-Caveat Lector- from: http://www.aci.net/kalliste/ <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Today's Lesson From The Open Society and Its Enemies by Karl R. Popper Historicism, which I have so far characterized only in a rather abstract way, can be well illustrated by one of the simplest and oldest of its forms, the doctrine of the chosen people. This doctrine is one of the attempts to make history understandable by a theistic interpretation, i.e. by recognizing God as the author of the play performed on the Historical Stage. The theory of the chosen people, more specifically, assumes that God has chosen one people to function as the selected instrument of His will, and that this people will inherit the earth. . . . There is no doubt that the doctrine of the chosen people grew out of the tribal form of social life. Tribalism, i.e. the emphasis on the supreme importance of the tribe without which the individual is nothing at all, is an element which we shall find in many forms of historicist theories. Other forms which are no longer tribalist may still retain an element of collectivism; they may still emphasize the significance of some group or collective--for example, a class--without which the inividual is nothing at all. Another aspect of the doctrine of the chosen people is the remoteness of what it proffers as the end of history. For although it may describe this end with some degree of definiteness, we have to go a long way before we reach it. And the way is not only long, but winding, leading up and down, right and left. Accordingly, it will be possible to bring every conceivable historical event well within the scheme of the interpretation. No conceivable experience can refute it. But to those who believe in it, it gives certainty regarding the ultimate outcome of human history. ===== Equity Markets US Investors Pull Money Out of International Funds Keeping It All at Home US private investors are removing money from international investment funds as the trend to invest only in US equities gathers pace. A net $7.15bn was withdrawn from funds investing outside the US in the first four months of this year, while the industry as a whole attracted $74.91bn in new cash, according to figures compiled by the Washington-based Investment Company Institute, the trade association. This continued a trend that started with the Asian financial crisis in 1997. In 1996, international funds attracted $47.5bn in new money, or more than 20 per cent of the total. This fell to only $7.5bn, or 3.1 per cent of the total, last year. The decline in new money from the US could affect the performance of international stock markets. It has also alarmed some mutual fund management companies, which have mailed investors urging them to retain some balance in their portfolios Several emerging markets have recovered in the past few months, but the sharp fall in the value of the euro has inflicted damage on dollar-denominated mutual funds, many of which were not hedged. This means that only exceptionally successful stock-pickers have attractive performance figures this year. The Moody's Europe Equity Fund Index, which tracks the performance of funds investing in European equities, has fallen 5.15 per cent over the past 12 months and gained only 0.96 per cent so far this year. By comparison, its US growth equity fund index, which covers the funds investing in the most popular large US companies, has gained 19.27 in the past 12 months and 5.25 per cent so far this year. Robert Swift, chief investment officer for international equities at Putnam Investments in Boston, one of the largest US mutual fund groups, said: "People are seeing that the US has provided 23 per cent returns over the last five years, compounded, while non-US has provided half that, and they're saying there's no point owning this stuff." According to Baltimore-based T. Rowe Price, one of the largest distributors of mutual funds: "People are reacting to the severe underperformance of international funds relative to the US in the last four or five years, and particularly last year." The Financial Times, June 8, 1999 Oil Market Castle Energy Appears in a Flurry of Recent Deals And then there's Zapata Petroleum . . . NEW YORK--Remember little Castle Energy? That was the Pennsylvania E&P firm nearly crushed to death in the $1.6-bil Metallgesellschaft futures fiasco in 1993. Backed by what it thought were rock-solid processing deals for all its output from MG, Castle went deep into hock buying two old refineries, a natural gas pipeline and other assets to become MG's defacto US operating arm. Then MG, Castle's main shareholder, reneged. In late 1994, red-faced MG settled up with Castle by forgiving its debt, giving back its Castle stock and unwinding its commitments, at a total cost of $479-mil. Published reports at that time said MG and unidentified companies it was doing business with had also come under investigation by Manhattan District Attorney Robert Morganthau in New York for possible "corrupt" criminal activites. But no charges have ever been brought and Morganthau's office had no comment on any possible remaining probe. Castle sold the Indian and Powerine refineries (both now closed). That eventually left Castle debt-free with $44-mil of cash and a lucrative Texas gas sales contract, which