Fugitive financier's twisted trail; Vanished: One of the biggest mysteries in this case of missing money is the power its central figure wielded over other people's lives.

THE BALTIMORE SUN

GREENWICH, Conn. -- No one was home when firefighters got to the tree-shrouded mansion on the evening of May 5. Inside, mounds of documents were burning in two fireplaces and in a metal filing cabinet, scorching nearby furniture.

The firefighters doused the flames and called police, who found strange notations on some of the charred documents. The top line on a handwritten "to-do" list pulled from the fire read, "Launder money." The next line: "Get $ to Israel get it back in."

Greenwich detectives and federal agents have been looking ever since for the owner of the $3.1 million house, Martin R. Frankel, 44. They also can't seem to find between $200 million and $3 billion in other people's money that Frankel, under several aliases, had been managing.

Authorities believe that they are tracking one of the biggest financial schemes in history. They won't talk about the case, but the trail Frankel left is so twisted that it has splashed this obsessively private man across the international news media.

The trail touches Walter Cronkite, Lee Iacocca and the Vatican. It veers into personals ads and illicit relationships and a 22-year-old woman hanged to death at another secluded estate.

One former boss blames Frankel for the loss of his wife, daughters and career. A series of small Southern insurance companies who trusted Frankel with their assets no longer appear to have any money.

If nothing else, the man's disappearance two months ago is finally accomplishing one thing he seems to have both desired and dreaded for most of his life: Marty Frankel of Toledo, Ohio -- also known as Eric Stevens, David Rosse and Mike King -- is making a name for himself.

One of the biggest mysteries of the Frankel case is the power its central figure has wielded over other lives.

At 6 feet and less than 150 pounds, Frankel is physically awkward, pale, bushy-haired, with eyes distorted by thick glasses. He has always dressed sloppily, favoring jeans or baggy shorts and rumpled shirts.

Frankel graduated from Toledo's Whitmer High School in only three years, but he never completed his studies at the University of Toledo. His father, Leon, who died last fall, was a magistrate for domestic relations court, and his mother, Tillie, retired as a town clerk.

He grew up the youngest of four children in a tranquil, middle-class neighborhood with tidy ranch-style homes built in the 1950s, endless lawns, a swimming pool and tennis courts nearby.

Neighbor Bernie Solomon remembers the youngest Frankel boy hiring other children to cut the grass on the sly so his parents would think he had done it.

In a "Biography/Resume" that Frankel prepared about 10 years ago, he claimed to have scored a 194 on the Stanford-Binet IQ test during elementary school -- "one of the highest scores ever registered by a child," he wrote.

On the same resume, Frankel said he began studying financial markets in 1978, though he apparently worked in real estate until the mid-1980s.

Advice, then a job

In the summer of 1985, he walked into the Toledo offices of the New York brokerage firm Dominick & Dominick. The branch was run by the husband-and-wife team of John and Sonia Howe Schulte.

At first, Frankel sought advice about playing the stock market. But within a year, he asked for a job. Frankel got his own small office at the firm in late 1986.

He immediately had his bosses bring in extra computers and news wires so he could practice what he said was a new theory of investing called "informational analysis."

"He saw the whole system," said longtime friend Edward Krauss. "He would see peacock feathers going down in one country and gold up in another, and he'd say, 'Sell Ford Motor.' "

There was a mystical side to the method. "He had to look at his astrology charts to go to the bathroom," said John Schulte, who said Frankel never actually did any trading, only talking. Schulte said he got fed up after less than six months and fired Frankel in 1987.

Sonia Schulte stayed in touch with Frankel, who was living with his parents. He had a strange, reverse charisma, John Schulte said, with gawky flaws that could seem charming and added to the impression that this was a mind that simply worked differently from others.

Then, one Friday in April 1989, John Schulte drove his Mercedes home and found that his wife and two young daughters were gone. She had left him, he said, for Frankel.

This was a busy time for Frankel. After leaving Dominick & Dominick, he had set up a limited partnership called the Frankel Fund and sought investors to let him manage their money.

John Schulte said that Frankel took two significant clients from him, and that once his wife left, the effort to drain away business intensified.

Frankel began marketing another partnership called Creative Partners Funds, promising "Never a down month" and incredible returns on investments -- by 1990, the funds boasted of a 12-month gain of more than 99 percent.

That year Frankel moved out of his parents' home and bought a house across the street for $70,000. There he began creating an insulated world where he could carry on as a self-styled market guru without interruption.

He walled off the garage, brought in 26 phone lines and installed a bank of as many as 20 television monitors on one wall, said Cindy Hitts, who later bought the house from Frankel.

Frankel hired an Asian couple to be his personal assistants, and they took his Mercedes to be washed, shopped for groceries and dealt with any visitors, recalled Bernie Solomon, who lived next door.

Round-the-clock armed guards prowled the little yard with two-way radios, Solomon said.

While neighbors wondered what Frankel was up to, Solomon said he understood that part of the reason for the security was concern about John Schulte, because Sonia Howe Schulte lived at the house for a time.

And, in fact, things became much more desperate for the cuckolded broker in 1990.

'Dropped atom bomb on me'

"They dropped the atom bomb on me," John Schulte said. "They" -- Sonia Schulte and Frankel -- "accused me of sexually molesting my two minor daughters."

John Schulte spent three years fighting the locally sensational case and was exonerated in 1993. But his business was left a shambles.

