Letter to the Editor
Most of you have read about Martin R. Frankel’s apparent cunning fraud, in which he appears to have stolen $350,000,000 from various organizations, including the Catholic church. Since all of the participants were sophisticated entities, both knowledgeable and experienced enough to have exercised due diligence in this affair, this fraud should not have worked. Rather than analyzing the fraud itself, which we may do at some later date, we would like to print the following letter to the editor, which we believe goes to the heart of the case.
28 June, 1999
I read with some interest today’s follow-up piece Fraud Claims Its First Victims Among Insurers.
Fraud of this type requires two willing parties: The fraudster and the greedy participant. Participants want to do business with the Mr. Frankels of the world because they have a better story than does anyone else, sufficiently appealing to the participants’ sense of avarice as to discourage careful – or even superficial – examination.
It should come as no surprise that, for the cost of a phone call to a regulatory agency, or a few hours of a financial investigator’s time, each of the participants in this debacle could have found out that Frankel had been disciplined several times and had lost several licenses. His violations were so flagrant and so numerous that it would have taken little time to uncover the history of transgressions, but several hours to draft the report.
Mr. Frankel will eventually be caught and stand trial. The facilitators should, in a more timely manner, be held accountable for their cupidity and their failure to exercise due diligence.
And what will have been learned from this? In the future we, as financial investigators, will be calling on at least some of your readers, who, even as we write, are shaking their heads in amazement over this incident. Our experience indicates that, believing themselves to be smarter than those coopted by Mr. Frankel, most will have no interest whatsoever in exercising due diligence in the affairs of their own enterprise.