Vatican Bank

[Magda Hassan]

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
GEORGE DALE, Commissioner of Insurance for the
State of Mississippi, in his official capacity as Receiver
of FRANKLIN PROTECTIVE LIFE INSURANCE
COMPANY;
GEORGE DALE, Commissioner of Insurance for the
State of Mississippi, in his official capacity as Receiver
of FAMILY GUARANTY LIFE INSURANCE
COMPANY;
GEORGE DALE, Commissioner of Insurance for the
State of Mississippi, in his official capacity as Receiver
of FIRST NATIONAL LIFE INSURANCE
COMPANY OF AMERICA;
ANNE B. POPE, Commissioner of Commerce and
Insurance for the State of Tennessee, in her official
capacity as Receiver of FRANKLIN AMERICAN
LIFE INSURANCE COMPANY;
SCOTT B. LAKIN, Director of the Department of
Insurance for the State of Missouri, in his official
capacity as Receiver of INTERNATIONAL
FINANCIAL SERVICES LIFE INSURANCE
COMPANY;
CARROLL FISHER, Insurance Commissioner for the
State of Oklahoma, in his official capacity as Receiver
of FARMERS AND RANCHERS LIFE INSURANCE
COMPANY; and
MIKE PICKENS, Insurance Commissioner for the
State of Arkansas, in his official capacity as Receiver
of OLD SOUTHWEST LIFE INSURANCE
COMPANY,
Plaintiffs,
v.
EMILIO COLAGIOVANNI; EDWARD DAVID
COLLINS; THOMAS CORBALLY; ENDURANCE
INVESTMENTS LTD.; THE HOLY SEE a/k/a
VATICAN CITY STATE; and MONITOR
ECCLESIASTICUS FOUNDATION,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
))
)
)
No. 3:01 CV 663BN
SECOND AMENDED
COMPLAINT
JURY DEMANDED
SECOND AMENDED COMPLAINT
Plaintiffs, for their Second Amended Complaint against Emilio Colagiovanni
(AColagiovanni@), Edward David Collins (ACollins@), Thomas Corbally (ACorbally@), Endurance
Investments, Ltd. (AEndurance@), the Holy See a/k/a Vatican City State (AVatican@ or AHoly See@)
and Monitor Ecclesiasticus Foundation (AMEF@), state as follows:
INTRODUCTION
1. Between at least 1990 and 1999, Martin Frankel (AFrankel@), assisted by Defendants
and others, devised and implemented a scheme to defraud insurance companies by acquiring them
while concealing Frankel=s involvement, and then misappropriating the companies= assets and
laundering the ill-gotten gains. Through this scheme, seven insurance companies were defrauded of
more than $200 million. The Defendants participated in activities that furthered and facilitated
Frankel=s fraudulent scheme.
THE PARTIES
The Plaintiffs
2. Plaintiff George Dale (ADale@) is the duly appointed Receiver of Mississippidomiciled
Franklin Protective Life Insurance Company (AFPL@), pursuant to an Order of
Rehabilitation entered on May 10, 1999, by the Chancery Court of the State of Mississippi, First
Judicial District, Hinds County, in the action George Dale, Commissioner v. Franklin Protective
Life Insurance Company, No. G99-907. On June 29, 1999, an Order of Liquidation was entered
against FPL.
3. Dale is the duly appointed Receiver of Mississippi-domiciled Family Guaranty Life
Insurance Company (AFGL@), pursuant to an Order of Rehabilitation entered on May 10, 1999, by
the Chancery Court of the State of Mississippi, First Judicial District, Hinds County, in the action
3
George Dale, Commissioner v. Family Guaranty Life Insurance Company, No. G99-909. On
June 29, 1999, an Order of Liquidation was entered against FGL.
4. Dale is the duly appointed Receiver of Mississippi-domiciled First National Life
Insurance Company of America (AFNL@), pursuant to an Order of Rehabilitation entered on May 10,
1999, by the Chancery Court of the State of Mississippi, First Judicial District, Hinds County, in the
action George Dale, Commissioner v. First National Life Insurance Company of America, No. G99-
908. On June 29, 1999, an Order of Liquidation was entered against FNL.
5. Plaintiff Anne B. Pope (APope@) is the duly appointed Receiver of Tennesseedomiciled
Franklin American Life Insurance Company (AFAL@), pursuant to an Order of
Rehabilitation entered on May 11, 1999, by the Chancery Court of the State of Tennessee, Twentieth
Judicial District, Davidson County, in the action State of Tennessee, ex rel. Douglas Sizemore v.
Franklin American Life Insurance Company, No. 99-1326-II. On October 25, 1999, an Order of
Liquidation was entered against FAL.
6. Plaintiff Scott B. Lakin (ALakin@) is the duly appointed Receiver of Missouridomiciled
International Financial Services Life Insurance Company (AIFS@), pursuant to an Order of
Rehabilitation entered on May 12, 1999, by the Circuit Court of the State of Missouri, Cole County,
in the action Keith A. Wenzel, Director v. International Financial Services Life Insurance Company,
No. CV199-623CC. On November 30, 1999, an Order of Liquidation was entered against IFS.
7. Plaintiff Carroll Fisher (AFisher@) is the duly appointed Receiver of Oklahomadomiciled
Farmers and Ranchers Life Insurance Company (AFRL@), pursuant to an Order of
Rehabilitation entered on May 21, 1999, in the action State of Oklahoma, ex rel. Carroll Fisher v.
Farmers and Ranchers Life Insurance Company, No. CJ-99-3401. On January 14, 2000, an Order of
Liquidation was entered against FRL.
4
8. Plaintiff Mike Pickens (APickens@) is the duly appointed Receiver of Arkansasdomiciled
Old Southwest Life Insurance Company (AOSL@), pursuant to an Order of Rehabilitation
entered on June 4, 1999, by the Circuit Court of the State of Arkansas, Seventh Division, Pulaski
County, in the action Mike Pickens, Commissioner v. Old Southwest Life Insurance Company,
No. 99-4541. No Order of Liquidation has been entered against OSL.
The Defendants
9. Defendant Colagiovanni is a citizen of the Republic of Italy and a Roman Catholic
Amonsignor.@ In 1998 and 1999, Colagiovanni was associated with Frankel and assisted him in his
efforts to acquire additional insurance companies. Colagiovanni is an auditor (judge) emeritus of the
Tribunale della Rota Romana (the ARota@), one of the Vatican=s three appellate courts, and is a
professor in the Studio Rotale, a graduate program connected to the Rota. He is a consultant to two
of the Vatican=s Congregations: the Congregation for Divine Worship and Sacrament, and the
Congregation for the Clergy. At all relevant times, Colagiovanni was a senior member of the
ACuria,@ the Vatican=s government, and was an agent of the Vatican, exercising both actual and
apparent authority on behalf of his principal, the Vatican. Colagiovanni=s status as a member of the
Curia was integral to the workings of Frankel=s scheme. In a Criminal Complaint filed in the United
States District Court for the District of Connecticut in United States of America v. Emilio
Colagiovanni, No. 3:01-M-221 (D. Conn.), Colagiovanni has been charged with wire fraud and
conspiracy to launder money, in violation of 18 U.S.C. '' 2, 1343, and 1956(h), in connection with
the scheme to defraud alleged herein. He is currently under house arrest in Ohio.
