HAMBURG - Diamonds may be Marty Frankel's best friend.
The once famous fugitive pleaded guilty yesterday in a German court to failing to pay duty on precious stones he smuggled into this country during his life on the run last year.
The plea could delay his extradition to the United States - something Mr. Frankel is vowing to do.
"Prisons in the United States are inhumane,'' he told reporters during his first day of trial this week.
The 45-year-old skinny, bespectacled investor, who once sold securities from a bedroom in his parents' Toledo home, could be sentenced to 10 years in prison on the German charges.
His court appearance yesterday was the latest in a series of efforts by the onetime investor to keep from being sent to the United States to stand trial in what is considered to be one of the most spectacular frauds of the 1990s.
FBI agents say he looted more than $200 million from the cash reserves of insurance companies under his control to support a lifestyle of mansions, luxury cars, and women he met through personal ads.
With authorities on his trail, he fled his mansion in Greenwich, Conn., for Europe in May, 1999.
During yesterday's hearing, a judge asked the former University of Toledo student whether he admitted his guilt on failing to pay duty on the stones, and Frankel replied: "Yes."
It wasn't immediately clear whether his admission would end the trial, which has captured headlines in this city where he was arrested in September.
It's unclear whether Frankel will serve time for his German crimes, or simply be sent back to the United States.
He is expected to be sentenced June 23.
His plea was made two days after the opening of the trial, when he indicated he wanted to call four witnesses to testify in his defense.
But it was his confession yesterday that surprised reporters and others observing the proceedings.
One of his attorneys read a statement in which the former stockbroker admitted knowing he had broken the law by not paying duty on the diamonds - valued at $5.3 million - which he took to Europe to finance his life on the run.
The court then called a brief recess.
Going into the courtroom, Frankel - clad in a black overcoat and tattered clothes - repeated his desire to serve time in Germany rather than in U.S. prisons, which he believes are inhumane.
"The German constitution has laws that let someone rehabilitate himself, and I'm being tried under German law," he told reporters.
German prosecutors say he should have paid $1.2 million in customs duties on the 547 stones found with him when he was nabbed by German police inside the upscale Prem Hotel.
At the start of his trial Wednesday, Frankel asked to call four witnesses: Mona Kim, his former business manager who accompanied him to Rome; Cynthia Allison, who was with him during his last 74 days on the lam; Thomas Corbally, a world traveler and once a player in the world espionage community; and Alfredo Fausti, the son of an Italian businessman.
Matthias Thiel, a defense lawyer for Frankel, said it could have taken two to three months before the witnesses could come to Germany to testify.
In fact, letters sent to Ms. Allison and Ms. Kim several weeks ago from the German courts to testify have been ignored, prosecutors here say.
Both women accompanied the onetime investor as he traveled through Europe last summer, trying to escape the law.
They are back in the United States and have not been charged with any crimes.
In an exclusive interview with The Blade last year, Miss Allison, 35, said Frankel was extremely leery of having to serve time in a state prison in the United States.
"That was his biggest fear,'' she said. "He was far more afraid of state prisons than federal.''
When he was arrested, German authorities said Frankel would be extradited swiftly, and that they would not pursue local charges stemming from the nine false passports found in his hotel room after his arrest.
But they apparently changed their minds after uncovering evidence of the more serious charge of tax evasion.
It was unclear how yesterday's developments would affect the extradition process.
Frankel's odyssey from financier to fugitive started more than a year ago.
After he fled his mansion in May, 1999, authorities called to investigate a fire there discovered a fireplace and file cabinet stuffed with burning documents.
An astrology buff, Frankel left star charts in the mansion which read: "Will I get caught?'' and "Will I be safe?'' according to an FBI affidavit.
Insurance commissioners in five states - Arkansas, Mississippi, Missouri, Oklahoma, and Tennessee - where Frankel companies were headquartered have filed a federal lawsuit asking for more than $600 million in damages from Frankel.
He was indicted in October on federal charges in Connecticut, and was indicted by a grand jury in Mississippi earlier this year on fraud and laundering charges.
Three of his associates, including his personal bodyguard, have pleaded guilty to charges related to his alleged scheme.
Blade national affairs writer Michael D. Sallah contributed to this report.
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