Fausto Fausti is a retired Italian air force commander who insists he was only a business consultant to Marty Frankel, trying to help the fugitive financier buy a bank in the Middle East.
But Frankel, in a journal he kept, claims he was blackmailed by the Italian national for millions of dollars - and now private lawyers are taking notice.
Mr. Fausti is among a cast of characters including a defrocked priest and convicted stock swindler who are at the center of an investigation that aims to answer a final question in the Frankel saga: Where's all the money?
Of the $200 million that Frankel is accused of stealing from six insurance companies, prosecutors say they've located about a third, or $60 million.
The lawyers working for the insurers are now trying to find the rest - with the help of Frankel's personal journal.
Lawyers want to know whether Frankel lied in his journal about the millions of dollars he paid several people.
LLEWELLYN PUBLICATIONS Enlarge
A copy of the spiral-bound planner - obtained recently through a federal court order - may provide the only clues to the whereabouts of the millions of dollars Frankel allegedly doled out to associates, say lawyers for the insurers.
The 46-year-old Toledo native is being held in a Connecticut state prison awaiting trial for his role in the massive fraud case. Indicted on 47 counts of fraud and racketeering, he has yet to talk publicly about how the money was spent over the last decade.
But his own journal - which covers 154 days in 1999 - provides names, dates, and amounts of money he claims to have deposited in banks and paid to people to keep quiet about his activities.
The astrology planner was found in his hotel room when he was arrested in Hamburg, Germany, in September, 1999, and was passed on to prosecutors. A copy was obtained by The Blade last year.
Now in possession of Frankel's own writings, the lawyers are trying to examine the roles that members of his inner circle played - more importantly, the money they received, court records state.
Subpoenas were issued last month to several former Frankel employees requesting information about people named in his journal, including Mr. Fausti, convicted securities dealer Thomas Quinn, and former New York priest Peter Jacobs. One of the former employees is Cynthia Allison, who has disavowed any knowledge of the Frankel insiders.
Her testimony is being sought by lawyers representing five states where the bankrupt insurance companies were headquartered.
The journal, which starts on Dec. 31, 1998, and ends a few weeks before his capture, describes everything from Frankel's bizarre sexual activities to his efforts to keep insurance regulators in the dark.
In cryptic, bold letters, the onetime stock broker wrote of sleepless nights and incessant worries about getting caught by authorities.
Since his capture, nearly a dozen associates - including Toledo native Sonia Howe - have been indicted in the Frankel scheme on various fraud counts.
But with the emergence of the journal, the focus has shifted to a new cast of characters - people who have never been charged in the scandal but who played shadowy roles in the Frankel empire.
For instance, Quinn, a disbarred lawyer who served two prison terms for stock fraud, is mentioned four times in the journal as an adviser to Frankel in the months before he fled to Europe.
Quinn allegedly received $12.9 million from Frankel in separate wire transfers of $2.5 million, $4.8 million, $2.9 million, and $2.7 million on April 1, 1999, the journal states. The ex-lawyer could not be reached for comment.
When Frankel was trying to appease suspicious insurance regulators, he constantly turned to Quinn for advice, his journal notes.
But at one point, Frankel noted on April 7, 1999, that “Tom Q. goes crazy. Threatens to kill me.” He does not specify why.
Another person mentioned several times in the journal is Peter Jacobs, 72, a defrocked Catholic priest who was a paid adviser to Frankel.
In interviews two years ago, Mr. Jacobs told reporters he was hired by Frankel to look for ways the money manager could forge ties with the Vatican. Mr. Jacobs, who lived in New York at the time, said he was led to believe Frankel wanted to help the poor through his investments.
“F. Jacobs leaves for Rome” as part of a mission for Frankel, the journal states on Jan. 30, 1999. The onetime priest, who fell into disfavor with the Catholic Church when he opened a New York bistro in the 1980s, agreed to be president of a foundation set up by Frankel in the Caribbean in 1999.
Prosecutors now say the St. Francis of Assisi Foundation was a ruse to conceal millions of dollars stolen by Frankel. The former priest was unavailable for comment, but his lawyer, John Kelly of New York, has repeatedly said his client was duped by Frankel.
Two people whose names appear prominently in the journal - and are now the targets of the civil search for the missing money - are Fausto Fausti, 65, and his son, Alfredo Fausti, 24.
On Feb. 22, 1999, the journal states, “Talk to Alfredo. He begs me to give him $3 million.”
