In a scam spanning five states, including Oklahoma, Martin Frankel stole more than $200 million from seven insurance companies, during the 1990s. Frankel, now incarcerated for the scheme, pretended to invest the insurers’ funds in U.S. Treasury instruments, while in fact transferring the assets to a Swiss bank account. Since 1999, LL&D has represented Oklahoma Insurance Commissioner Kim Holland and her predecessor commissioner, as Receiver of the Oklahoma insurer victimized by the scheme. 

 

     Using the alias “Eric Stevens,” Frankel used various accounts, including several at Dreyfus Service Corporation, to move hundreds of millions of dollars in and out of Swiss bank accounts. On January 26, 2010, the Fifth Circuit held Commissioner Holland and the receivers of six other insurer-victims, located in five other states, may take Dreyfus to trial on the issue of whether Dreyfus was negligent in allowing this to happen. See Chaney v. Dreyfus Service Corp., No. 08-60555, slip op. at 12 (5th Cir. Jan. 25, 2010).

 

     While courts worry about “imposing . . . endless, unpredictable liability” on entities that aid fraud without intending to, the Fifth Circuit held New York law required Dreyfus to ensure the Swiss transfers were authorized by the insurers. The Fifth Circuit found Dreyfus’ “efforts to identify the origin, legitimacy, or ultimate destination” of the $480 million that passed through its accounts “were non-existent.” Instead, the Court said, Dreyfus relied solely on Frankel’s representations in conducting the transactions.

 

     The story of Frankel’s scheme is full of intrigue. In addition to Dreyfus, Frankel attempted to use the Vatican to launder money. One Vatican official, Monsignor Emilio Colagiovanni, pleaded guilty to conspiracy to commit wire fraud and launder money. Colagiovanni, an Italian citizen and a priest for 60 years, admitted in his guilty plea that in 1998 and 1999 he helped Frankel defraud American insurance companies.