money," Dale recalls. "He was saying the 
Vatican had
                    lots of money they wanted to invest in worthy 
projects in
                    Mississippi." 

                    The commissioner's suspicions were heightened when 
two men
                    identifying themselves as Jacobs and Colagiovanni 
came to an
                    April 29 meeting promising millions for the poor. 

                    After the two men began speaking to each other "in 
a language
                    no one recognized," Dale gave the insurance 
companies a week
                    to account for their money. 

                    Within days, Frankel's Greenwich neighbors saw 
moving vans at
                    his mansion. 


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