Inside Suite 5 at the Hotel Prem in Hamburg, Germany, Martin Frankel relaxed in the kind of luxury that millions of swindled dollars can buy. In the hallway outside his posh room, two Hamburg detectives, guns drawn, crept toward the door. With a spare key obtained from hotel staff, the detectives burst in, ending a four-month manhunt. "You got me," was all Frankel said before he was handcuffed and hauled away.

Thus did one of history's greatest con games quietly come undone. Before his capture on Sept. 4, Frankel, 44, had allegedly masterminded a complex insurance scam that may have netted him anywhere from $215 million to as much as $2 billion. Secretive and slippery—he never allowed his picture to be taken and used several aliases—Frankel kept a harem of women in his Connecticut mansion while concocting elaborate schemes that ensnared victims ranging from retirees to a Vatican official. "He is a no-good, deceiving, evil person," says John Schulte, a former broker who hired Frankel in 1985 and claims he not only ruined his business but also stole his wife. "There isn't one good bone in his body."

Yet Frankel—now in a Hamburg jail while the U.S. works on extraditing him—was hardly the dashing, diabolical villain his crimes and life style suggest. Actually, says Jeff Creamer, the attorney for several of Frankel's victims, "He's kind of this goofy, Woody Allen-type character." Nondescript, disheveled and eccentrically germophobic (he would sterilize soda cans with alcohol swabs before drinking from them), Frankel lived with his parents into his 30s. He also relied on astrological charts to plot his business moves. What's more, the self-professed financial genius was so terrified of making deals that he saw a psychiatrist for help with what he called his "trader's block." How, then, could he have potentially bilked investors out of millions and eluded the FBI for weeks? "People always ask, 'How could this happen?' says Creamer. "But if you met the guy, you'd understand."

Frankel's real genius, it seems, was in convincing people he was brilliant. In fact the Toledo, Ohio-born son of Leon Frankel, an attorney, and his wife, Tillie, a court clerk, dropped out of Whitmer High School (he later earned an equivalency degree) and attended but never graduated from the University of Toledo. In 1985 he sot his stockbroker's license and started working in a Toledo branch of the New York City brokerage firm Dominick & Dominick. "This kid came in and said he had a special gift for investing people's money," says the branch's then owner, John Schulte. "He had a glowing resume and a smooth delivery."

The résumé turned out to be fabricated, but Frankel's seemingly sophisticated market ideas helped him gain the trust of clients like Ted Bitter, a Toledo tool-and-die maker who handed over his life savings of $64,000. "He was very shy, kind of a nebbish," says Bitter, 53. "At the same time, he had a big ego because he thought he was very smart." But Schulte says Frankel made only one trade in six months and was fired for, among other things, signing contracts without authorization—after which, according to Schulte, Frankel wrecked his former boss's marriage. "He'd spent an inordinate amount of time in my wife's office, and she was totally sold on him," says Schulte, who claims the two eventually ran off and lived together.

After his firing, Frankel started his own investment fund, which he operated out of a bedroom in his parents' home. "Marty would let his Wall Street Journals pile up in the garage, so his parents would bicker at him," says Bitter, who lost his savings to Frankel and was forced to sue to get them back (he eventually retrieved most of them). In 1991 the Securities and Exchange Commission accused Frankel of mismanaging his clients' funds and, the next year, banned him from the securities industry for life.

Undaunted, Frankel now embarked on a new series of alleged scams—these involving the insurance industry. Working under aliases he bought controlling stakes in several small firms specializing in burial insurance, a product for people of limited means. Authorities say he siphoned off millions of dollars to support his lavish lifestyle while keeping investors at bay with grand promises. He even got a Vatican official to endorse a children's charity that he ultimately used to launder stolen funds. Frankel ran his shell game from a 12-room mansion in Greenwich, Conn., that was patrolled by armed guards and crammed with the latest in high-tech stock-trading gear.

As Frankel's riches grew, his behavior turned increasingly bizarre. He placed personal ads in newspapers and trolled overseas Web sites to lure a series of young females to his mansion, allowing a stable of some 20 women (some, ex-girlfriends) to live with him and run up huge American Express bills. The chaos he created only enhanced his anxiety over making trades. Complaining to associates that he had trader's block—and relying more and more on astrology charts—Frankel reportedly sought help from New York City psychiatrist Ari Kiev, who specialized in performance anxiety. "Everybody walked on eggshells during trading hours," recalls Mona Kim, then Frankel's personal assistant. "He'd fly off the handle very easily."

Frankel's high-tech house of cards began to crumble in April 1999, when Mississippi regulators demanded he return $200 million to several insurance firms. Last May 5 the Greenwich fire department responded to an alarm from Frankel's mansion; inside they found burning documents and a To Do list that began "Launder money." By then, Frankel had already packed several suitcases and one bag of diamonds and boarded a private jet to Rome.

Connecticut officials issued a warrant for his arrest, and the FBI and Interpol joined in the hunt. Frankel, meanwhile, was living in rented apartments and villas in Rome, casually eating in outdoor cafes and talking for hours on pay phones. "He called everybody and anybody he knew," says Kim, who returned to the U.S. after two months, claiming she didn't originally realize Frankel was a fugitive (she has yet to be charged with anything and is cooperating with investigators).

Police nearly nabbed Frankel when he moved to Munich, but his trail quickly grew cold again. On July 7, Frankel used a phony name to check into Hamburg's Hotel Prem, where for nearly two months he enjoyed dining in the hotel's La Mer restaurant and strolling in the garden. On Sept. 4, working on a tip from the FBI, Hamburg police arrested Frankel in his suite, confiscating false passports, computers, cash and diamonds (a girlfriend, Cynthia Allison, 35, was also arrested but later released).

Locked away in Hamburg's Holstenglacis Road jail, Frankel has complained about not getting kosher food and has already gone through two lawyers (his American counsel recently resigned, claiming German authorities blocked access to his client). Nevertheless, Frankel will likely fight extradition to the U.S., where he could face as much as 25 years behind bars for mail fraud and money laundering—a fate, say some, Frankel richly deserves. "I hope he serves a good long time in prison," says Ted Bitter, the tool-and-die maker who was one of Frankel's first victims. "He has hurt so many innocent people."

Alex Tresniowski
Champ Clark in Chicago, Hannah Cleaver in Hamburg, Jennifer Longley and Bob Meadows in Greenwich and Shari Sweeney in Toledo

  • Contributors:
  • Champ Clark,
  • Hannah Cleaver,
  • Jennifer Longley,
  • Bob Meadows,
  • Shari Sweeney.