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Gary Frank, called a ‘serial, pathological liar,’ receives 17½-year sentence for $34 million fraud

The federal judge on the case said “con men and manipulators of Mr. Frank’s caliber are a danger to society.”

Gary Frank and and his former fiancee Alexian Timeus at a Philly Pops event in December 2017.
Gary Frank and and his former fiancee Alexian Timeus at a Philly Pops event in December 2017.Read moreHughE Dillon

Gary Alan Frank, who wildly overstated the size of his legal services benefits firm to obtain more than $30 million in loans and enjoyed a lavish lifestyle that helped him land on the Philadelphia Orchestra’s board, was sentenced Tuesday to 17 ½ years in prison.

While discussing the sentence, U.S. District Judge Gerald J. Pappert described Frank as a “serial, pathological liar in all aspects of his life, personal and professional,” and said that “con men and manipulators of Mr. Frank’s caliber are a danger to society.”

After the sentencing, Pappert ordered Frank, 49, to be taken into custody immediately and he was led out of the courtroom in handcuffs. In April, Frank pleaded guilty to 27 counts of wire fraud, six counts of money laundering, and other crimes.

Frank’s lawyer, Robert E. Welsh Jr., declined to comment after the all-day hearing ended.

The vehicle for what prosecutors called Frank’s “audacious scheme” was Legal Coverage Group Ltd. in Bala Cynwyd, which he founded in the mid-1990s after receiving a law degree from Villanova University. The company offered legal plans to employers, which could be provided to staff as a benefit, similar to group medical insurance but for legal services.

About 2006, Frank started exaggerating the size of his company to obtain ever-bigger loans, culminating in a $30 million loan from Prudential Insurance Co. of America at the end of 2014. In an effort in 2017 to refinance the Prudential loan with one as large as $80 million, including a $15 million payout for himself, Frank claimed $378 million in revenue, $42 million in profit, and 3 million enrollees in legal coverage plans, according to a March 2018 FBI affidavit.

The reality was that Legal Coverage Group, with 10 staffers, had about $400,000 in annual revenue and about 2,500 people enrolled in its benefit plans, according to testimony Tuesday.

After receiving the $30 million from Prudential, Frank immediately used $12 million to pay off older bank loans, credit card debt, and professional fees. During 2015 and 2016, Frank used loan proceeds to make payments to Prudential, buy two luxury condominiums for a total of $2.94 million, and travel to such places as Mexico, France, England, Italy, and Hong Kong, according to the government’s sentencing memorandum.

Purchases included a $122,300 engagement ring for his then-fiancée. Two weeks after that purchase in June 2017, Frank’s company missed its loan payment to Prudential. Frank was on vacation in Italy at the time, the government said.

“The lifestyle expenses, in 2015, 2016, 2017, are staggering,” Pappert said.

The money from Prudential was gone in 2017, so Frank turned to friends and acquaintances, including former Philadelphia mayoral candidate Tom Knox, borrowing a total of $4 million, some of which he used to keep Prudential at bay for several months while he attempted to find a new lender.

Fabricated bank statements used in Frank’s bid to obtain new financing showed the scale of his hype. The fraudulent statement for November 2017 claimed an average balance of $19.2 million. That figure on the actual statement was $7,750.

Judge Pappert was not convinced that the lies had stopped, even on Frank’s day of sentencing. “He is an unusually good liar. He is a very smart man,” the judge said.

In addition to the prison term, Frank was ordered to pay $33.7 million in restitution.