Richard Frajola was a bigwig in the world of stamp and coin memorabilia and an expert on Western postal history, so when he moved to Colorado from Connecticut in 1990, local dealers gave him due respect.
"Richard is one of the most knowledgeable stamp experts in the country," says dealer Charles Shreve, who runs stamp shops in Dallas and New York City. "Even his detractors would say he's one of the top three experts in U.S. postal history in the country."
But his detractors have a lot more than that to say about him. Last summer Frajola filed for liquidation under Chapter 7 of U.S. bankruptcy laws, having posted a debt of more than $1.4 million in the past several years. A lot of that money is owed to collectors who consigned their philatelic items to him for auction. He's also under investigation by the U.S. Postal Inspection Service for alleged mail fraud, though officials decline to comment about his case.
Some local stamp dealers think Frajola never had any intention of paying the collectors, but others say he was just a lousy businessman. "It's not like he's gone to Mars or Rio," says Bill McCarren, an attorney who represented Frajola in a real estate dispute in Black Hawk several years ago. "It's not the pattern of people involved in fraud, who take something and are on the lam. It's more a case of imprudent cash management than intent to fraud."
It was a dispute in Black Hawk, claims Frajola's bankruptcy attorney, John Smiley, that put his client in the hole. In 1989 Frajola tried to buy the historic Bull Durham building in Black Hawk but wound up in a lawsuit with the previous owner. A casino company offered Frajola a half-million dollars in promissory notes to turn the property over, but the company later went bankrupt itself, and Frajola never collected.
"The fact remains, and what few people want to see, is that he had a $500,000 note and got nothing for it," Smiley says. "That put him in a cash crunch and precipitated the need to file bankruptcy. Richard has done everything he can to get these people paid."
But the only thing many creditors say Frajola has done is sell other people's stamps and not give them the proceeds. According to bankruptcy-court records, more than twenty creditors nationwide--many of whom are senior citizens who had planned to use the proceeds from the sale of their collections to fund their retirements--are still waiting for their money.
"I would say there was severe mismanagement and errors in judgment," says Janice Steinle, the federally appointed trustee for Frajola's bankruptcy estate. "He was using the proceeds from various auctions to purchase other things rather than pay people he owed. Sometimes he got around to paying consigners, sometimes not."
Los Angeles attorney R. Carlton Seaver, however, sees Frajola's predicament as more than a slippery slope. "The first time may be a mistake," he says. "Then you move to a point where you have a lack of morality. It seems by the second or third step, you've decided not to operate by the ordinary rules."
Seaver represents three of a handful of clients who are filing lawsuits to prevent the court from discharging their portion of the Frajola bankruptcy estate. (The court has the power to discharge all of Frajola's debt, essentially leaving creditors who don't have collateral against him out of luck.)
Seaver's clients are three sisters whose father's stamp collection was auctioned by Frajola in 1992. They claim that Frajola paid them only a small portion of the proceeds and that he still owes them almost $400,000.
Before his problems began, Frajola was a central figure in the stamp business. "For about ten years he issued some of the best auction catalogues in the field of envelopes in the United States," says New York auction agent Frank Mandel, who attended several Frajola events and found them all first-rate. These events, he adds, were "very professionally run, attended by the most knowledgeable people in the business. This was not a hole-in-the-wall operation." Frajola declines to comment on his situation, but local stamp dealer John Olson contends that "Richard is very honest, very above-board."
Frajola's reputation, though, may be peeling off. Last February he was expelled from the American Stamp Dealers Association. "There were several complaints for failure to honor outstanding debts," says executive vice president Joe Savarese.
A month later Frajola was booted out of the American Philatelic Society, a 55,000-member organization of collectors and enthusiasts. The society's complaint manager, Helen Bruno, won't discuss the particulars of Frajola's dismissal except to say that he was expelled "for a failure to meet philatelic indebtedness. Expulsion is not something we do lightly."
Some people wonder whether Frajola has hidden some of his money away. "He didn't live a high-flyin' lifestyle, so where's the money?" says Ken Beiner, owner of Showcase Stamps. "If you got the money and sold the merchandise, where'd the money go? It's not like this guy had a $50,000-a-month nut. So where'd the money go?"
That's what Steinle is trying to determine. She says she has found no evidence of bankruptcy fraud.
