Martin Frankl Ponzi Scheme

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Examples of Ponzi Scheme Fraudulent Investments

Party On

Lake States Inc., which was a commodity fund ponzi, took 400 investors for $60 million. The promoters hosted lavish parties where investors discussed their good fortunes amongst themselves, creating a collective sense of trust and well-being.

For The Good of All Men

Martin Frankel AKA David Rosse AKA Eric Stevens absconded with $335 million after he found out that laxly regulated insurance companies are the perfect target for scam artists as they collect regular cash premiums that are paid out only as policies come due.

Despite being banned for life from securities trading in 1992 - after complaints that $1m had disappeared from a fund he managed - Frankel was able to set up Liberty National Securities, an unlicensed brokerage.

He took over Liberty National, which sold burial policies, then, using its assets, went on to gain controlling stakes in insurance firms in Arkansas, Mississippi, Missouri, Oklahoma and Tennessee. By issuing false statements to company trustees he siphoned off $208 million in cash reserves for an extravagant lifestyle consisting of jets, lavish parties and a bevy of live-in ladies.

A college dropout, obsessed over the financial markets, he also bought side-by-side mansions in Greenwich Conn. worth $3 million each with proceeds from his scheme.

Wishing to draw in more money he created a benevolent foundation which purported to not only generate high returns for investors but would acquire insurers and use the profits for charitable purposes. While pitching it he displayed an in-depth knowledge of the saints, especially St. Francis, who was known for helping the poor.

A well-connected New York business consultant introduced Frankel to various movers and shakers who Frankel hoped would add legitimacy to the St. Francis foundation. It soon attracted investments from major church groups but eventually he was forced to flee when authorities intervened.

While eleven insurance companies in five states were horrified to learn of the missing assets, so were some prominent people whose names had been attached to the charity without their permission.

Retired CBS newsman Walter Cronkite said he was contacted by an old friend, a priest living in Rome, and asked to become a member of the St. Francis Foundation's advisory board. It was described as a new organization that was being founded to aid charities involving children, health and education.

Cronkite said he refused, mainly because he was already busy with several other charities. Former Chrysler chairman Lee Iacocca was also listed, although he, too, withheld giving his permission. After Frankel disappeared, Cronkite learned that despite his refusal, his name had been listed as a member of the board on the foundation's mission statement. "Anybody who says he's got a billion dollars and is willing to give it away is likely to attract an awful lot of people," said Cronkite.

Monsignor Emilio Colagiovanni, 82, pleaded guilty to conspiracy to commit wire fraud and to launder money.while assisting Frankel in using the Saint Francis of Assisi Foundation to acquire insurance companies, while concealing Frankel's involvement, according to a complaint which charges both wire fraud and conspiracy to launder money.

The monsignor said in his statement that the plan was for Mr. Frankel to deposit $50 million into the Monitor Ecclesiasticus Foundation's bank account. The money would then be transferred to Saint Francis and Mr. Frankel would donate an additional $5 million to Monitor Ecclesiasticus or other organizations it designated. Mr. Frankel never transferred any of that money, but eventually gave Msgr. Colagiovanni $40,000, which he deposited in Monitor Ecclesiasticus's account at the Vatican bank.

Saint Francis never ended up acquiring any insurers, in part because regulators became suspicious about the foundation. Insurance companies and regulators were led to believe that the source of the foundation's funds were the Holy See and other Catholic entities when Frankel was the actual source.

A state initiated lawsuit says the Vatican was associated with the fraud through the actions of Colagiovanni in his role as a senior member of the Vatican government, and that other senior Vatican officials knew of the schemes but did not act to stop them, so they are seeking the $200 million-plus the amount U.S. insurance companies lost.

Frankel was to give $55 million to the Vatican as a charitable foundation whereby the Vatican would keep $5 million and Frankel would retain control over the remaining $50 million.

While the Vatican never received funds from the foundations nor furnished any from the $200 million, under the racketeering law, a party involved in the conspiracy is responsible for the entire amount stolen. A Vatican spokesman said Colagiovanni was a retired priest at the time of the alleged scheme and was acting "as a private Italian citizen."

Frankel, 47, after pleading guilty to 24 federal charges including racketeering, securities fraud and conspiracy could face a sentence of 150 years in jail and $6.5m in fines. Prosecutors have said they will back a lower penalty if he helps recover some of the stolen funds beyond the $70 million already recovered. Seven other people have entered guilty pleas in the case. Three of Mr. Frankel's associates are expected to face trial early next year.

12/04 - A former powerhouse fund-raiser for the Republican party and the Catholic church pleaded guilty yesterday to taking part in financier Martin Frankel's scheme to loot insurance companies in five states.

Thomas Bolan, 80, a lawyer of New York City, introduced Frankel to high-ranking church officials and helped him run a phony Roman Catholic foundation used to hide the plot.