Oversight, Or Lack Thereof, Let Frankel Steal

September 19, 2000

A lack of state regulations and oversight allowed rogue financier Martin Frankel to bilk more than $200 million from insurance companies in five states, says the General Accounting Office.

The information was broken today by the Associated Press and included information from an investigative Congressional subcommittee that found, if state regulators paid more attention to the purchases of insurance companies by a firm controlled by Frankel, they may have detected his alleged scam earlier. The report is scheduled for release later today.

Frankel ran an unlicensed insurance brokerage from his Greenwich, Conn. mansion before setting fire to business documents and disappearing in May 1999. He was arrested last fall in Germany and convicted of passport fraud and tax evasion. He continues to fight extradition to the United States, claiming Germany would infringe upon their own human rights laws should he be returned. Frankel allegedly purchased insurance companies in Tennessee, Mississippi, Arkansas, Oklahoma and Missouri under the umbrella of Thunor Trust, which he established in 1991.

“The purchase of insurance companies under Thunor Trust provided a number of opportunities for regulators to ask questions about the prospective owners. We believe some of these questions should have been routine,” the report said. “Had regulators exercised a higher degree of scrutiny or professional skepticism during the purchases, the scam may have been detected earlier.”

The report also says that a lack of communication in the Mississippi Insurance Department allowed Frankel to move one of his insurance companies to the state at the same time the department was growing suspicious of two other Frankel-controlled companies. According to the Associated Press story, the report also concludes that Tennessee officials never notified other states after discovering that another Frankel outfit, Franklin American Life, had looted its assets.

“During our review, we found no evidence that this information was proactively shared with other state regulators to help prevent the possibility of a potential scam spreading,” the report says. The report recommends, according to the Associated Press, that state insurance departments make sure that companies are worth the amount they claim. Also, the report says states should start sharing more information with each other.

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