Martin Frankel
Encyclopedia
Martin R. "Marty" Frankel (born 1954) is an American financial criminal who conducted a series of investment frauds in the late 20th century, causing hundreds of millions of dollars in losses. He was caught in 1999, and in 2004 was sentenced to 200 months in prison based on over $200 million in proven losses to insurance companies he bought then looted; the sentence was reaffirmed in 2006.
Marty Frankel was born to Leon and Tilly Frankel in 1954; he was Leon's fourth child and Tilly's second. He attended the University of Toledo
but never graduated.
Frankel used astrology
to make financial trading decisions. In addition, he usually could not bring himself to actually make trades, causing trouble for him with the brokerage firm
s he worked for. After being fired by his boss John Schultze in 1986, Frankel set up Winthrop Capital using the phony name of James Spencer. He also set up The Frankel Fund with Douglas Maxwell, but remained reluctant to buy or hold his chosen investments.
Frankel moved to Florida in 1987, and attracted Palm Beach
investors, but the Frankel Fund lost money on trades, and Frankel was using shareholder accounts to paying expenses, including rent, stock-quote services, and personal spending money for himself, his sister, and his mother. By mid-1988, he was also raiding some investor's accounts to cash out other, worried investors who were pulling out their money. He transferred the remaining funds to his personal account and told his remaining investor that the fund had collapsed due to Maxwell's bad trades and embezzlement. Frankel gave the funds to an attorney, but the funds were then turned over to the Securities and Exchange Commission.
Frankel moved back to Toledo and started a new firm, Creative Partners, while the SEC was investigating him, using the name Rothschild International Investments and a Swiss bank account to separate Creative Partners from his own name and ongoing investigation. By this time, his former boss's wife, Sonia Schulte, was divorcing. Sonia Schulte set up a brokerage in direct competition with her husband's and directed her clients to Creative Partners; meanwhile, Frankel set up another company, Donar Corporation, which paid for Sonia Schulte's new house, and paid Sonia's divorce and custody lawyers over $300,000 out of the Swiss bank account.
After paying a fine and agreeding to be barred from trading by the Securities and Exchange Commission in 1992, Frankel used several aliases, including David Rosse.
In an attempt to use the Roman Catholic Church
to discourage questions of legitimacy, Frankel founded the St. Francis of Assisi Foundation in the British Virgin Islands
, with a nominal mission of investing in insurance companies in order to fund hospitals. Among people solicited to join the Foundation board was retired CBS Evening News
anchorman Walter Cronkite
; when he declined to join, his name was used anyway. An official of the Roman Curia
, Monsignor
Emilio Colagiovanni, agreed to sign a letter falsely stating that the Foundation received funding from the Vatican
.
Frankel fled the United States in May 1999. He went by private plane to Rome
and then to Hamburg, Germany, where he was arrested on September 4. He was first tried and sentenced in Germany to three years in jail for passport fraud. He was then extradited to the U.S. in 2001.
Colagiovanni was arrested in Cleveland, Ohio
on August 30, 2001.
In May 2002, Frankel plead guilty to 24 federal counts of securities fraud
, wire fraud
, and related racketeering and conspiracy
. Fifteen of Frankel's associates, including Colagiovanni and Sonia Schulte, also pled guilty to related crimes. By the time Frankel was first sentenced in December 2004, sixteen of his accomplices had been convicted. Frankel told the judge that most of his behavior what to earn enough money to provide for Sonia Schulte (by then Sonia Howe) and her two children; after this, the judge asked "So, you stole $209 million in order to take care of the children?" Frankel then explained that he could not end the scheme without it coming apart, and asked the judge to consider that deterrence should not be a factor in his sentencing because "If somebody is mentally ill, you shouldn't punish them because it won't stop other mentally ill people from doing it." Frankel was sentenced to 200 months (16 years 8 months) in federal prison; a state court in Tennessee also sentenced Frankel to 16 years, which was allowed to run concurrently on the condition that he assist officials in recovering lost assets looted from his Tennessee insurance companies.
Several states put Frankel's insurance companies into receivership when it was discovered the companies' primary assets were investments in Frankel's own shell company; among the states affected were Arkansas, Mississippi, Missouri, Oklahoma, Tennessee, and Virginia.
Marty Frankel was born to Leon and Tilly Frankel in 1954; he was Leon's fourth child and Tilly's second. He attended the University of Toledo
University of Toledo
The University of Toledo is a public university in Toledo, Ohio, United States. The Carnegie Foundation classified the university as "Doctoral/Research Extensive."-National recognition:...
but never graduated.
Frankel used astrology
Astrology
Astrology consists of a number of belief systems which hold that there is a relationship between astronomical phenomena and events in the human world...
to make financial trading decisions. In addition, he usually could not bring himself to actually make trades, causing trouble for him with the brokerage firm
Brokerage firm
A brokerage firm, or simply brokerage or broker in context, is a financial institution that facilitates the buying and selling of financial derivatives between a buyer and a seller...
s he worked for. After being fired by his boss John Schultze in 1986, Frankel set up Winthrop Capital using the phony name of James Spencer. He also set up The Frankel Fund with Douglas Maxwell, but remained reluctant to buy or hold his chosen investments.