finally ran out in May. Since the MG mess, Castle CEO and 21% shareholder Joseph Castle II, 66, has bided his time, waiting for the chance to use that financial firepower to buy Castle's way back into the energy business. Leery for the past four years of overpaying for energy assets, Castle has opted instead to buy back 65% of its own stock at an average of just of $14/share. The remaining 2.6-mil shares trade upwards of $18/share or a total of about $50-mil. Now, in a flurry of deals in recent days, cashed-up Castle has made his move to take advantage of a buyer's market for distressed assets. On May 24, Castle agreed to spend $5.3-mil for upwards of a 50% stake in a gas-reef drilling venture in Texas' Maverick County operated by a small, cash-strapped San Antonio firm called The Exploration Co. On June 1, Castle completed a $22-mil purchase of AmBrit Energy, the Texas-Louisiana E&P arm and essentially the only asset of troubled UK-based United Energy plc. AmBrit ended 1998 with 4.6-mil boe of proved reserves, up from 4.2-mil boe a year earlier. But low prices forced a writedown at year-end to a discounted present value of $19-mil, pushing AmBrit parent United Energy into a loss and prompting its bank to trim its credit line. Then on June 2, Castle exercised an option it bought last winter to take over from even more hard-pressed Costilla Energy a 50% stake in a massive 3.1-mil acre exploration concession in Romania by paying less than $400,000 and assuming a $3-mil drilling commitment. Debt-laden Costilla has also been under pressure from bank lenders ever since it was unable to get financing to complete an ambitious $400-mil asset purchase from Pioneer Natural Resources. Thrown in essentially for free in the Romanian deal: Costilla's 100% stake in a huge 8.3-mil acre gas exploration concession covering the entire land mass of neighboring Moldova. Operating partner of the Romanian play is Dallas-based Hunt Exploration. After more seismic work there this year, Castle says drilling is expected to start next spring. "Frankly it's a modest thing," said Castle. "We'll keep our exploration budget small. As far as the Moldovan concession, we're not sure what we'll do there. We're interested in Romania." Costilla's Eastern Europe foray has a curious history. Last year, despite its cash running tight, Costilla shelled out about $1-mil and forgave $1.6-mil in debt to acquire the Romanian stake and the remaining 50% in Moldova from a company controlled by William Liedtke, brother of Costilla chairman and dominant shareholder Cadell Liedtke (ON 10/26/98). But within months Costilla wrote off its entire $4.6-mil investment there at year-end, discontinued operations and put them up for sale. Castle says it first eyed the Romanian and Moldovan deals more than two years ago when William Liedtke's Canada-based Resource Development Co (Redeco) was looking for a partner. Curiously, the just-closed AmBrit deal is also closely tied to Costilla. One of AmBrit's primary assets is a 10.65% overriding royalty interest inherited in Costilla's flagship Southwest Speaks gas play in Texas' Lavaca County. Castle says that is merely a coincidence. Another coincidence is that AmBrit's parent company, United Energy, bears the same name as another company that figured prominently in the Liedtke family's oil-patch business adventures, although United CEO Nick Tamblyn said there has never been any business or ownership connection. Back in 1968, Cadell Liedtke's uncle, J Hugh Liedtke, launched the first big hostile tender offer of the modern era when his Zapata Petroleum went after United Gas Corp, a sleepy Louisiana pipeline and E&P firm 10 times Zapata's size. That pipeline was later spun off as United Energy Resources. Platt's Oilgram, Volume 77, Number 107, June 7, 1999 Financial Scams Missing Financier Got Rich in a Hurry But a billion isn't what it used to be GREENWICH, Conn. - To those who know him, Marty Frankel is an eccentric investor who consults astrology charts before making stock trades and refuses to go outdoors for days at a time. For the past six years, the former Toledoan has been living in a secluded $3 million home protected by security cameras and fences in this upscale community of millionaires and corporate CEOs. "He was living a very secretive life," says his friend, Ed Krauss. Now FBI and law-enforcement agents from four states are looking for the reclusive man who surrounded himself with bodyguards. The financier who wore baggy jeans and T-shirts vanished three weeks ago - along with nearly $1 billion from the businesses he controlled. "I'm not sure I have ever heard of that much money gone anywhere - anytime," says Donald Pierce, a former U.S. Justice Department task force agent. "This is big time." According to documents and court testimony, $970 million has been reported missing from at least seven insurance firms - and possibly 11 - that Mr. Frankel controlled through two trust companies. Because of the losses, the insurance firms have been taken over by state regulators in four states and have been forced into receivership. Regulators say Mr. Frankel, 44, acted as a personal investor for the companies over the last seven years, despite losing his license as a stockbroker in 1992. The name of his company: Liberty National Securities. During his