10. Defendant Collins is a citizen of the state of California. In 1998 and 1999, Collins
was associated with Frankel and assisted him in his efforts to acquire additional insurance
companies. In 1998, Collins served as an officer and director of American Service Corporation. In
5
1999, Collins served as a Trustee of the St. Francis of Assisi Foundation to Serve and Help the Poor
and Alleviate Suffering.
11. Defendant Corbally is a citizen of the state of New York. In 1998 and 1999, Corbally
was associated with Frankel and assisted Frankel in his efforts to expand his insurance empire.
12. Defendant Endurance is an entity of unknown citizenship that is under the control and
domination of Corbally. In 1998 and 1999, Corbally used Endurance as a vehicle to receive cash
compensation from Frankel.
13. Defendant Vatican is a unique entity. Although it does not necessarily meet the
formal definition of a Astate,@ it has entered into treaties and conventions with other states, maintains
diplomatic relations with other states, including the United States, and has observer status at the
United Nations. It has its own sovereign territory, completely surrounded by the city of Rome, Italy.
As the Holy See, it is also the administrative capital of the Roman Catholic Church. By assisting
Frankel in the attempted purchase of U.S. insurance companies during 1998 and 1999, the Vatican,
through its agents, carried on commercial activities in the United States, committed acts in the
United States which affected its commercial activities elsewhere, and engaged in commercial
activities outside the United States which had a direct effect within the United States, as set forth in
28 U.S.C. ' 1603 and 28 U.S.C. ' 1605(a)(2). These commercial activities were private, not
sovereign, and secular, not religious. In 1998 and 1999, the Vatican was associated with Frankel
through the activities of its agent Colagiovanni, Defendant MEF, other Vatican officials, and
associates of Frankel.
14. MEF is an autonomous pious foundation originally established in the Archdiocese of
Naples, Italy. It was at all relevant times headquartered in and operated from the Vatican. An
Aautonomous pious foundation@ is an ecclesiastical entity, formed under the internal laws of the
6
Roman Catholic Church known as ACanon Law.@ MEF publishes a journal, Monitor Ecclesiasticus,
which reports the decisions of the Vatican=s three tribunals and publishes articles relating to those
decisions. The journal is distributed in nearly every country of the world, including the United
States. In addition to publishing Monitor Ecclesiasticus, MEF engages in general charitable works.
At all relevant times, Colagiovanni was the President and legal representative of MEF, and was a
member of the board of editors of Monitor Ecclesiasticus. At all relevant times, Father Peter Jacobs
was the International Coordinator of MEF and helped with its fund-raising activities.
JURISDICTION AND VENUE
15. This Court has subject matter jurisdiction pursuant to 28 U.S.C. ' 1605(a)(2) and 28
U.S.C. ' 1608. Jurisdiction is also proper pursuant to 28 U.S.C. ' 1330(b), 28 U.S.C. ' 1331, 28
U.S.C. ' 1367, and the Racketeer Influenced and Corrupt Organizations Act (ARICO@), 18 U.S.C. '
1961, et seq.
16. This Court has personal jurisdiction over the Defendants pursuant to 18 U.S.C.
' 1965 and Miss. Code Ann. ' 13-3-57.
17. Venue is proper in this district pursuant to 28 U.S.C. ' 1391 and 18 U.S.C. ' 1965.
FACTUAL ALLEGATIONS
7
18. This action arises out of a course of illegal conduct, masterminded by Frankel, that
began no later than 1990 and ended with Frankel=s capture in Germany in September 1999. During
this period, Frankel, assisted by numerous others, including Defendants, devised and implemented a
scheme to defraud. Among other things, Frankel=s scheme called for the acquisition of insurance
companies while concealing his involvement in those acquisitions, the misappropriation of the
insurance companies= invested assets, and the laundering of the ill-gotten gains. Frankel=s plan was
essentially a pyramid scheme, since some of the money looted from the insurance companies he
acquired was used to fund the acquisition of additional insurance companies, which would in turn be
looted of their assets, and the ill-gotten gains laundered.
19. Each of the insurance companies Frankel looted is now insolvent. Plaintiffs are the
court-appointed receivers for the seven insurance companies looted by Frankel (collectively the
AInsurance Companies@). As Receivers, Plaintiffs are charged with the administration of the estates
of the insolvent Insurance Companies and have been ordered to locate, marshal, take into possession
and distribute to policyholders and creditors all assets of the Insurance Companies. Plaintiffs are
vested by law with the title to all assets and causes of action and with the authority to prosecute any
action which may exist on behalf of each of the Insurance Companies, as well as on behalf of their
creditors, policyholders and shareholders, against any culpable parties.
20. Insurance is a regulated business. All states require that any change of control for an
insurance company be approved by insurance regulators in the state in which the company is
domiciled, through the process of filing a AForm A.@ The proposed acquiring entity must file an
application for change of control that includes information about, among other things, the identity
and background of the ultimate controlling party, the nature, source and amount of consideration to
8
be paid for the acquisition, and the future plans for the company. It is a criminal offense willfully or
knowingly to make false statements in connection with a Form A application.
21. Insurance laws and regulations also require that each insurance company file an
Annual Statement each year. The Annual Statement must disclose financial information relating to
the insurance company, including information relating to its assets, liabilities and investments. It is
a criminal offense for an insurance company director to subscribe to an Annual Statement knowing it
to contain any material false statement.
22. Despite these regulations requiring disclosure, it was essential to the success of
Frankel=s scheme that regulators and acquisition targets not know of his role in the funding,
acquisition, operation and control of the insurance companies. In 1992, as the result of a Securities
and Exchange Commission enforcement action in federal court, Frankel was permanently enjoined
from trading securities and from associating with any broker-dealer, investment advisor or securities
dealer. Frankel=s bar from the securities industry would have disqualified him from owning or
operating insurance companies. Secrecy as to the source of funds being used was also essential
because Frankel used looted funds wired from his bank account in Switzerland to purchase new
insurance companies. Discovery of Frankel=s role in the acquisition and control of insurance
companies, or the source of funds he used to acquire insurance companies, would have destroyed his
plans and brought an end to his scheme.
23. To permit his acquisition of insurance companies while concealing his involvement,
Frankel, acting with the assistance of at least John Hackney, John Jordan and Gary Atnip, formed the
Thunor Trust in 1991. The final version of the trust documents listed three persons as grantors,
although none of them actually contributed any money to the trust. They were nominees or aliases
9
of, and/or were controlled by, Frankel. Hackney was named the sole Trustee of Thunor Trust, but at
all relevant times Frankel controlled Thunor Trust and its assets.
24. In 1991, Thunor Trust entered into an agreement to purchase a majority interest in
Franklin American Corporation (AFAC@), which was the sole shareholder of FAL. Thunor Trust
filed an application for change of control with the Tennessee Department of Commerce and
Insurance (ATennessee Department@). The Form A application concealed Frankel=s interest in and
control of Thunor Trust and his plans to control and loot FAC and FAL. As a result of this
concealment, the Tennessee Department approved the acquisition on October 7, 1991. Frankel used
monies stolen from his former securities clients to fund the purchase.
