September 6, 1999
 
 
 

                   A Fugitive U.S. Financier's Odyssey
                   Ends With Arrest at Hamburg Hotel

                   By CHRISTOPHER RHOADS and WILLIAM BOSTON
                   Staff Reporters of THE WALL STREET JOURNAL

                   HAMBURG, Germany -- The dirty cell in a Nazi-era prison where fugitive
                   broker Martin Frankel awaits extradition to the U.S. is just across the river
                   from Hamburg's stately Hotel Prem, where he was arrested on Saturday.

                                     But it is a world away from the glamorous life to
                                     which he aspired and which allegedly proved his
                                     downfall.

                                     The final leg of a four-month international manhunt
                                     for Mr. Frankel, 44 years old, began in his
                                     sprawling estate in Greenwich, Conn., and ended
                                     here in this port city. On July 7, a man who called
                                     himself Roger Ellis (Mr. Frankel) and a woman
                                     who called herself Susan Kelly (actually Cynthia
                                     Allison) checked into the Hotel Prem on the banks
                                     of Lake Alster under the name "Kelly" and paid in
                                     advance for a two-month stay in the luxury suite --
                   in cash. (The suite ordinarily goes for 450 marks to 500 marks [230 euros
                   to 255 euros and $241 and $268] a night.)

                   And there they waited, behaving just like any of the other well-heeled
                   guests, says the hotel manager, while authorities from the U.S. and other
                   countries scoured the globe for Mr. Frankel, who is believed to have
                   drained more than $200 million from U.S. insurance companies under his
                   control. They took meals regularly in the hotel's La Mer restaurant, one of
                   Hamburg's top seafood restaurants, occasionally having the doorman hail a
                   cab to go into town, but overall spending a lot of time together in their
                   suite.

                   But after months of dead ends, the U.S.
                   Federal Bureau of Investigation received a
                   promising tip and notified their German
                   counterparts, the Bundeskriminalamt or BKA,
                   in Wiesbaden at about 4 p.m. local time Saturday. The BKA then called
                   the Landeskriminalamt, or LKA, the state police force, in Hamburg. At
                   about 8:30 p.m., two LKA detectives in plain clothes drove out of the
                   garage at police headquarters in central Hamburg and approached Hotel
                   Prem.

                   Using a pass key they had obtained from the receptionist on duty in the
                   hotel lobby, the two LKA men entered the door of Room 5. "They moved
                   in silently and quickly, and you could say the two were surprised," said
                   Hans Juergen Petersen, a spokesman for the state police.

                   Realizing that the snare had fallen around him, Mr. Frankel looked at the
                   men from LKA and said: "You got me."

                   When the police searched the room they found two false passports, a wad
                   of cash, a desktop computer and diamonds. "We were kind of surprised
                   to find it all there with him," said Thomas Pickard, head of criminal
                   investigation for the FBI in Washington. Mr. Frankel fled the U.S. with an
                   estimated $2 million (1.87 million euros) worth of diamonds.

                   Note to Self: 'Launder Money'

                   Mr. Frankel was fingerprinted, photographed and questioned for about
                   one hour Saturday night. Following more questioning Sunday morning, Mr.
                   Frankel was transported at about 11 a.m. in an unmarked Volkswagen
                   Passat model to a state prison where suspects are held during
                   investigation. Mr. Frankel was described as having short, blond hair,
                   suggesting that he had attempted to disguise himself.

                   Wearing a white blouse and multicolored skirt, Ms. Allison appeared calm
                   and tired under questioning Sunday morning, the police spokesman said.
                   She was released from custody at about noon, and has checked out of the
                   hotel.

                   The Saturday night arrest ended Mr. Frankel's four-month flight. His
                   disappearance was first noticed in early May, when a fire alarm in his
                   abandoned luxury estate in Greenwich, a suburb of New York City,
                   alerted police. They notified the FBI after finding burned and partly
                   destroyed documents, including the notorious "to-do list" that began with
                   the reference: "launder money." By then a house of cards that Mr. Frankel
                   had allegedly built up to finance his lavish lifestyle was about to collapse
                   around him. Mr. Frankel now faces up to 25 years in prison on charges of
                   federal money laundering and wire-fraud offenses.

                   Mr. Frankel is a native of Toledo, Ohio, and had his trading license
                   revoked in 1992 by the U.S. Securities and Exchange Commission. But
                   documents discovered in the debris of his sprawling $3 million estate
                   indicate that he ran an unlicensed trading office. Through a string of aliases
                   and front companies, he is believed to have embezzled more than $200
                   million from insurance companies, diverting the money to Swiss bank
                   accounts and later turning cash into diamonds to hide his trail.

                   "In the last two weeks, we continued to get more and more leads from
                   different sources, from his associates in the U.S. who had gotten
                   disgruntled with him, and from people in the Hamburg area, who saw him,"
                   said Thomas Pickard, head of criminal investigations for the FBI in
                   Washington.

