One of the most tumultuous periods of insurance and securities oversight quietly drew to a close recently when convicted swindler Martin Frankel finished his 17-year federal sentence.
The geekish financier recently was released from federal prison in New Jersey. He’s in a transition facility, prepping for life back on the streets.
Frankel sent shockwaves through the securities and state insurance systems. He launched a daring swindle that exposed large gaps in how states oversee insurance and protect against scams.
He secretly bought several small, ailing life insurance companies back in the 1990s. Hiding his ownership, Frankel looted more than $200 million of their assets and hid the money in Swiss bank accounts. He ran the insurers into the ground. Several hundred innocent employees lost their jobs and livelihoods.
It’s one of the largest insider lootings of insurers in history.
He hid the conniving from state regulators for a decade. Frankel had been banned from securities for bilking investors. Yet incredibly, he next created an investment firm called Thunor Trust as a front for his looting. Yet state insurance regulators had no idea a crook was brazenly doing insurance business.
Frankel lived a princely lifestyle off the stolen insurance loot. He bought a 25-room mansion in swanky Greenwich, Conn. A bevy of live-in girlfriends kept coming and going. Frankel showered them with diamonds, trips and other goodies, while stabling a fleet of 30 luxury cars. By day, he did business in an onsite NASA-like command center with 80 computers and widescreen TVs.
Mississippi and Tennessee insurance regulators finally got wind of Frankel’s maneuvering and busted him.
He tried to burn down his mansion to hide the evidence as law enforcement closed in. Officials found a partially burned to-do list: “Launder more money NOW.” Frankel fled to Europe and was captured in Germany. He had nine fake passports and 547 diamonds.
Frankel even bribed a Vatican official to vouch for a false charity he’d set up to hide his conniving.
The scheme exposed widespread shortfalls in how securities and insurance regulators oversaw such entities.
Call the problems oversight oversights.
“We found inadequate tools and measures for assessing the appropriateness of insurance company purchasers, analyzing securities investments, evaluating the appropriateness of asset custodians, verifying insurers’ assets, and sharing information within and outside the insurance industry,” the feds warned in a report.
Major reforms and stricter oversight went into place. Future Frankels will have a much harder time operating the way he did. Certainly the insurance system is better equipped with tripwires to expose such cons earlier in the game.
On the cusp of freedom, however, Frankel was packed off to jail again this week. He’s already charged with unspecified rules violations.
Whatever. Marty Frankel still did regulators a backhanded favor, putting the systems through a much-needed stress test that hardened oversight considerably. Several hundred honest Americans lost their jobs and careers while Frankel luxuriated in BMWs and diamonds. Yet we can still say “Thanks Marty – sort of.”
About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.