25. Approximately one month after acquiring control of FAL and FAC, Frankel caused
FAL=s invested assets of approximately $17.5 million to be wired, through a series of transfers, to
an account at Banque SCS Alliance in Switzerland, over which he exercised complete control and
domination. Frankel then used those assets for his own benefit and for the benefit of his friends and
associates.
26. This pattern continued over the next six and one-half years. In 1994, FAL purchased
FRL. Also in 1994, FAC purchased FGL, IFS and FPL. In February 1998, International Financial
Corporation (AIFC@), a Frankel-controlled holding company, purchased Plaintiff FNL. In April
1999, FAL purchased OSL.
27. For each acquisition, a Form A was filed with the insurance regulators of the state in
which the acquired company was domiciled. Each Form A concealed Frankel=s control of Thunor
Trust, FAC, FAL and the other companies. Each Form A contained false statements about the
source of the funds to be used in the acquisition and future plans for the company.
10
28. After each acquisition, Frankel caused the insurer=s invested assets to be liquidated
and wire transferred to his account at Banque SCS Alliance, where he exercised complete control
and domination over them, and converted them to his use and the use of his friends and accomplices.
29. After Frankel=s acquisition of each of the Insurance Companies (except OSL),
Hackney represented to regulators and others that Hackney managed the Insurance Companies=
assets, although he knew such representations were false. Hackney and others also represented to
regulators and others that investments made with the assets of the Insurance Companies (except
OSL) were held by Liberty National Securities, Inc. (ALNS@), although they knew such
representations were false.
30. Purportedly, LNS acted as custodian of the assets and funds of the Insurance
Companies, and invested the assets for the benefit of the Insurance Companies. In fact, Frankel,
Hackney, Atnip and others, acting through LNS, converted and misappropriated those assets and
funds for their own personal use and enjoyment, and for the benefit of others who conspired with
and assisted them in their fraudulent activities.
31. In addition, to conceal the fact that the Insurance Companies had been looted of their
assets, Frankel, Hackney, Atnip and Jordan caused false Annual Statements for each of the Insurance
Companies (except OSL) to be filed each year with regulators in the states in which the companies
were domiciled. The Annual Statements falsely indicated that the Insurance Companies (except
OSL) possessed substantial assets and that the assets were invested predominantly in United States
Government securities. In reality, the assets were under the control and domination of Frankel, who
used them for his own benefit and for the benefit of his friends and associates. The false statements
and omissions misled insurance regulators and others and allowed Frankel, Hackney, Atnip, Jordan
and others to maintain their control of the Insurance Companies, and to continue to acquire, loot and
11
launder funds of the Insurance Companies, while concealing Frankel=s identity and the true status of
the insurance companies.
The Spring of 1998: Frankel Decides to Further Expand His Operations
32. In the spring of 1998, Frankel decided to operate on a much grander scale, both to
acquire further assets and to create a new and more credible front to conceal his involvement in the
acquisition and control of insurance companies. His plan called for the acquisition of up to $150
billion in additional insurance company holdings. As with the Insurance Companies previously
acquired, Frankel=s true intention was to misappropriate the assets of these companies and then
launder the funds so that he could use them for the benefit of himself and those associated with him.
33. One of Frankel=s first targets under the plan was Colorado-domiciled Capitol Life
Insurance Company (ACLICO@), which had over $400 million in invested assets. A purchase of
CLICO would enable Frankel to almost triple the assets under his control.
34. Colorado insurance regulators require specific disclosures before the purchase of an
insurance company may be consummated. The buyer must disclose the names and addresses of any
person who would directly or indirectly control the insurance company, the nature and source of the
monies to be used in the purchase, and the identity of the person or persons furnishing the monies.
Because of these regulations, Frankel needed to find a nominee or Afront@ organization to disguise
his involvement in the proposed acquisition of CLICO. Frankel also believed that the Thunor Trust
group of companies was too small and insignificant to serve as a vehicle for his planned hundredbillion-
dollar acquisitions. To succeed in his plan, Frankel needed the involvement of higher profile
associates to lend him credibility.
Frankel Meets Corbally
12
35. In April or May 1998, Frankel, using the alias ADavid Rosse,@ met Corbally through
Frankel=s former girlfriend and co-conspirator, Kaethe Schuchter (ASchuchter@). Schuchter was one
of Frankel=s Alieutenants,@ often making trips on his behalf to Europe to handle business matters
related to the scheme. At the time he met Frankel, Corbally was employed by the internationally
known private detective agency Kroll Associates, and was known for his extensive business contacts
throughout the world. Frankel realized that Corbally could introduce him to the people who would
give Frankel=s operation the appearance of legitimacy he needed. Frankel asked Corbally to help
him form a team of insurance, legal and financial professionals to implement Frankel=s plans for
expanding his illegal insurance operations. Corbally set about introducing Frankel to influential
people who could assist him.
36. In May 1998, Corbally introduced Frankel, posing as ARosse,@ to Collins. Collins,
whom Plaintiffs believe to be a retired executive of Hanson Trust Plc, served as a Afront@ for
Frankel=s proposed acquisition of CLICO. Collins represented that he was the source of the funds
for the purchase, although he was not. In exchange for his participation, Collins received substantial
in-kind payments and other benefits, including but not limited to $40,000 to $50,000 in air travel for
himself and his companions.
37. At a meeting in June 1998 relating to the proposed CLICO acquisition, Collins falsely
represented that he had a net worth of $200 million and was interested in setting up a trust and
making a charitable contribution. Collins expressed an interest in purchasing insurance \companies
as a means of raising the money for charity. Collins falsely represented that his own money would
be used to fund the trust and purchase the insurance companies.
13
The Summer of 1998: The Initial Plan to Purchase CLICO
38. As a result of the June 16 meeting, Frankel and other members of his team agreed to
create a new corporation to use as a front to acquire insurance companies. That same day, American
Service Corporation (AASC@) was formed in Delaware. Collins was listed as the director and
incorporator.
39. Shortly thereafter, ASC, through Collins and Frankel, made an application to open a
new account at Prudential Securities. Although the forms listed Collins as the President of ASC, the
forms indicate that Frankel (posing as ARosse@), as Afinancial advisor,@ was to have full access to the
account.
40. In June and July, Frankel, Hackney, Atnip and others circulated several draft Letters
of Intent for ASC to purchase CLICO. Some versions represented that Collins owned ASC, while
others stated that AUS Charity Trust,@ an irrevocable trust supposedly funded by Collins, owned
ASC.
41. By July 1998, members of CLICO management began questioning whether ASC had
sufficient funds to complete the acquisition. To allay these suspicions, Collins hurriedly finished
opening the Prudential Securities account. Frankel then transferred $50 million from his Swiss bank
account into the ASC account at Prudential Securities, so that an account statement could be
generated showing that, as of a certain date, ASC had $50 million in the account. The money was
transferred out of the account a few days later.
42. As the deal progressed, Frankel=s team exchanged drafts of a Stock Purchase
Agreement with CLICO. The owner of ASC was variously described as ALourdes Charitable Trust,@
AU.S. Charity Trust,@ ACambridge Charity Trust,@ and the APontifical Foundation for the Benefit of
14
World Charities.@ At all times, however, Collins was depicted in these documents and held out by
Frankel=s Ateam@ as the source of the funds for the CLICO acquisition.