years in Toledo, he was sued twice by investors for alleged improprieties, eventually leading to his being banned from trading by the U.S. Securities and Exchange Commission. "At this point, we're still trying to figure out how this happened - and where the money went," says Tim Allen, a spokesman for the Oklahoma Insurance Department. "And I guess everyone is trying to figure out where Mr. Frankel is." The last time he visited Toledo was in November to attend the funeral of his father, Leon Frankel. He came surrounded by bodyguards - as many as 10, by one count. "It was like something out of a Mafia movie," says Toledo dentist Jon Frankel, a second cousin of Marty. The insurance companies have hired a private investigator in Washington, D.C., to search for the lanky businessman with the dark hair and glasses. "I don't know where he is," says his mother, Tillie, 78, a retired clerk for the city of Toledo. "I am just as puzzled as anybody else - more so." His sister, Amy, encourages people to withhold judgment. "This might turn out to be absolutely nothing," she says. The investigation has taken several twists, grabbing the interest of network news shows such as 60 Minutes and 20/20. Since Mr. Frankel's disappearance May 6, Greenwich police have blocked the entrance to his stone mansion as well as a $2.6 million home he owns next door. Inside the mansion, FBI agents are wading through a complex set of financial records that may shed light on what could be the largest case of missing money ever in the United States. The Internal Revenue Service has joined the probe, along with Connecticut state police. It is not the first time law-enforcement officials have visited Mr. Frankel's estate. In August, 1997, a 22-year-old office assistance was found dead in a house that Mr. Frankel was renting, next door to his main residence. Greenwich police interviewed him but ruled the death of Frances Burge a suicide. Mr. Krauss says the last time he saw Mr. Frankel was at the investor's mansion in January. He appeared to be doing well. "I was thinking, 'This is a Toledo kid who made good,' " recalled Mr. Krauss, a vice president for the Greater Columbus Chamber of Commerce. "He was fabulously wealthy. He had nice cars. He owned two nice homes. He had finally fulfilled his dream." But he also noticed something bizarre: Mr. Frankel, who lived alone, would not go outside. He had installed security cameras and fences around the home. Building inspection records showed that Mr. Frankel had installed motion detectors. A former next-door neighbor, Charles Davidson, says the investor illuminated the exterior of his house with security lights. "It was sort of strange," Mr. Davidson says. In six years, Mr. Davidson says he saw his next-door neighbor once. Mr. Frankel introduced himself as "Marty King." Earlier this year, Mr. Davidson sold his house to Mr. Frankel, but the two neighbors never talked, communicating with each other through brokers. "He wanted to keep to himself, and I respected that," he says. Mr. Frankel used the mansion as a home and an office; so he did not have to venture out much, Mr. Krauss says. "He just wasn't comfortable going out, and I didn't press it," he recalled. "He basically just stayed in two big rooms in his house. His staff was always there, working the phones and computers." Unlikely millionaire To several people who knew Mr. Frankel in Toledo, his recent success has been a surprise. Just 10 years ago, he was living with his parents in their modest home in the Lincolnshire neighborhood of West Toledo. A high school dropout, he was driving an old Chevrolet and trying to sell securities. "He was far from being a millionaire, at least back then," recalls Ted Bitter, 52, who invested money with Mr. Frankel. "He didn't go out much socially. He was kind of a hermit." His bizarre disappearance came to light on May 5, when firefighters were called to his mansion. A fire alarm had sounded in the home. By the time firefighters arrived, no one was inside. But they saw something unusual in the home: a file cabinet on fire. As they searched the house, they found two more fires burning in separate fireplaces. No one will say what was found, but the next day, FBI agents obtained a court order to search the home. Meanwhile, hundreds of miles away, another event had occurred in Mississippi that investigators believe was linked to the fire. Millions of dollars were discovered missing from the accounts of three life insurance companies: First National Life Insurance Company of America, Family Guaranty Life Insurance, and Franklin Protective Life. The money was found to be missing after an audit, say officials there. "During the course of the investigation, we became aware of the fire in Connecticut and the possibility of it being linked to the solvency problems wiht the insurance companies," says Shepard Montgomery of the Mississippi Department of Insurance. Insurance companies were alerted in other states. Within days, it was found that at least four other companies in three other states - Missouri, Tennessee, and Oklahoma - were missing large sums of money. Carroll Fisher, Oklahoma insurance commissioner, says in a court document the total could reach $970 million. While they were headquartered in different states, the insurers shared something in common: Their assets were under the control of one man, Mr. Frankel. "From what we understand, he was basically the person who was investing their money," explained Mr. Allen. What made this arrangement unusual was that the Securities and Exchange Commission had barred Mr. Frankel from investing other people's money in the stock market seven years ago. He was operating a securities company from his mansion, nonetheless. Shortly after insurance executives began to call him asking about the whereabouts of their money, he was gone, they say. Mr. Krauss, who worked briefly as a consultant for Mr. Frankel, says he hwas no idea where the investor may be. "He gave me no hint that he was going to be leaving his business, or anything like that," says Mr. Krauss, who was here in January. He says he spent 12 days helping Mr. Frankel hire clerks and secretaries for his business. "My background is personnel; so I just went there to help him screen and interview people. He paid me for my time and that was it." He noticed that Mr. Frankel spent most of his time watching television financial news reports when he wasn't working. "He was into astrology charts and making market buys based on what he was coming up with on these astrology charts," he says. "That was very big with him." He says he tried to coax his old friend into going out and getting away from the office. "I said, 'Marty, you're fabulously wealthy, and you live an hour from New York City. Why don't you go out and have some fun?' But he just wanted to stay home. ...It was like he was a hermit." Mr. Krauss, who grew up with Mr. Frankel's older brother, Robert, when they both lived in Toledo's Old West End neighborhood, says he has been called by several reporters since the news broke about Marty Frankel. But he says he has yet to talk to law enforcement agents. "This has been really hard on the family, and they don't deserve it. They're really good people." Mr. Frankel's mother, Tillie, says she had trouble sleeping the first night after hearing of her son's case. She doesn't want to talk about it now. "I'm 78 years old," she says. Mr. Pierce, the former Justice Department agent, says in cases like these, the FBI looks at two possibilities: foul play for massive fraud. "It's not that complicated," he says. "The business transactions may be complex, but you have a missing person and a lot of missing money. Mr. Krauss says it's difficult for him to believe that his old friend took that much money. "I could understand if it was an accounting error, or sloppy bookkeeping but not this. It just doesn't make sense." Brilliant loner Marty Frankel was born on Nov. 21, 1954, in New York, one of four children of Tillie and Leon Frankel. He moved to Toledo as a child and went to Fulton Elementary School before he transferred into Washington Local Schools. He attended Washington Junior High School, where he was in the student council, and later went to Whitmer High School. In 1971, he left high school before graduating. Details about the rest of his education are sketchy. He received a high school equivalency degree and attended the University of Toledo. But he placed a privacy restriction on any information being released about his years at UT, says a clerk in the registrar's office. Several people who went to school with him say he was a loner. "He was very eccentric. He didn't ever appear to have a lot of friends or to do a lot of things socially," says Brad Dolgin, who went to grade school and high school with Mr. Frankel. "He wasn't part of any kind of group." Mr. Dolgin remembers Mr. Frankel was a "brilliant" student. "My impression of him was if he was not at the genius level, he was near it," he says. Mr. Frankel passed his stockbroker's exam in 1984, starting a career in securities that was anything but brilliant. In fact, it was marred by controversy almost from the start. It began in 1986, when he went to work for Dominick & Dominick, a New York brokerage firm with an office outside Toledo on Woodville Road. At the time, he forged a relationship with the couple operating the local office -John and Sonia Schulte - that would lead to more problems. After six months, Mr. Frankel was fired, says Mr. Schulte. "He just didn't produce, and that's really all it came down to," says Mr. Schulte. They often quarreled over Mr. Frankel's attire. "It was hard to get him to wear a shirt and tie," he sayss. During his short stint at Dominick & Dominick, Mr. Frankel struck up a friendship with customer Ted Bitter. "I thought he was a genius," says Mr. Bitter. So after Mr. Frankel went to work for another brokerage house, Lasalle Street Investors, Mr. Bitter followed Mr. Frankel and continued investing with him. "He basically set up an office in his parents' home - where he was living - with a stock quote machine and everything," recalls Mr. Bitter. The two men would often meet at Barry's Bagel Restaurant, talking about stocks, American history, and government. "To me, he was a liberal who was always talking about how society needs to help the downtrodden," recalls Mr. Bitter, 52, who grew up in Genoa. "He wore baggy jeans all the time. "He was always alone, and he liked to stay indoors a lot. He was very quirky about that. He did not like to go to bars." Zealous about protecting his privacy, Mr. Frankel would not allow his