Two months later, prosecutors charge that $3 million was wired to a Swiss bank account in the name of Fausto Fausti in April, 1999.
The journal states in another entry on April 14, 1999: “Fausto attempts blackmail - wants $500,000 and gives me 3-day ultimatum or he'll turn me in.”
In another entry on April 19, the journal reads: “Order $542,000 to Fausto - blackmail fee.”
It's not clear the journal entries are true, but a New York lawyer representing the Fausti family says his clients merely worked as consultants for Frankel and never tried to blackmail him.
“I have to wonder about anything Frankel would say,” says Paul Goldberger. He says his clients, who are Italian nationals, believed Frankel was a legitimate stock trader who was enormously wealthy.
“I've told this to the prosecutors,” Mr. Goldberger says. “There are lots of rich people who hire people to try to protect their assets. [The Faustis] did not know his money was stolen.”
He says the Faustis set up “written contractual agreements” to help Frankel on at least two projects: establishing ties with the Vatican, and to purchase a bank in Amman, Jordan.
Several months was spent “trying to work on the bank,” Mr. Goldberger said, and “they started to negotiate the purchase of the bank, when all of a sudden, Frankel changed his mind.
“Now, in retrospect, I have to think that he was looking for a way to launder his money. What better way to launder your money than through your own bank?”
He denies his clients tried to find hiding places for Frankel when he fled his Connecticut mansion for Italy two years ago. Mr. Goldberger would not say how much his clients were paid altogether for their services.
While hiding in Italy, Frankel wrote an entry on June 27 reading: “Alf tells me all $ stolen - He won't give back $2 million.”
Whether Frankel is telling the truth in his journal is open to debate. But in a dozen unrelated entries, Frankel noted that specific amounts of money were wired from his companies to various bank accounts.
Those transactions have been confirmed by federal agents who have found the paper trails on those precise dates, court records show.
Another person who has become a target of the inquiry over the whereabouts of the missing money is Thomas Corbally, 80, a private detective who played a role in the Profumo sex scandal in England in the 1960s.
Frankel noted in his journal that he gave Mr. Corbally, then an adviser to the Frankel businesses, “$577,000 for 10 percent payment on apartment” in New York City on March 7.
Another entry on April 14 states “blackmail,” and Mr. Corbally “threatens to undo the good times If I take his apartment back.”
Mr. Corbally, who divides his time between New York and London, could not be reached for comment. His lawyer, Edward Little of New York, did not return phone messages.
Another business adviser whose name appears in the journal is Mississippi businessman Thurston Little, who received $1.39 million from Frankel on April 16, 1999, to buy an airplane, according to the journal.
Mr. Little's lawyer, Joseph Langston, has confirmed Frankel sent his client more than $1 million to buy a plane around that time. But he says his client did not know Frankel was using stolen money.
One lawyer representing two of the insurance companies that lost money in the Frankel scheme says the money that changed hands between Frankel and his associates needs to be fully examined.
“Nothing is going to stop people from investigating what's in that journal,” says Nashville attorney William Norton, whose clients include Peoples Benefit and Veterans life insurance companies. “What is actually proven is the larger question.” His clients lost $14.6 million, records state.
The existence of the Frankel journal is rare in criminal and civil investigations, and it could prove to be crucial in both, says Gary Zeune, a Columbus fraud expert who has been monitoring the Frankel case.
“It's not so much he was chronicling fraudulent acts,” says Mr. Zeune, author of the book, The CEO's Complete Guide to Committing Fraud. “He appears to be obsessive about detail, and wanted to make sure he noted his actions. The fact that he was into astrology made it more important. It wasn't done to [incriminate himself]. It was done to help himself.” That, he says, makes the journal more credible.
Whether the insurance companies looted by Frankel can ever recover their money is another question, say legal experts.
Neal Sonnet, former president of the National Association of Defense Lawyers, says unless lawyers can prove someone knew the money was illegal, “I would say there's not much chance to recover it.”
But if it was hush money, “then there's a much better chance” of getting something back, says Mr. Norton, the lawyer for two insurers. Federal prosecutors refuse to comment about the journal. They say their own investigation into the Frankel fraud case continues.
Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Comments that violate these standards, or our privacy statement or visitor's agreement, are subject to being removed and commenters are subject to being banned. To post comments, you must be a registered user on toledoblade.com. To find out more, please visit the FAQ.