Franklin National Bank
| Company type | Private |
|---|---|
| Industry | Banking, Financial services |
| Founded | 1926 |
| Defunct | 1974-10-08 |
| Fate | Declared insolvent and acquired by European American Bank in 1974 |
| Headquarters | Franklin Square, New York , United States |
Franklin National Bank, once ranked as the 20th largest bank in the United States, was headquartered in Franklin Square, Long Island, New York. It collapsed on October 8, 1974, under contentious circumstances involving Michele Sindona, a banker connected to the Sicilian Mafia and the secretive freemasonic lodge Propaganda Due. This event represented the largest bank failure in U.S. history up to that point.
History
Established in 1926 under the name Franklin Square National Bank, it adopted the name Franklin National Bank in 1947. The bank's original headquarters, designed in the Colonial Revival style and constructed in 1929 in Franklin Square, underwent several expansions until 1955, including the addition of a second story and a drive-through teller window. This building remained the main office until operations relocated to Mineola, New York, in 1960. The original site was officially recognized and listed on the National Register of Historic Places in 2015.
Arthur T. Roth began his career at the bank as head teller in 1934 and rose to president by 1946. During his tenure, the bank introduced several pioneering services such as junior savings accounts (1947), drive-up teller windows (1950), bank-issued credit cards (1951), smoking bans on banking floors (1958), outdoor teller machines (1968), and transformed the Franklin Savings Bond into what became known as the Certificate of Deposit (1969).
In 1955, Franklin National expanded by acquiring Roslyn National Bank and Trust Company along with First National Bank of Glen Cove. The bank further extended its reach into New York City with branch openings in 1964 and merged with Federation Bank & Trust Company in 1967. Roth was removed from his CEO position in 1968 following a scandal related to real estate development at Calverton Executive Airpark. Notably, prior to 1971, Franklin National operated branches located in tax havens such as the Bahamas. By 1970, Michele Sindona’s influence led to Roth losing his chairmanship; Harold Gleason assumed roles as chairman and CEO while bringing Laurence Tisch on board as vice chairman and significant shareholder.
Collapse
In 1972, Michele Sindona, who had affiliations with the Sicilian Mafia, Propaganda Due (P2), and connections within the Nixon administration, purchased a controlling stake in Franklin National Bank from Laurence Tisch, chairman of Loews Corporation. The U.S. Comptroller of the Currency later ruled Tisch unfit to serve as a director due to conflicts of interest, facilitating Sindona’s acquisition. Sindona paid a premium over Tisch’s original investment; Tisch had accumulated shares gradually as a favor to Sindona. Subsequently, the FDIC filed suit against Tisch for breach of fiduciary duty linked to this transaction. Despite these concerns, regulatory authorities showed minimal intervention.
Sindona exploited Franklin National’s expertise in fund transfers, letters of credit, and foreign exchange trading to establish a U.S.-based banking network connected with both the Vatican Bank and Sicilian drug trafficking organizations. Leveraging his ties to the Republican Party and Nixon administration helped secure his position as vice chairman and largest shareholder. However, substantial losses from currency speculation compelled Sindona to embezzle $30 million from the bank to offset deficits, which caused capital shortfalls below regulatory requirements. By mid-1974, these losses were revealed publicly, prompting massive customer withdrawals and forcing Franklin National Bank to borrow over $1 billion from the Federal Reserve Bank. On October 8, 1974, due to mismanagement and fraudulent activities involving foreign currency speculation and risky loan practices, the bank was declared insolvent.
In 1975, Peter Shaddick—former executive vice-chairman of Franklin’s international division—pleaded guilty to fraud charges. A federal trial held in New York in 1979 resulted in convictions for Harold Gleason, former president Paul Luftig, and senior vice president J. Michael Carter for falsifying financial statements. Giorgio Ambrosoli, an Italian lawyer tasked with liquidating Sindona’s financial holdings, supplied crucial evidence leading to Sindona’s conviction related to the bank’s downfall; Ambrosoli was assassinated by a Mafia hitman hired by Sindona in 1979.
Sindona was convicted within the United States in 1980 and extradited back to Italy in 1984. He died from cyanide poisoning while imprisoned in 1986 under circumstances debated as either suicide or murder linked to his involvement in major criminal activities. Ultimately, Franklin National Bank’s assets were acquired by European American Bank, which itself was later integrated into Citigroup.
References
- Michele Sindona: St. Peter's Banker authored by Luigi DiFonzo; published by Franklin Watts in 1983
External links
- The Collapse of Roth's Bank by George DeWan, Newsday Long Island History Site (archived December 15, 2007)
- Articles with short description
- Banks founded in 1926
- Former banks of the United States
- Propaganda Due
- Defunct New York (state) companies
- Banks closed in 1974
- Companies located in Nassau County, New York
- Bank structures listed on the National Register of Historic Places in New York (state)
- Colonial Revival style architecture in New York (state)
- Commercial properties completed in 1929
- National Register of Historic Places in Nassau County, New York
- Bank buildings on the National Register of Historic Places in New York (state)