                   It could still be months before Mr. Frankel is extradited to the U.S., but
                   because an extradition agreement between the U.S. and Germany has
                   been in place since 1980, officials of both countries are not expecting any
                   problems. Law enforcement officials were already working late in the night
                   Saturday in Hamburg and at the U.S. embassy in Berlin to get the
                   paperwork started.

                   U.S. authorities now have three days to submit an extradition request to a
                   court in Hamburg with the possibility of a 20-day extension. The request
                   must include a statement from a U.S. prosecutor detailing the charges. The
                   length of the procedures depends on whether Mr. Frankel waives his right
                   to extradition hearings or resists. If he resists, the process could take
                   several months. The existing extradition treaty between the U.S. and
                   Germany covers the offenses with which Mr. Frankel has been charged.
                   An American embassy spokesman in Berlin said German authorities must
                   first determine whether Mr. Frankel has violated any German laws during
                   his two month stay here. If not, the Germans will have no claim on him and
                   that would ease the extradition process.

                   In a brief interview Saturday night, Mr. Frankel's New Haven lawyer said
                   he had not talked to his client, or the FBI, since the capture. Hugh Keefe
                   said that as far as he knew, he would continue to represent Mr. Frankel.
                   Previously, Mr. Keefe had said that he had been in contact with his client
                   regularly and that he had had conversations with federal authorities, but he
                   had declined to characterize those conversations.

                   International Dragnet

                   Last spring, the U.S. launched an international dragnet that soon involved
                   Interpol. There appears to have been at least one attempt to arrest Mr.
                   Frankel before his successful apprehension in Hamburg. A spokeswoman
                   at the U.S. Embassy in Berlin said authorities had come close to nabbing
                   Mr. Frankel in Italy, but she declined to elaborate on any of the details.
                   "There was a plan to arrest him in Italy, but he fled before it could be
                   carried out," she said.

                   Mr. Frankel arrived in Rome in early May and initially stayed in a
                   63-square-meter apartment arranged by contacts. He went out in public,
                   visiting cafes, eating out and going to cybercafes to check the Internet for
                   news coverage in the U.S. He moved twice, the first time to a bed and
                   breakfast.

                   He left there after only two nights, according to Mona Kim, who
                   accompanied him after the proprietor demanded their passports. Ms. Kim
                   stalled him by saying she had put them in a safe deposit box at a bank. The
                   next morning Mr. Frankel and his entourage departed at 6 a.m. Most of
                   Mr. Frankel's days centered around making phone calls, from public
                   phones using phone cards. Toward the end of his stay in Italy, he spent
                   most of his time indoors.

                   Ms. Kim said that he had read up on several European countries, and that
                   he had expressed fears about hiding in Germany because he feared being
                   exposed there. "I'm very surprised he ended up in Germany," she said.
                   Keith Rubenstein, a lawyer for Ms. Kim, said that his client had no idea
                   where Mr. Frankel intended to travel after she left him in late June. Mr.
                   Frankel doesn't speak any languages besides English.

                   Blind Alleys

                   The FBI suspects he didn't go directly from Italy to Germany. "We
                   tracked him to a couple of other places in between and we're not sure of
                   the exact route he took. We went down a few blind alleys," Mr. Pickard
                   of the FBI said. Mr. Frankel kept moving money from one account to
                   another, trying to stay ahead of authorities.

                   The woman with Mr. Frankel when he was arrested, Ms. Allison, was one
                   of roughly two dozen women who worked for Mr. Frankel's extended
                   household in Greenwich, but she was never one of his favorites. At least
                   seven of the women had been Mr. Frankel's lovers, but she was not
                   among them, people familiar with the household said. She did mostly
                   clerical-type work for Mr. Frankel.

                   Ms. Allison, who was divorced, had a romantic crush on Mr. Frankel,
                   according to several people who worked for him. Ms. Allison, who was
                   originally from the Midwest, came to the East Coast from California and
                   began working for Mr. Frankel in early 1998. Mr. Frankel made
                   arrangements for her to join him after Ms. Kim, who had accompanied him
                   to Italy decided to leave in late June. Another associate who had
                   accompanied him, Jackie Ju, had already returned to the U.S.

                   Low on Cash

                   In the last few weeks, Mr. Frankel has been depressed and has been low
                   on cash, said a person familiar with his situation. Although he had
                   diamonds, he was unable to get access to a bank account in Rome that
                   contained about $500,000.

                   Michael Wolf, the FBI special agent in charge of the investigation, told
                   reporters at a news conference in New Haven that authorities had received
                   numerous tips about Mr. Frankel's whereabouts from "Brazil to Italy, to
                   various countries all around the world, and many of them were inaccurate.
                   This particular one did bear fruit," he said.

                   At the 87-year-old Hotel Prem, where the brochure boasts of all the artists
                   and politicians who have stayed there, the staff was being instructed on
                   Sunday not to answer questions from reporters. A "Do Not Disturb" sign
                   hangs from the doorknob of Room 5, where Mr. Frankel had been
                   staying. But an inquisitive knock is met with silence.

                   -- Ellen Joan Pollock in New York contributed to this article.