Franklin Credit Union Crimes Unfairly Claim New Victims - May 19, 1994 - Omaha World-Herald
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May 19, 1994 Franklin Credit Union Crimes Unfairly Claim New Victims; [Sunrise Edition]
Omaha World - Herald. Omaha, Neb. pg. 12
Full Text (525 words)
(Copyright 1994 Omaha World-Herald Company)
More than five years' time has passed since the collapse of the Franklin Community Federal Credit Union. The crimes of its manager, Lawrence E. King, which included embezzling $39 million from the institution, continue to claim new victims.
The credit union had been formed in 1969 by civic, corporate and religious leaders. Their purpose was to help low-income people in inner-city neighborhoods obtain credit and financial advice. King is now in a federal prison.
Earlier, his victims included institutions and people who helped establish the credit union, deposited money in its accounts or put their reputation on the line to raise funds for it and promote its services. Low-income people who placed their trust in Franklin were also victims, as were vendors to whom King or Franklin owed money at the time of the credit union's collapse.
Some of the people most horribly victimized were people and institutions whose names and reputations were dragged through the mud. Investigators for the Nebraska Legislature allowed their videotapes of young hoaxers to get into the hands of people who leaked rumors of alleged drug rings and child sexual abuse related to people with some connection to King.
Now it's 1994. But the harm that King and the Legislature did continues to ripple through the community.
In recent months, banks, insurance companies and former Franklin board members have been sued by the National Credit Union Administration, the federal agency that insured Franklin accounts up to $100,000. The lawsuits sought reimbursement for part of the $36 million the NCUA paid to owners of insured Franklin accounts.
Some defendants, including banks and a law firm, have agreed to pay more than $10 million to the NCUA to settle the claims. They admitted no wrongdoing. They said they acted to avoid prolonged litigation.
Their position is understandable. Litigation is expensive. Moreover, this particular litigation ran the risk of creating a false impression. The government alleged that banks and lawyers with whom King and Franklin did business could have stopped King by halting or revealing irregularities in the way he and other Franklin figures did business. The impression could have taken hold that a wide circle of legal and financial advisers sat on the knowledge that King was looting the credit union.
Such an impression would have been false. King was too cunning to give his bankers and lawyers information that could convict him. He fooled people. He exploited the desire of community and religious leaders to help the less fortunate, particularly minorities. When he was asked about his lavish spending, he persuaded people that wealthy relatives in Jamaica had given him large gifts of cash. Those who now question why banks didn't shut Franklin down for overdrawing its accounts should remember that King and the credit union were perceived as doing good in the community.
Certainly bankers and lawyers must not condone crimes that come to their attention in professional relationships. But since when did bankers and lawyers get saddled with the obligation to spread the word of irregularities for which the client offers an explanation? The government's attempt to hang so much responsibility on a few banks and lawyers seems unfair.