43. Collins signed documents indicating that he was a ATrustee@ of the Lourdes
Charitable Trust of Guernsey, knowing that he was a Trustee in name only, and that Frankel would
have control of the Trust. Collins also signed documents indicating that he was a ATrustee@ of the
Cambridge Charitable Trust, knowing that he was a trustee in name only and that Frankel would
have control of the trust. These documents were mailed, e-mailed and/or faxed to create the
appearance that Collins, not Frankel, was in control of the above-named trusts, and that Collins, not
Frankel, was funding the purchase of CLICO.
44. In late July 1998, Frankel decided that the Roman Catholic Church would make an
even better Afront@ than Collins for his purchase of United States insurance companies. Corbally
again provided introductions, this time to Fausto Fausti, an Italian businessman who had contacts
with the Church. Fausti contacted Father Christopher Zielinski, a Roman Catholic priest and the
director of The Genesis Center in Florence, Italy, a charitable foundation. Fausti told Father
Zielinski that a wealthy investor wanted to donate $50 million to the Center. The Center=s lawyer
spoke with Corbally, who outlined the deal to her: Frankel, as ARosse@ would not Adonate@ $50
million to the Center, but would maintain control of the money and would use it to purchase United
States insurance companies. When those insurance companies profited, the Center would receive
donations from the profits. After meeting with Fausti and Schuchter, and consulting with its
attorney, the Center, suspecting it was being asked to participate in a money-laundering scheme,
turned down Frankel=s offer.
45. Corbally then introduced Frankel to Thomas A. Bolan (ABolan@), a well-connected
New York lawyer with ties to the Roman Catholic Church. Corbally told Bolan he knew a man who
15
made millions a day through trading who wanted to help the poor and thought he should do it
through the Roman Catholic Church.
46. Bolan contacted Father Peter Jacobs (AJacobs@), a Roman Catholic priest with ties to
the Vatican. Jacobs is officially incardinated in the Archdiocese of Washington, D.C., but lives in
Rome.
47. Jacobs in turn contacted Defendant Colagiovanni. In the early part of August 1998,
Jacobs and Colagiovanni flew to the United States at Frankel=s expense and met with Bolan and
Frankel, posing as ARosse,@ at Frankel=s home in Greenwich, Connecticut.
48. Frankel told Bolan, Jacobs and Colagiovanni he planned to set up a charitable
foundation. This foundation would be formed in the Vatican, under Vatican law. Frankel proposed
to secretly control the foundation through the ability to elect a majority of its Board of Trustees.
Frankel offered to transfer $55 million to this Vatican foundation. The Vatican would be permitted
to keep $5 million to do with as it saw fit, in exchange for which Frankel would be allowed to
secretly retain control over the remaining $50 million, ostensibly to use for insurance company
acquisitions. While at Frankel=s home in Greenwich, Bolan, Jacobs and Colagiovanni discussed how
the $5 million that was to be donated for charitable purposes might be spent.
49. For Frankel=s plan to work, the $50 million had to appear to be Vatican money, being
used to pursue a Vatican-related initiative. As Frankel explained in a letter addressed to Bolan:
AOur agreement will include the Vatican=s promise that the Vatican will aid me in my effort to
acquire insurance companies by allowing Father Jacobs or another Vatican official to certify to the
authorities, if necessary, that the source of funds for the Foundation is the Vatican.@ In fact, Frankel
repeatedly stressed that his name (ARosse,@ as his co-conspirators knew it) should not be disclosed in
16
any documents, and that no outsider should know he was the true source of the funds used in the
deal.
50. Bolan then traveled to the Vatican and, with Colagiovanni, proposed the plan to
Bishop Francesco Salerno (ASalerno@) in a meeting at the Vatican. At that time Salerno was the
Secretary of the Prefecture for the Economic Affairs of the Holy See, the Vatican=s Afinance
department.@ Salerno was also on the board of MEF. The parties discussed the proposal, informing
Salerno specifically that ARosse@ would be the source of the funds, and would retain control of the
$50 million, even after it was Adonated@ to the Vatican foundation.
51. On August 18, 1998, Salerno approved the plan, saying it was Aa good idea,@ and
instructed Bolan to prepare by-laws for the foundation. Bolan did so, and Jacobs provided them to
Salerno. The proposed by-laws allowed Frankel to appoint two of the proposed foundation=s three
trustees, and the Vatican to appoint the other. Salerno inquired of John Cardinal O=Connor, then the
Archbishop of New York, as to who the Vatican appointee should be.
52. Thereafter, Jacobs received a telephone call from Salerno saying that the Vatican=s
Secretary of State had expressed misgivings about the plan. After consultation with Frankel, Bolan
was again dispatched to the Vatican, where he and Jacobs met with Monsignor Gianfranco Piovano
and Father Brian Farrell. Both were employees of the Vatican=s Secretariat of State and met with
Bolan and Jacobs in the Vatican building which houses the Secretariat. Piovano informed Bolan that
Frankel could not control a Vatican foundation, and that the Vatican Adid not want the perception
that it was running insurance companies.@ Piovano stated that some other way would have to be
found to make the donation.
53. Frankel accepted Piovano=s suggestion that they Afind some other way@ by devising
an alternative plan to accomplish the original goal of the scheme. Under the new plan, Frankel
17
would form St. Francis of Assisi Foundation to Serve and Help the Poor and Alleviate Suffering
(ASt. Francis@). The new foundation would be created outside of the Vatican to alleviate the
Vatican=s concern about appearing to be involved in insurance company operations. A Vaticanrelated
charity would be the settlor of the new foundation. The Vatican-related charity would be
able to state that it was funded by the Vatican, so that St. Francis could claim that its funding
originated from Vatican sources. In actuality, however, St. Francis would be funded entirely from
looted funds held in Frankel=s Swiss bank account.
54. Colagiovanni then agreed to allow MEF, the Vatican-related organization of which he
was President, to be held out as the Asettlor@ of St. Francis. Colagiovanni spoke to Piovano and
Salerno about MEF playing the role of the Vatican entity in Frankel=s plan. After speaking with
them, Colagiovanni faxed a letter to Bolan, on Rota letterhead, informing him that MEF Ahad been
authorized@ to receive the $55 million; that is, MEF would first receive and transfer the sum of
$50 million to Frankel=s foundation, which would remain under Frankel=s control. MEF would then
receive an additional $5 million from Frankel, to keep and use without restriction. Colagiovanni
also confirmed to Bolan and Jacobs at a later meeting in Italy that the plan had been authorized.
55. MEF was used to create the impression that the funding for Frankel=s foundation, St.
Francis, had come from the Vatican or Vatican-related sources. However, neither the Vatican nor
MEF would provide any of their own funds to St. Francis. Instead, Colagiovanni was told that
Frankel would deposit funds in an MEF account, which would in turn be transferred to an account in
St. Francis= name. Colagiovanni, acting as an agent for the Vatican, knew of and approved this plan.
Bolan memorialized this plan in a writing which Colagiovanni signed.
56. Other Vatican personnel also knew of this plan. Upon information and belief,
Colagiovanni consulted with sostituto Giovanni Battista Cardinal Re, head of the First Section of the
18
Vatican Secretariat of State, before he agreed to assist ARosse@ in implementing the plan. Cardinal
Re, as sostituto, was the third highest-ranking Vatican official at the time.
