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.