Rogue financier faces new charge that could delay return to U.S.

HAMBURG, Germany - German prosecutors say rogue financier Martin Frankel did not pay taxes on a cache of diamonds found in his hotel room, a charge that could hinder his extradition to the United States.

That seemed to suit Frankel, who said Wednesday he's not eager to leave Germany for the United States, where he faces possibly decades behind bars and tens of millions of dollars in lawsuits.

''Obviously, I'd rather stay in Germany,'' Frankel, 45, told reporters in a Hamburg courtroom.

Nine months after he was arrested in a Hamburg hotel on a U.S. warrant, Frankel was charged in a German court Wednesday with tax evasion on top of earlier counts of passport fraud.

German authorities initially said they didn't plan to pursue the relatively minor charges resulting from the two British and seven Greek passports found in his hotel room. But they apparently changed their minds after uncovering evidence to support the more serious charge of tax evasion.

Frankel faces up to 10 years if convicted of failing to pay $1.2 million in customs duties on $5.35 million worth of diamonds allegedly found with him in his hotel room.

Also on his trail are U.S. insurance regulators from five states looking to recover the millions they say Frankel stole from insurers and funneled to the unlicensed brokerage run from his Connecticut mansion. He also faces numerous federal and state criminal charges.

Before his Sept. 4 arrest, Frankel eluded authorities for four months. U.S. authorities now may have to wait months longer before the German trial ends - and even longer if he's sentenced to prison.

Bearded and wearing a black trench coat in his first public appearance since he fled Connecticut for Europe 13 months ago, Frankel spoke to reporters at his trial Wednesday even after the judge entered the chambers.

But Frankel displayed no eagerness in helping the court, initially refusing to make any statements beyond his name, date of birth and previous and current residences.

That infuriated Judge Horst Muenzker, who paged through files on pretrial agreements that showed Frankel would stipulate to certain details of the alleged crimes.

Only three days had been allotted for the trial, and no witnesses were available in court.

After a recess where he consulted with his lawyers, Frankel named four witnesses he would like to call - including two of the women who accompanied him during his flight.

''The best thing would be to have the truth of the whole matter come out,'' Frankel said. ''And the best way would be to have those four witnesses. ... They would know the true facts about the importation of the diamonds from America to Italy.''

The witnesses Frankel requested were Mona Kim, his former business manager who accompanied him to Rome; Cynthia Allison, who was with him in Hamburg; Thomas Corbally, a New York business consultant; and Alfredo Fausti, the son of an Italian businessman.

The court will decide on Frankel's request to call witnesses when it reconvenes Friday. Defense attorney Matthias Thiel said it could take two to three months before the witnesses would come to Germany to testify.

Frankel's odyssey from financier to fugitive started May 5, 1999, when authorities were called to investigate a fire at his Greenwich, Conn., mansion and discovered a fireplace and file cabinet full of burning documents. He had left the country the day before.

From there, he is known to have traveled to Rome and Hamburg.

Insurance commissioners in Arkansas, Mississippi, Missouri, Oklahoma and Tennessee have filed a federal lawsuit asking for more than $600 million in damages from Frankel, who is accused of bilking more than $200 million from insurers.

Frankel also faces dozens of state charges and was indicted in October on federal charges in Connecticut. At least three Frankel associates have pleaded guilty to charges relating to his alleged money laundering.