57. Jacobs discussed Frankel=s plan with his friend, Pio Cardinal Laghi, who was the head
of the Congregation for Catholic Education in the Vatican, and who had previously served as the
Vatican=s Nuncio (Ambassador) to the United States. While Frankel was trying to gain approval for
his plan, Laghi intervened at the Vatican on his behalf. Laghi also received $100,000 from ARosse@
in August 1998 as a donation to a hospital. When Laghi sent a thank-you letter to ARosse@ for the
donation, it was returned to him by Jacobs, who told Laghi not to thank ARosse@ personally for the
payment. Laghi then sent a new thank-you letter, which thanked only Frankel=s foundation for the
funds.
58. Another Vatican official who knew of the plan was Father Giovanni D=Ercole, who is
now one of the Capi Ufficio in the First Section of the Vatican=s Secretariat of State. Frankel had
considered using D=Ercole=s religious order, the Sons of Divine Providence, also known as ADon
Orione@ after its founder, as the vehicle through which to channel funds to St. Francis. D=Ercole
visited with ARosse@ at his home in Connecticut, and a charity operated by the Sons of Divine
Providence received donations from Frankel.
59. Archbishop Alberto Tricarico (ATricarico@) also knew about the plan. Tricarico was
the Nunzio Apostolico a disposizione in the Second Section of the Vatican=s Secretariat of State,
where his responsibilities included overseeing the Holy See=s relations with the countries formerly
comprising the Soviet Union. Tricarico knew that Frankel, posing as ARosse,@ was the Adonor@ of St.
Francis. Tricarico considered traveling to Connecticut to meet ARosse@ in person. He also, through
Jacobs, sought to obtain money from Frankel for Catholic charities in Kazakhstan. Jacobs traveled
19
to Almaty in Kazakhstan at Tricarico=s request to visit some of the charities. Jacobs= airplane ticket
was charged to an American Express card controlled by Frankel and paid with looted funds.
60. Frankel was also interested in securing the involvement of the Istituto per le Opere di
Religione (AIOR@), popularly known as the AVatican Bank.@ As a Vatican entity, the IOR is beyond
the reach of any regulatory scrutiny other than the Vatican=s own supervision. Although
Colagiovanni informed Frankel that, as a non-Catholic, he could not open his own account at the
IOR, Colagiovanni assured Frankel that any fund or donation given to MEF would fall under the
protection of the Avery strict confidentiality and secrecy@ laws that apply to any entity linked to the
IOR.
61. The IOR was involved in a number of ways with Frankel=s scheme. MEF has an
account at the IOR, and Colagiovanni and, apparently Jacobs, were both authorized users of that
account. Frankel wired money to MEF=s account at the IOR, as described below. Jacobs also had
his own account at the IOR to which Frankel wired money.
62 In addition, as part of the scheme, Frankel had Colagiovanni obtain a letter from the
IOR, indicating that MEF was an organization in good standing with the IOR. Before the IOR
would issue the letter, Colagiovanni was required to, and did, provide the IOR with information
about ARosse@ and the plan. Colagiovanni and Frankel provided the IOR with the private telephone
number of Frankel=s Swiss banker, Jean-Marie Wery (AWery@), a Managing Director of Banque SCS
Alliance. The IOR contacted Wery to confirm that Frankel had the wealth necessary to make the
proposed donation.
63 After the IOR checked Frankel=s bank reference, Salerno prepared a letter confirming
MEF=s Auninterrupted relation@ with IOR, which was signed by the IOR=s director, Dr. Lelio Scaletti,
and by another IOR official, Dr. Anthony Chiminello. This letter was used to bolster MEF=s and St.
20
Francis= credibility with insurance regulators and others. For example, when lawyers and officials
connected with one of the United States insurance companies Frankel targeted questioned the
Vatican=s connection to St. Francis, the IOR letter was presented as proof of the association.
The Fall of 1998: The Second Attempt to Purchase CLICO
64 Once the Vatican connection was in place, Frankel established St. Francis as a British
Virgin Islands trust. The St. Francis documents were backdated to August 10, 1998, at Frankel=s
direction, in part to coincide with astrological events Frankel considered favorable. In the
St. Francis Deed of Settlement, MEF was named the settlor and was alleged to have contributed $90
million to St. Francis. Jacobs was named sole Trustee, although Bolan, Collins and possibly others
were later added.
65 Frankel then directed that the proposed purchase of CLICO move forward, with MEF
allegedly providing funding through St. Francis, the new purchaser. ASC was caused to withdraw
from the deal.
66 Colagiovanni was directly involved in assisting Frankel in his efforts to acquire
insurance companies. Colagiovanni made a number of significant representations in the United
States about the Vatican=s relationship with St. Francis. He used his position as a member of the
Curia to convince state government officials and insurance companies in the United States that
St. Francis was connected with the Vatican through MEF, and that St. Francis was a Vatican-funded
initiative.
67 On November 24, 1998, St. Francis filed a Form A application with the Colorado
Department of Insurance (the AColorado Department@) for the purchase of CLICO. The Form A
application included false representations stating, among other things, that St. Francis was the source
of funds for the CLICO acquisition and that St. Francis had received its money from MEF. The
21
Form A application also intentionally concealed Frankel=s involvement in and control of St. Francis,
and falsely represented that Jacobs controlled St. Francis as its sole Trustee, when Frankel had
complete control of St. Francis.
68 At the time of the filing of the Form A application, Colagiovanni, as an agent of the
Vatican, knew, or was subjectively aware of a strong possibility of illegal conduct and purposefully
contrived to avoid learning, that statements in the Form A application about control of St. Francis
and its source of funding were false.
69 On November 24, 1998, Colagiovanni signed an unsworn Aaffidavit@ in which he
stated: AThe funds that the MEF has contributed to St. Francis for the purchase of the common stock
of CLICO Acquisition Corporation have come from funds of the Holy See that are dedicated to use
for investment for charitable purposes.@ The Aaffidavit@ was signed AEmilio Colagiovanni, President
MEF.@ This Aaffidavit@ was distributed to several insurance companies which Frankel was seeking
to acquire. Colagiovanni has admitted this affidavit was false.
70 On December 4, 1998, in response to the Form A application, the Colorado
Department sent Jacobs twenty-three detailed questions about St. Francis and its source of funding.
As a result of this further inquiry by the Colorado Department, by mid-December, Frankel and his
associates withdrew the St. Francis Form A application and abandoned the proposed CLICO
acquisition.
22
Fall and Winter of 1998-99: Frankel Tries a Second Front
71 Meanwhile, Corbally continued to assist Frankel by introducing Frankel to other
persons who might be able to help Frankel establish credibility in the insurance world. Corbally
tried to get his friend Lee Iacocca, the former Chief Executive Officer of Chrysler Corporation, to
assist Frankel in his plan. Although Frankel spent lavish amounts of looted funds in an effort to
persuade him, Iacocca declined to participate.