About a month after the court battle ended, the Internal Revenue Service raided Schulte's office. He wound up spending eight months in federal prison for tax evasion. He lost his broker's license.

Frankel himself suffered a professional setback in 1991. Two investors complained about his practices to the Securities and Exchange Commission, which eventually found that Frankel had lied to prospective clients about his investment track record, had used investors' proceeds for personal benefit and had sent out account statements claiming profits when the Frankel Fund was actually losing money.

The SEC banned him in 1992 from ever trading securities again.

Frankel left Toledo and somehow ended up in Greenwich, Conn., on Lake Avenue -- a winding spine of privilege outside New York City featuring some of the most affluent housing in the country.

At first, Frankel rented the contemporary stone mansion on a forested hilltop at 889 Lake Ave., but he later bought it for $3.1 million. He also bought another mansion at 895 Lake Ave. and leased yet another at 881.

Just as he did in Toledo, Frankel set about walling himself off from the world -- but on a far grander scale. Armed guards, a sentry building and a 6-foot-high fence alarmed his genteel neighbors. When someone from the equestrian association showed up to ask why riding trails across his property had been blocked off, they were shooed away by a security camera and intercom, a neighbor said.

The inside of 889 Lake Ave. was carved up into offices, according to a federal affidavit filed in May in U.S. District Court in Bridgeport, Conn. Several rooms were sealed with electronic cipher locks. More than 80 computers were networked throughout the house and connected to satellite dishes on a platform outside, the affidavit stated.

Neighbors reported as many as 10 cars in the driveway at all times, with limousines coming and going at all hours.

One friend who visited Frankel in Greenwich earlier this year said that besides two full-time chefs, Frankel had a bevy of young women working as clerks and personal assistants.

Placing personal ads

He met many of them through personals ads he placed in the Village Voice and elsewhere. In summer 1996, Frankel sent a limousine to Long Island to pick up a woman responding to one of his ads. When she got to his house, he judged her to be overweight and told her that he would not have sex with her, Frankel later told police.

He did allow the woman to live in the mansion that he was renting at 881 Lake Ave., along with several other young women. "Some of the females I have had sexual contact with [while others] think that they might be my girlfriend someday," Frankel later said in a statement to police. "The girls do not get paid a salary, but I give them money as they need it."

The Long Island woman never could please Frankel with her appearance, and, already struggling with depression, in August 1997 she hanged herself off the back deck of the estate, according to police reports and police interviews. Exactly where Frankel got the money to sustain his entourage remains unclear. But federal investigators said in court filings that Frankel, though banned from trading stocks, assumed several aliases and went on assembling increasingly ambitious investment schemes.

According to the FBI, Frankel spent the past few years buying small insurance companies in the South. He took the money those companies used to cover claims and invested it in a brokerage that he also controlled.

Instead of playing the stock market, though, Frankel allegedly put the money into personal accounts here and overseas, the FBI said in the affidavit filed in May.

Frankel's grandest alleged scheme involved setting up a Catholic charity called the St. Francis of Assisi Foundation.

Saying he was a Jewish businessman named David Rosse who was fascinated by the history of the church, Frankel persuaded prominent Catholic benefactors to help set up the charity last year.

"He pyramided names as he pyramided money," said Maurice N. Nessen, a former federal prosecutor now representing a St. Francis trustee.

Frankel listed Walter Cronkite and Lee Iacocca as advisers, but the offices of both men said they had declined invitations to participate in the charity. Cronkite, however, did offer to informally advise a friend on the St. Francis board, and Iacocca reportedly accepted a plane flight to Italy from Frankel.

Ultimately, Frankel won permission to link his foundation to Rome's Monitor Ecclesiasticus Foundation and, through that organization, was able to claim ties to the Vatican.

The church has disavowed any connection to Frankel's group, just as the trustees of the St. Francis foundation say they knew nothing of Frankel's alleged plan to use the charity to buy insurance companies.

Frankel allegedly wound up transferring $1.98 billion through the Monitor Ecclesiasticus Foundation to St. Francis and then to his brokerage. That money is now reported missing, although authorities are unsure whether it ever existed.

The Southern insurance companies that Frankel acquired are looking for somewhere between $200 million and $900 million that they entrusted to his brokerage, meaning that the total amount he is suspected of embezzling could be anywhere from $200 million to nearly $3 billion, if the charity's funds were real.

Just as regulators in several states began questioning the finances of the insurance companies, the Greenwich Fire Department got the call to respond to a fire at 889 Lake Ave., which was unoccupied and appeared ransacked.

Airport, passports

Limousine drivers later told investigators that they had recently taken several people from that address to the airport and that the people were talking about passports. Among the charred documents investigators found at the house were materials on countries that lack extradition treaties with the United States.

A federal grand jury in Bridgeport is sifting through the wreckage Frankel left behind. The finances of the insurance companies and the charity remain unclear, but everyone associated with them claims to have been duped by the reclusive financier.

Sonia Howe Schulte's name has been found on many of Frankel's financial documents. Her former husband said he believes her romance with Frankel ended several years ago. She lives in North Carolina but could not be reached for comment.

John Schulte, now living in a $30,000 house in Toledo, driving a Ford Taurus and working as a lobbyist for the National Federation of Independent Businesses, said he has found one ray of light in the turmoil.

This year, for what he said was the first time in 10 years, he got a Father's Day card from his daughters, ages 15 and 13.

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