photograph to be taken, Mr. Bitter says. But what struck Mr. Bitter was that Mr. Frankel was always talking about how intrigued he was with Robert Vesco, the international swindler who stole millions of dollars and fled to Cuba. "He talked about him and others like him, and he was really, really taken by them," recalls Mr. Bitter. About 1987, Mr. Frankel began to sell shares in what he was calling "The Frankel Fund," a limited investment pool. He persuaded Mr. Bitter to invest $65,000, and another man, John Herlihy of Toledo, about $300,000, records show. He then decided to move to Palm Beach, Fla., recalls Mr. Bitter. "He told us that he would continue to watch our investments from down there, and gave us a number to call," says Mr. Bitter, a tool-and-die worker. "He felt that by going to Palm Beach, he would run into a lot of wealthy investors." But it didn't work out. A year later, Mr. Frankel returned to Toledo upset, says Mr. Bitter. "He didn't want to talk about it," Mr. Bitter says. But records show that at the time, complaints were filed with the Securities and Exchange Commission in Florida and Illinois again Mr. Frankel, as well as a business partner, Douglas Maxwell. Filed by a group of investors in 1988, the complaints alleged that Mr. Frankel misrepresented the Frankel Fund and where the money was being invested, according to the SEC. Mr. Bitter says he asked Mr. Frankel for his original $65,000. "He said I couldn't get it. I asked him why, and he told me it was frozen in a Chicago bank," he says. The SEC had received a court order to freeze the Frankel Fund account because of the previous complaints, records show. Finally, Mr. Bitter and Mr. Herlihy filed a lawsuit against Mr. Frankel in federal court in Toledo in 1989, alleging fraud, racketeering, and other improprieties. As it turned out, the money was never invested in the securities that Mr. Frankel had represented in statements mailed to the investors, according to SEC records. An SEC arbitration hearing was held in Cleveland and a settlement was reached with the investors. Mr. Bitter and Mr. Herlihy were both compensated for their losses, and Mr. Frankel agreed to surrender his broker's license, records show. No criminal charges were ever filed, and both lawsuits were settled out of court. Mr. Herlihl is now deceased, and Mr. Bitter says he just wants to forget the experience. "Marty Frankel was someone I trusted, and as far as I'm concerned, I'm just glad that this thing is over," he says. "To this day, I wish I never met the guy. It was a really bad experience for me." Building trust Though Mr. Frankel gave up his license, he didn't stop making investments. He left Toledo in the early 1990s, first moving to Altamont, N.Y., and later, Greenwich, a tony bedroom community an hour away from New York City. In 1991, he ventured into a new business, insurance, and helped form a trust company known as Thunor Trust, in Franklin, Tenn., according to insurance regulators from that state. The officers listed in the new trust: Ed Krauss and Sonia Howe, the ex-wife of John Schulte. Ms. Howe, who now lives in Charlotte, N.C., says she cannot talk about her role in the corporation on the advice of her lawyer. She was aware of the disappearance of Mr. Frankel but declined to comment. Thunor Trust began to acquire controlling shares of small insurance companies, beginning with Franklin American Life of Tennessee. The trust bought 52 per cent of the firm's shares for a reported $3.8 million in 1991. At the time, there were $25 million in assets with the firm. The trust found another firm in Oklahoma, the Farmers and Ranchers Life Insurance Co., which had $13 million in assets. Eventually, the trust gained control of at least one more company: a Missouri firm. By 1997, it grouped three companies in Mississippi that were owned by the St. Francis of Assisi Foundation, a British Virgin Islands entity, according to a spokesman for the Mississippi insurance department. Mr. Krauss, who says he only helped Mr. Frankel set up the business, says it was Mr. Frankel's goal to acquire smaller, struggling firms. "He said to me many times that he was taking great pride in the fact that he was able to help save these companies and put them under trusts to make them stronger,'' says Mr. Krauss. Mr. Frankel took over investing the insurance companies' assets, a Thunor trustee, John Hackney, told regulators. By March, at least some of the assets were missing, raising regulators' eyebrows. The money was supposedly invested through a company, National Liberty Securities, which was based at Mr. Frankel's mansion in Greenwich. "He had more computer equipment and high-tech stuff in that house,'' recalls Mr. Krauss. Mr. Krauss says it was his understanding that the employees were there to sell annuities and insurance. Early this month, insurance executives for some of the companies told regulators in a Mississippi court that they asked Liberty National to sell the securities it was holding for the companies. They never got a response. Later, they got the bad news: There was no Liberty National listed with the Securities and Exchange Commission. They tried calling Mr. Frankel, but he was gone. The Blade, May 30, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. 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