72 Corbally also introduced Frankel, as ARosse,@ to Larry Martin (AMartin@). Martin
agreed to help Frankel acquire insurance companies in exchange for a payment of $100,000 per
month. Martin assembled a team of insurance industry experts and established American Annuity
and Life Acquisitions LLP (AAmerican Annuity@) as a vehicle to acquire insurance companies for
Frankel. Corbally also introduced Frankel to Thomas F. Quinn, who was once described by the New
York Times as Aone of the securities industry=s best-known swindlers . . . a disbarred lawyer with
multiple convictions in securities and money laundering dating back to the 1960s.@ Martin, Quinn,
Frankel and others developed a complicated plan involving offshore reinsurance companies and a
Luxembourg Aplate@ corporation, which would enable Frankel to acquire insurance companies
through American Annuity, while making it virtually impossible to trace the funds back to their true
source.
73 Besides performing introductions, Corbally acted as a go-between, helping mediate
matters between Frankel and some of the people Corbally had brought into the scheme, such as
Martin and Quinn. Frankel used Corbally to deliver bad news and to finesse relations among
Frankel=s growing crowd of associates.
74 In exchange for his services, Corbally received traveler=s checks and numerous
payments in kind, such as airplane tickets (on the Concorde), which totaled more than $100,000 in
23
1998 and 1999. Corbally was also given the use of an American Express Platinum Card, on which
he charged up to $112,000 per month. The traveler=s checks, payments in kind and American
Express bills were paid using money looted from the Insurance Companies which was wired from
Frankel=s Swiss bank account.
75 In addition, as payment for Corbally=s services, Frankel offered to buy Corbally a
Manhattan luxury apartment costing in excess of $5 million. Corbally chose an apartment in a notyet-
completed building at 515 Park Avenue. As payment for the apartment, in 1998 and 1999,
Frankel wired approximately $1.5 million in looted funds of the Insurance Companies from his
Swiss bank account to an account designated by Corbally at Solbank SBD S.A. in Spain in the name
of Defendant Endurance. Endurance is an entity which, although purportedly owned by Corbally=s
wife, is actually under the control and domination of Corbally himself. From Solbank, the monies
were transferred to an escrow account in New York, where they were held pending the final closing
date on the luxury apartment.
The Winter of 1998-99: Western United Life Assurance Company
76 In December 1998, not long after St. Francis had submitted the Form A relating to
CLICO, St. Francis signed a Letter of Intent to purchase Western United Life Assurance Company
(AWestern United@) of Spokane, Washington. In the course of negotiating the deal, representatives
of St. Francis told Western United employees that Frankel, who was still posing as ARosse,@ did bond
trading for the Vatican, that the source of funds for the Western United deal was the Vatican, that the
purpose of the Vatican=s proposed investment was to grow Vatican assets, and that the Pope himself
had authorized funds to go to MEF from a general fund, which were then contributed to St. Francis.
These statements were false.
24
77 Vatican leadership was informed on several occasions that persons acting on behalf
of St. Francis and MEF were representing that St. Francis was connected with the Vatican, and
making misrepresentations about St. Francis= funding and control. In January 1999, C. Paul Sandifur
(ASandifur@), the President of Western United=s parent company, sent a letter to Vatican Secretary of
State Angelo Cardinal Sodano asking for a confirmation of statements about St. Francis= and MEF=s
relationship to the Vatican. In particular, Sandifur asked Cardinal Sodano (a) whether St. Francis
was an agent of the Holy See, (b) whether MEF was a Vatican foundation, © whether MEF was the
settlor of St. Francis, and (d) whether the Holy See had given $190 million to MEF and St. Francis,
as had been represented.
78 Sostituto Re sent a reply on behalf of the Vatican, but stated only that, with respect to
St. Francis, Ano such foundation has the approval of the Holy See or exists in the Vatican.@ Re did
not deny that the Vatican had donated $190 million to MEF, that MEF had donated $190 million to
St. Francis, or that MEF was a Vatican foundation. Re=s careful, cryptic and incomplete response to
Sandifur=s letter in February 1999 was in sharp contrast to the Vatican=s response to similar
questions posed by the international press in June 1999, after Frankel=s scheme was exposed to the
world. It also differed from the more informative, but still incomplete, letter Re wrote to Cardinal
O=Connor of New York, dated the same day as his response to Sandifur.
79 Despite being informed through the Western United letter that statements were being
made in the United States to insurance companies that the Vatican knew were false, neither Re nor
any other Vatican official took steps to correct or stop the misrepresentations made by Colagiovanni,
Frankel and others concerning St. Francis= control and funding. In fact, by giving an incomplete
response to Sandifur=s inquiries, Re created the impression that the statements he failed to address
25
were true. Colagiovanni explained the letter by stating that, according to Vatican policy, failure to
address certain facts in such a response indicates those facts are true.
80 On February 16, 1999, after Western United had received the letter from Re, and to
mitigate the ambiguous nature of Re=s letter, representatives of St. Francis faxed to Western United a
written statement signed by Colagiovanni in which he represented that MEF had contributed $1
billion to St. Francis with funds that came from various ARoman Catholic tribunals and Roman
Catholic charitable and cultural institutions.@ This statement was later submitted to insurance
regulators in an attempt to substantiate the Vatican=s alleged funding of MEF and St. Francis.
Colagiovanni knew that the representations made in the statement were false when he made them.
81 Also in February 1999, Collins became a Trustee of St. Francis. As with the Lourdes
Charitable Trust and the Cambridge Charitable Trust, Collins was a Trustee of St. Francis in name
only. Frankel controlled and funded St. Francis completely.
82 On February 16, 1999, Defendant Collins signed a written statement as a Trustee of
St. Francis. In the statement, Collins stated that all funds held by St. Francis were donated to it by
MEF, which had in turn obtained them from various ARoman Catholic tribunals and Roman Catholic
charitable and cultural institutions.@ This statement was designed to give the false appearance that
Collins, as Trustee, had control of St. Francis= operations and funding, and to disguise Frankel=s true
role as the source of funds for St. Francis and the operator and controlling person behind St. Francis.
26
The Winter and Spring of 1999: Additional Trips to the Vatican
83 To further demonstrate St. Francis= and MEF=s ties to the Vatican, Frankel and
Colagiovanni arranged for two Western United executives, Sandifur and William Snider (ASnider@),
Chief Financial Officer of Western United, to travel to the Vatican and meet with Vatican officials to
clarify whether representations made about the Vatican=s involvement with St. Francis and MEF
were true. Snider and Sandifur were accompanied by Father Eugene Tracy (ATracy@), a former
insurance executive now serving as a Roman Catholic priest in Spokane. Frankel had thus far failed
to make the $5 million Adonation@ he had promised to MEF. Apparently in the hope of encouraging
Frankel to make the payment, Colagiovanni agreed to host the executives.
84 Sandifur, Snider and Tracy met with Colagiovanni in the Cancelleria, the building
which houses the Rota. This building, although located in a section of Rome which is not
contiguous to the main area of Vatican City, is considered the Vatican=s sovereign territory. Swiss
Guards, the personal guards of the Pope, were stationed outside.
85 While in an office in the Cancelleria, Colagiovanni told the Western United
executives and Tracy that the funds MEF provided to St. Francis originated from friends of the
foundation and that some of the money was actually secret Vatican funds. Sandifur, Snider and
Tracy then met with an Italian bishop believed to be Salerno, who by that time had become the
Secretary of the Supremo Tribunale della Segnatura Apostolica, another of the Vatican=s courts with
offices in the Cancelleria. The bishop posed for a picture with them.
