Bear Stearns is being sued by seven defunct insurance companies for purportedly helping convicted financier Martin Frankel steal more than $200 million, according to a lawsuit filed on Friday by five state insurance commissioners with the US District Court in Manhattan.
The lawsuit calls on Bear Stearns to pay compensation, which could be used to pay back creditors and policyholders. It also seeks treble damages and punitive damages. The commissioners said Bear Stearns facilitated Frankel’s fraud, and that it and some employees “purposely contrived to avoid learning, or were recklessly indifferent to Frankel illegally laundering money through the Bear Stearns accounts.”
Bear Stearns had filed a lawsuit on 16 March, in anticipation of Friday’s lawsuit, seeking a declaration that it was not liable for Frankel’s actions. Bear Stearns spokesman Russell Sherman declined to comment on the new lawsuit. The insurance commissioners — from Arkansas, Mississippi, Missouri, Oklahoma, and Tennessee — had previously sued Geneva asset manager Banque SCS Alliance in the matter.
Frankel in May 2002 pleaded guilty to 24 counts of wire fraud, securities fraud and related charges, and agreed to cooperate with prosecutors. The money he stole helped him support an extravagant lifestyle including luxury cars, mansions and mistresses. Frankel, from Toledo, Ohio, was arrested in a Hamburg hotel room in September 1999 after a worldwide manhunt. He had vanished shortly before a May 1999 fire that destroyed documents in his Greenwich, Connecticut, mansion.
The seven insurers are Family Guaranty Life Insurance Co., Farmers and Ranchers Life Insurance Co., Franklin American Life Insurance Co., Franklin Protective Life Insurance Co., International Financial Services Life Insurance Co., National Life Insurance Co. of America, and Old Southwest Life Insurance Co.