We’ve talked, on this blog, about insurance fraud many times before. But our focus has always been on a somewhat small scale (think builders who leave with your money before their job is done or a homeowner claiming exaggerated losses after a house fire). Now, however, comes a case where the money laundered is in the hundreds of millions instead of the tens of thousands; where the swindled aren’t unsuspecting insureds, but entire insurance companies across the United States. This is the case of Martin Frankel and his $200 million in stolen loot.
The background is this: In the 1990s, a businessman, Martin Frankel, had a penchant for purchasing small insurance companies. He would launder money from a company–putting aside enough to purchase a new one–and then leave the first company insolvent in ruins. When the scam was complete, he’d find another company and repeat.
How did Frankel accomplish this disingenuous feat time and time again? Insurance Journal reports that he used an alias, David Rosse, and third parties to disguise his actions. In fact, his most notable victim happens to be the Roman Catholic Church.
“Frankel cultivated a relationship with [a priest in his 90s, Monsignor Emilio] Colagiovanni and formed a charity, the St. Francis of Assisi Foundation to Serve and Help the Poor and Alleviate Suffering, and set it up in the British Virgin Islands in 1998 to deceive regulators about the source of money he was using to buy insurance companies, court records said,” according to Insurance Journal.
“The lawsuit said Colagiovanni agreed to use the Monitor Ecclesiasticus Foundation and its Vatican bank account to work with St. Francis and to vouch for Frankel’s charity with regulators. In exchange, Colagiovanni was to get $5 million to use on charitable projects, court records said.”
In the wake of Frankel’s misdeeds (in a fraud case that has been going on for 11 years), Colagiovanni was fined $15,000 and put on probation in 2002 after pleading guilty to a count of conspiracy, but agreed to cooperate with the investigation to bring down Frankel.
In a case that seemed like it would never end, authorities are finally bringing a close to the final details. Frankel is currently incarcerated and serving an almost 17-year sentence after being charged with 24 counts of fraud and racketeering.
Although he was guilty of carrying out his scheme in five different states and fleeing to Europe in 1999, after torching one of his two mansions, Frankel is scheduled for release in 2015. Despite his multitude of over 21 cars and SUVs, substantial real estate, personal airplane, and literally hundreds of diamonds, the general consensus in Mississippi where the case has played out, is that there is no more retribution that can be gleaned from Frankel’s once-resplendent estate.
Most of us will never see this kind of wealth but, like the fate of Bernie Madoff, Martin Frankel’s story needs to be taken as a cautionary tale. In an industry that deals with fraud on a daily basis, it’s always the right choice to steer clear of any dishonestly conniving actions. If Frankel’s plight makes anything clear, it’s this: insurance fraud will get you nowhere…other than a jail cell for the foreseeable future.