86 The Western United visitors were given a tour of the Vatican by Colagiovanni,
including several areas not usually accessible to tourists. The Western United executives reasonably
concluded from their visit that MEF and St. Francis were known in the Vatican, that Colagiovanni
was who he claimed to be, and that MEF and St. Francis were recipients of Vatican money.
27
87 The Western United visitors also met with Alan Kershaw, an American lawyer who
argues cases before the Vatican=s tribunals and who represents the Vatican=s own interests from time
to time. Kershaw, apparently at Colagiovanni=s request, assured the Western United visitors that a
group of Anorthern Italian laypeople@ who wanted to obtain the tax benefits available by a donation
to the Vatican had secretly donated large sums of money to MEF. Like Colagiovanni, Kershaw also
indicated that MEF had received funds from the Vatican. To further assure the Western United
visitors about the proposed deal, Kershaw told them that the Vatican exercised supervisory power
over St. Francis and that St. Francis= funds and money management would go through the IOR.
88 Meanwhile, Frankel, Bolan and Colagiovanni had been upset with Re=s letter sent to
Sandifur, because it did not, in their view, affirmatively support the representations being made
about MEF and St. Francis. To ensure that this would not happen again, Colagiovanni arranged for
Bolan to meet with Vatican officials in March 1999 to discuss how the Vatican should answer future
inquiries related to St. Francis= acquisition of United States insurance companies. Colagiovanni
originally arranged for Bolan to meet with Re, but Bolan and Colagiovanni in fact met with
Agostino Cardinal Cacciavillan (ACacciavillan@), the president of the Administration of the Property
of the Holy See. At this time, Cacciavillan was the government official in charge of the Vatican=s
investments, although he had recently left his post as the Vatican=s Nuncio (Ambassador) to the
United States.
89 Sandifur=s letter and Re=s response were specifically discussed at this meeting.
Cacciavillan was informed that a private individual, and not MEF or the Vatican, was the source of
St. Francis= funds, and he knew that MEF would be used as a vehicle through which this private
individual would make Adonations@ to St. Francis. Despite this knowledge, Cacciavillan did not tell
Bolan or Colagiovanni to stop claiming that the funds originated with MEF or the Vatican.
28
Cacciavillan directed only that St. Francis not be held out as a Vatican foundation, and did not
express any concern about any other aspects of the described relationship between St. Francis and
MEF or between MEF and the Vatican.
90 Instead, Cacciavillan, Colagiovanni and Bolan agreed that if the Vatican received
any future inquiries related to St. Francis= purchase of United States insurance companies, the
inquiries would be routed to Colagiovanni or someone else who understood the MEF/St. Francis
plan, who could then respond.
The Hearing in Mississippi
91 Meanwhile, the Mississippi Department of Insurance (AMississippi Department@) had
begun to take a close look at other aspects of Frankel=s scheme. On March 12, 1999, the Mississippi
Department wrote Hackney a letter asking him nineteen questions about the Insurance Companies=
investment practices and about the Insurance Companies themselves.
92 Frankel decided that because St. Francis, as a supposed Roman Catholic organization,
had Agood moral character,@ it should play a leading role in the Mississippi investigation. On March
29, 1999, St. Francis allegedly Apurchased@ Thunor Trust, and Hackney relayed this Afact@ to the
Mississippi Department. Upon receiving this news, the Mississippi Department informed Hackney
that a Form A application must be filed relating to the change of control of the Mississippi insurance
companies. The Mississippi Department set a hearing for April 29, 1999, in Jackson, Mississippi, to
address the issue. Frankel and his associates were very distressed when they heard about the
hearing. At first, Frankel tried to postpone the hearing by having his associates make several calls to
Dale, the Mississippi Commissioner of Insurance. Dale did not change the date of the hearing.
93 Before the April 29 hearing, Colagiovanni sent several letters to the Bishop of
Jackson, introducing St. Francis and MEF, and explaining the good works St. Francis was
29
supposedly performing. The letters were intended to further the scheme. Frankel, Colagiovanni and
others hoped that if the bishop were contacted by the Mississippi Department about St. Francis or
MEF, he would repeat the Afacts@ he had learned from Colagiovanni=s letters. Colagiovanni faxed
these letters from the Vatican and at least one of the letters was headed, in Italian, AVatican City
Fax.@ Colagiovanni signed these letters with all of his Vatican titles.
94 On April 27, 1999, Colagiovanni traveled from Rome to Mississippi at Frankel=s
expense. Frankel, Colagiovanni and others associated with St. Francis visited the Bishop of
Jackson=s official residence on April 27, 1999, in hopes of convincing the bishop to attend the
hearing at the Mississippi Department. He declined to do so. The next day Colagiovanni
participated in a pre-hearing meeting at a Jackson hotel in which Frankel and others planned the
testimony and prepared the documents they would provide to the Mississippi Department on
April 29.
95 Frankel wanted to make sure that his involvement in the affairs of St. Francis was
concealed, so he asked Collins to make an appearance as a St. Francis ATrustee@ at the hearing.
Collins traveled to Mississippi to assist with St. Francis= appearance before the Mississippi
Department. Collins was present for and assisted in the pre-hearing meeting in Jackson, although he
did not attend the hearing itself.
96 At the April 29 hearing, Colagiovanni wore priest=s clothing, displayed what he
identified as a Papal ring, and indicated that he was present as a representative of the Vatican.
Colagiovanni, acting as an agent of the Vatican, represented orally and in a sworn writing that
Vatican-related entities had contributed over $1 billion to St. Francis. At the time he made these
representations, he knew them to be false. Also at the hearing, various representatives of St. Francis
made numerous other misrepresentations, orally and in writing, regarding the funding and
30
management of St. Francis, including representations that the Vatican had provided St. Francis=
funds, that St. Francis had assets worth more than $1 billion, that St. Francis had acquired Defendant
Thunor Trust, and that the Trustees of St. Francis controlled St. Francis. These statements were
false.
97 Colagiovanni, and, indirectly, the Vatican, received benefits from Colagiovanni=s role
in Frankel=s scheme. From August 1998 to May 1999, Frankel made periodic financial contributions
to Colagiovanni, Jacobs and MEF, and to accounts designated by them. The following represent
some, but not all, of the wire transfers:
$ On August 24, 1998, Frankel wired $100,000 from his Swiss bank account to Jacobs=
account at the IOR. Jacobs then wrote a check in that amount to Laghi, which was
apparently donated to a hospital with which Laghi had some relationship.
$ On December 11, 1998, Frankel wired $10,000 from his Swiss account to Jacobs=
account at Chase Manhattan Bank in New York for further credit to MEF=s account
at the IOR.
$ On February 24, 1999, Frankel caused $10,000 to be wired from the account of
ARosse@ at Chase Manhattan Bank in New York to MEF=s account at the IOR.
$ On April 13, 1999, Frankel wired $25,000 from his Swiss account to the Don Orione
Fathers at the Bank of the Phillippines. The Don Orione Fathers, also known as the
Sons of Divine Providence, are an order of the Roman Catholic Church of which
D=Ercole is a member.
$ On April 20, 1999, Frankel wired $40,000 to Jacobs= account at the IOR for the
benefit of ARosse/St. Francis.@
$ On April 22, 1999, one week before Colagiovanni=s appearance in Mississippi,
Frankel wired $30,000 to Jacobs= account at Chase Manhattan Bank in New York.