Frankel moved to Florida in 1987, and attracted Palm Beach
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
investors, but the Frankel Fund lost money on trades, and Frankel was using shareholder accounts to paying expenses, including rent, stock-quote services, and personal spending money for himself, his sister, and his mother. By mid-1988, he was also raiding some investor's accounts to cash out other, worried investors who were pulling out their money. He transferred the remaining funds to his personal account and told his remaining investor that the fund had collapsed due to Maxwell's bad trades and embezzlement. Frankel gave the funds to an attorney, but the funds were then turned over to the Securities and Exchange Commission.
Frankel moved back to Toledo and started a new firm, Creative Partners, while the SEC was investigating him, using the name Rothschild International Investments and a Swiss bank account to separate Creative Partners from his own name and ongoing investigation. By this time, his former boss's wife, Sonia Schulte, was divorcing. Sonia Schulte set up a brokerage in direct competition with her husband's and directed her clients to Creative Partners; meanwhile, Frankel set up another company, Donar Corporation, which paid for Sonia Schulte's new house, and paid Sonia's divorce and custody lawyers over $300,000 out of the Swiss bank account.
After paying a fine and agreeding to be barred from trading by the Securities and Exchange Commission in 1992, Frankel used several aliases, including David Rosse.
In an attempt to use the Roman Catholic Church
Roman Catholic Church
The Catholic Church, also known as the Roman Catholic Church, is the world's largest Christian church, with over a billion members. Led by the Pope, it defines its mission as spreading the gospel of Jesus Christ, administering the sacraments and exercising charity...
to discourage questions of legitimacy, Frankel founded the St. Francis of Assisi Foundation in the British Virgin Islands
British Virgin Islands
The Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...
, with a nominal mission of investing in insurance companies in order to fund hospitals. Among people solicited to join the Foundation board was retired CBS Evening News
CBS Evening News
CBS Evening News is the flagship nightly television news program of the American television network CBS. The network has broadcast this program since 1948, and has used the CBS Evening News title since 1963....
anchorman Walter Cronkite
Walter Cronkite
Walter Leland Cronkite, Jr. was an American broadcast journalist, best known as anchorman for the CBS Evening News for 19 years . During the heyday of CBS News in the 1960s and 1970s, he was often cited as "the most trusted man in America" after being so named in an opinion poll...
; when he declined to join, his name was used anyway. An official of the Roman Curia
Roman Curia
The Roman Curia is the administrative apparatus of the Holy See and the central governing body of the entire Catholic Church, together with the Pope...
, Monsignor
Monsignor
Monsignor, pl. monsignori, is the form of address for those members of the clergy of the Catholic Church holding certain ecclesiastical honorific titles. Monsignor is the apocopic form of the Italian monsignore, from the French mon seigneur, meaning "my lord"...
Emilio Colagiovanni, agreed to sign a letter falsely stating that the Foundation received funding from the Vatican
Holy See
The Holy See is the episcopal jurisdiction of the Catholic Church in Rome, in which its Bishop is commonly known as the Pope. It is the preeminent episcopal see of the Catholic Church, forming the central government of the Church. As such, diplomatically, and in other spheres the Holy See acts and...
.
Frankel fled the United States in May 1999. He went by private plane to Rome
Rome
Rome is the capital of Italy and the country's largest and most populated city and comune, with over 2.7 million residents in . The city is located in the central-western portion of the Italian Peninsula, on the Tiber River within the Lazio region of Italy.Rome's history spans two and a half...
and then to Hamburg, Germany, where he was arrested on September 4. He was first tried and sentenced in Germany to three years in jail for passport fraud. He was then extradited to the U.S. in 2001.
Colagiovanni was arrested in Cleveland, Ohio
Cleveland, Ohio
Cleveland is a city in the U.S. state of Ohio and is the county seat of Cuyahoga County, the most populous county in the state. The city is located in northeastern Ohio on the southern shore of Lake Erie, approximately west of the Pennsylvania border...
on August 30, 2001.
In May 2002, Frankel plead guilty to 24 federal counts of securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
, and related racketeering and conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
. Fifteen of Frankel's associates, including Colagiovanni and Sonia Schulte, also pled guilty to related crimes. By the time Frankel was first sentenced in December 2004, sixteen of his accomplices had been convicted. Frankel told the judge that most of his behavior what to earn enough money to provide for Sonia Schulte (by then Sonia Howe) and her two children; after this, the judge asked "So, you stole $209 million in order to take care of the children?" Frankel then explained that he could not end the scheme without it coming apart, and asked the judge to consider that deterrence should not be a factor in his sentencing because "If somebody is mentally ill, you shouldn't punish them because it won't stop other mentally ill people from doing it." Frankel was sentenced to 200 months (16 years 8 months) in federal prison; a state court in Tennessee also sentenced Frankel to 16 years, which was allowed to run concurrently on the condition that he assist officials in recovering lost assets looted from his Tennessee insurance companies.
Several states put Frankel's insurance companies into receivership when it was discovered the companies' primary assets were investments in Frankel's own shell company; among the states affected were Arkansas, Mississippi, Missouri, Oklahoma, Tennessee, and Virginia.