Frankel Plea-Bargains As Five Commissioners Sue Vatican For Fraud
Jailed financier Martin Frankel entered a guilty plea May 15 on charges that he embezzled money from seven life insurance companies he owned in five different states.
The plea came just days after insurance commissioners in those states sued the Vatican and others in Federal court in Mississippi for allegedly helping Frankel defraud state officials and bring those companies to financial ruin.
Frankel, standing before Senior Judge Ellen Bree Burns in federal court in New Haven, pled guilty to one count each of securities fraud, racketeering and racketeering conspiracy and to 20 counts of wire fraud in bleeding more than $200 million from the seven companies, says John A. Danaher III, U.S. Attorney for Connecticut.
Frankel admitted he controlled a racketeering business to gain control of the cash reserves of the companies, which he then shifted to a brokerage firm. Frankel “and others” then stole those assets, Danaher says.
Danaher says the federal investigation is continuing. Seven of his former associates have previously entered guilty pleas for their part in the fraud, he notes.
On May 9, insurance commissioners of Mississippi, Missouri, Tennessee, Arkansas and Oklahoma filed suit in the U.S. District Court for the southern district of Mississippi, charging that church officials in Rome were involved in an elaborate scheme run by Frankel that looted the seven companies.
By law, each of the states must cover any insurance claims through state guaranty funds that bankrupted companies are unable to pay for residents in their states. In a statement, Mississippi Insurance Commissioner George Dale said it was his duty to pursue recovery from any persons or entities that contributed to the insolvency of the seven insurers.
“The law charges me to recover for the stolen money that ultimately may have to be paid by the taxpayers,” he said.
The commissioners suit also names Thomas Corbally, a New York consultant; a former Vatican official, Msgr. Emilio Colagiovanni; a church foundation, Monitor Ecclesiasticus; and several former associates of Frankel.
It charges them with using their influence to lend legitimacy to a phony charity that Frankel had set up in an effort to hide his involvement in purchasing the insurers.
The Vatican could not be reached for comment on the charges. An attorney for Corbally did not respond to a request for comment.
In previous statements to the press, a Vatican spokesperson denied involvement in Frankels alleged scheme. Corbally and others accused in the suit have also stated in the past that they were not accomplices of Frankel but rather were his victims.
The suit charges that in July 1998, Frankel tried through Corbally and other contacts to recruit church officials to front for a trust company Frankel owned, which he was using to buy insurance companies domiciled in the five states. In return, Frankel was to share the profits with the charity, according to the suit. The suit also states Frankels initial attempt met with failure as church officials balked at Corballys alleged suggestion that he use a legitimate church charity as a cover in buying the U.S. companies.
Later, however, Colagiovanni used his offices to advance the deception, while other church officials who knew of the scheme did not act to stop it, the suit states.
The suit charges the Vatican and other defendants under a variety of statutes, including the federal Racketeer Influenced Corrupt Organizations Act, a law originally designed to attack organized crime.
The suit maintains the Vatican is not immune from prosecution in the Frankel case either as a religious organization or as a sovereign state.
“By assisting Frankel in the attempted purchase of U.S. insurance companies during 1998 and 1999, the Vatican, through its agents, carried on commercial activities in the United States, committed acts in the United States which affected its commercial activities elsewhere, and engaged in commercial activities outside the United States which had a direct effect within the United States,” the suit states.
Those commercial activities, it says, “were private, not sovereign, and secular, not religious.”
Frankel was arrested in Germany in 2000 after allegedly fleeing the U.S. in 1999 when Mississippi and other states began questioning financial transactions of some of the insurance companies he owned. He was extradited to the U.S. last year.
The states also have a lawsuit pending against Frankel seeking $600 million in damages. Frankels trial had been scheduled to begin in October.
Reproduced from National Underwriter Life & Health/Financial Services Edition, May 20, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.