Jacobs wrote a check to Colagiovanni for $20,000 which Colagiovanni then
deposited at the IOR.
The funds used in these wire transfers were assets of the Insurance Companies which Frankel had
looted.
31
98 On the day of the Mississippi hearing, Frankel realized that his scheme was about to
be uncovered. He tried to hide or launder as much money as he could, and made plans to leave the
United States. Frankel turned to Corbally for assistance in escaping the country. Corbally, through
a contact believed to be named AMikey@ Signoretto, arranged for Frankel to obtain a number of false
passports and birth certificates. AMikey,@ Corbally, Schuchter and another Frankel employee met in
London where the passports were transferred to Schuchter and the employee. The passports were
sent via international courier service to Frankel in Connecticut. After receiving the passports,
Frankel fled the United States for Italy. He was apprehended in Germany about five months later.
99 By mid-May 1999, Frankel=s financial fraud had been uncovered by state insurance
regulators and federal and state law enforcement officials and was made public. On June 30, 1999,
the Vatican, through its Press Office Director, for the first time contended publicly that the Vatican
had no legal or financial connection to MEF or St. Francis:
I wish to make it clear that the AMonitor Ecclesiasticus@ and ASt.
Francis of Assisi@ Foundations do not have Vatican juridical
character and are not inscribed in the registers of Vatican juridical
personalities. I wish to add that the Holy See does not have any
relationship with Father Peter Jacobs and has neither furnished nor
received funds from either the Monitor Ecclesiasticus Foundation or
the St. Francis of Assisi Foundation. Contrary to what has been
affirmed, the St. Francis of Assisi Foundation does not have an
account in the Institute for Works of Religion (IOR) and indeed is not
recognized by this Institute. Msgr. Emilio Colagiovanni is president
of the Monitor Ecclesiasticus Foundation, established by the
archdiocese of Naples in 1967. This foundation has always acted
totally outside of any Vatican context, and does not have any
relationship with it whatsoever.
GENERAL RICO ALLEGATIONS
The Enterprises
32
100 At all relevant times, the Insurance Companies each constituted an enterprise, as that
term is defined in 18 U.S.C. ' 1961(4), that engaged in and the affairs of which affected interstate
commerce. In addition, Colagiovanni, MEF, Corbally, Collins, Endurance, Frankel, and others
associated with Frankel, including David Rosse, Karen Timmins, Philip Miller, Mona Kim, Sonia
Howe, Kaethe Schuchter, Jeffrey Moreau, Cynthia Allison, Adriana Gustavo, Miriam Fischer,
Kathryn Higgins, Stefan Radencovici, Jacqueline Ju, Alicia Walters, Oksana Wiktor, Gregory
Wiktor, Beng Wan Tan, C. Mark Burgess, Deborah Spaeth, Hackney, Atnip, Jordan, American
Security Services, ASC, AWV Corporation, Ba-Gio Investments, S.A., Bloomfield Investments,
S.A., Bloomfield Investments, Limited - BVI, Bradshaw Enterprises Co., Inc., Bunnies, Inc.,
Creative Partners Fund, Devonshire Technologies, Ltd., FAC, Gates Investments, Inc., Good Luck
Corporation, Hartwick Management, Ltd., IFC, Judicial Investigation Agency, The Jupiter Capital
Growth Fund, LNS, Lucky Star Investments, Middleburg Investments, Ltd., Resolute Investments,
RMI, Inc., Sundew International, Ltd., Thunor Trust, American Life Acquisitions, L.P., American
Annuity and Life Acquisitions, L.P., St. Francis, Larry Martin, Thomas Quinn, Robert Guyer,
Banque SCS Alliance SA and Jean-Marie Wery, constituted an association-in-fact enterprise (the
AAssociation@). The Association functioned in a hierarchical decision-making structure and as a
continuing unit from at least 1991 until May 1999, and was engaged in and the affairs of which
affected interstate commerce.
Federal Law
101 There were in force and effect at all relevant times criminal statutes of the United
States involving mail and wire fraud, 18 U.S.C. ' 1341 and 18 U.S.C. ' 1343. These statutes
currently state in relevant parts as follows:
33
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by means of
false or fraudulent pretenses, representations, or promises. . . for the
purpose of executing such scheme or artifice or attempting to do so,
places in any post office or authorized depository for mail matter, any
matter or thing whatever to be sent or delivered by the Postal Service,
or deposits or causes to be deposited any matter or thing whatever to
be sent or delivered by any private or commercial interstate carrier, or
takes or receives therefrom, any such matter or thing, or knowingly
causes to be delivered by mail or such carrier according to the
direction thereon . . . any such matter or thing, shall be . . . [punished
according to law].
* * *
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by means of
false or fraudulent pretenses, representations, or promises, transmits
or causes to be transmitted by means of wire, radio, or television
communication in interstate or foreign commerce, any writings,
signs, signals, pictures, or sounds for the purpose of executing such
scheme or artifice, shall be [punished according to law].
The Scheme to Defraud
102 Beginning in 1990, Frankel devised and, along with Hackney, Atnip, Jordan and
others, implemented a scheme to defraud various investors, financial institutions and insurance
companies, and to obtain money and property, by false and fraudulent representations and promises,
from various investors, financial institutions and insurance companies. The scheme, as described
above, included Frankel=s acquisition of insurance companies while concealing his involvement in
and control of the companies, his looting of the acquired insurance companies and his laundering of
the assets of the insurance companies once the assets were within his control.
103 To sustain, advance and prevent detection of the scheme to defraud, Frankel,
Hackney, Atnip and Jordan established the Thunor Trust as described above. In addition, Frankel,
Hackney, Atnip, Jordan and others caused statements to be made in Form A applications for various
34
insurance companies, as described above, knowing such statements to be false, so as to conceal
Frankel=s control and involvement in the proposed acquisition of those insurance companies.
104 To sustain, advance and prevent detection of the scheme to defraud, Frankel,
Hackney, Atnip, Jordan and others caused the cash assets of the Insurance Companies to be
represented as having been invested with LNS, knowing such representations to be false. Frankel,
his associates Sonia Howe and Mona Kim, and others, transmitted fabricated monthly statements
and other information to the Insurance Companies (except OSL), knowing such statements falsely
represented that the assets had been invested in U.S. Government obligations by LNS, that certain
trades had been conducted in such securities, and that the assets were earning profits as a result of
these investments.
105 To sustain, advance and prevent detection of the scheme to defraud, Frankel,
Hackney, Atnip, Jordan and others caused statements to be made in Annual Statements and other
financial statements of the Insurance Companies (except OSL) that those companies= assets had been
invested in U.S. Government obligations by LNS, that certain trades had been conducted in such
securities, and that the assets were earning profits as a result of these investments, knowing such
statements to be false.
106 To sustain, advance and prevent detection of the scheme to defraud, Frankel,
Hackney, Atnip, Jordan, Collins and others established ASC, Lourdes Charitable Trust and
Cambridge Charitable Trust for the purpose of acquiring additional insurance companies while
concealing Frankel=s control and involvement. In addition, Frankel, Collins and others made false
statements regarding ASC, Lourdes Charitable Trust and Cambridge Charitable Trust, knowing
those statements to be false, to conceal Frankel=s control and involvement in the ...