Franklin Officials Question Whether Millions Gone - Nov 13, 1988 - Omaha World-Herald
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Franklin Officials Question Whether $- Million Gone; [Sunrise Edition]
Paul Goodsell. Omaha World - Herald. Omaha, Neb.: Nov 13, 1988. pg. 1.B
Full Text (1155 words)
(Copyright 1988 Omaha World-Herald Company)
Three members of the Franklin Community Federal Credit Union board said they question whether $0 million is actually missing from the credit union.
"There's an image of guilt projected already," board member Glenn Mitchell said. "Franklin has not been given an opportunity to live by the American code: innocent until proven guilty."
Federal regulators said last week that they have begun liquidating Franklin after discovering that $0 million in deposits allegedly was not recorded on the credit union's books.
The National Credit Union Administration took control of Franklin Nov. 4, and FBI and Internal Revenue Service agents have been investigating the institution.
Authorities Are Criticized
Three board members interviewed Friday and Saturday backed the credit union's staff, including chief executive Lawrence E. King Jr., and criticized the actions of federal authorities.
Mitchell and other board members said that until meeting last week with federal officials they knew nothing of allegations that certificates of deposit were not recorded.
Earlier, Mitchell said, federal examiners had raised questions about policies and practices at the credit union but had not mentioned such a major problem. He said the credit union board was responding to the policy questions, which he would not reveal.
"Everything that was requested of us was either in process, being examined, or being reviewed," said Mitchell, an Omaha School District administrator. "If there's a problem now, why didn't it show up then?"
The Rev. Stan Kessler, another board member, said he was "totally befuddled" by the allegation that $0 million is missing.
"The only thing that I can say is all of this is just an absolute surprise, based on information I was privy to as a member of the board," Kessler said. "I sure hope they get to the bottom of this and find out what's going on."
Kessler said federal examiners did not tell the board in advance that the credit union was in danger of being taken over.
"They didn't say, 'This is likely, this is a possibility,' " he said. "There was nothing that indicated to the board that something like this was in the works."
At the time of the Nov. 4 takeover, Kessler said, it seemed to be "overkill" for the federal credit union agency to suddenly move in. He said, however, the action was within the agency's legal jurisdiction.'Very Exaggerated
"On the surface, it seems very exaggerated," said board member Floyd Waterman, a University of Nebraska at Omaha professor.
Said Mitchell: "Someone must be in line for a promotion. If it's not $0 million, will they (Franklin officials) get as many days of reprieve as they have of torment?"
Mitchell said the board is reserving judgment on the allegations and Franklin's future until federal officials provide more information.
"We're taking a wait-and-see attitude," he said.
Meanwhile, Franklin's activities have been disrupted by the takeover. Instead of banking at the main office at 1723 N. 33rd St. or the South Omaha branch at 2429 M St., credit union members now must go to a temporary office at 217 S. 17th St. to withdraw their money. Automatic bill-paying and other services have been ended.
And unless a new credit union is started to replace Franklin, there will be fewer financial options for residents in the north Omaha area, Mitchell said.
"You don't see a First National Bank on 33rd and Parker, you don't see a FirsTier in an area where people will drive through with their windows raised," Mitchell said.
The loss of Franklin would be a major blow to the financial well-being and confidence of the north Omaha community, credit union co-founder Rodney Wead said.
'Too Big a Loss'
"We have to do something about that," Wead said. "It's too big a loss. I don't want to see the black community lose confidence in themselves."
Wead, who no longer is involved with Franklin, was among the people who started Franklin in late 1968. He now heads United Methodist Community Center, which includes Wesley House.
"The credit union was designed for welfare mothers and fathers," he said.
At first, he said, the maximum loan amount was $00. Members who borrowed money to buy furnishings, winter coats or other small items also were able to develop a credit record that allowed them to approach businesses or other institutions for larger loans, he said.
"Then, teaching thrift, we would put a couple of extra dollars onto their monthly payments and add it to their account," Wead said. "I think it taught a lot of folks how to save. Those are things that we simply can't lose."
Wead said King was hired in July 1970 at a time when the credit union was about ready to fold.
"The small loans weren't coming back as fast as they should have," he said.
Wead said the credit union needed more financial backing from Omaha businesses, churches or other organizations.
"We just didn't have a person like Larry who would get out and sell the credit union," Wead said. He said King has been the key man in developing Franklin "with his innate marketing skills, and his ability to put that credit union front and center in our community."
But the long-term strength of Franklin - and one of its main virtues - is the pride that the north Omaha community has been able to take in the credit union, Wead said.
"They saw some ownership there," he said.
Wead said he did not know whether the credit union had strayed from its original "grassroots" role. But he said he would be willing to work with people who want to restore Franklin or set up a successor.
"I haven't been asked," he said. "But I would sure work my can off to make it work."
Lyn Wallin Ziegenbein, executive director of the Peter Kiewit Foundation, which has deposits in the credit union, said she didn't know whether a new credit union will be established.'
Community Must Decide'
"The first move needs to come from those whose lives are most affected," she said. "The community must decide if they want one to be reorganized."
Mrs. Ziegenbein said she met Friday with J. Leonard Skiles, regional director of the National Credit Union Administration. She said the informal session was intended to discuss Franklin's condition and discover whether it will be possible to have another organization assume Franklin's role.
In the past, she said, local corporations have backed Franklin because "they felt this was an important service in the minority community."
The foundation, Nebraska's largest, has a $00,000 certificate of deposit with Franklin. The foundation had not filed a claim for its money, she said.
Federal authorities said they have received claims so far for $5 million of the $0 million in unrecorded certificates of deposit.
"It's too early to tell what, if anything, is possible to do," she said. "Mr. Skiles did say to me this is hardly a typical credit union failure."
Bank Failure Business Conditions Misconduct
Credit: World-Herald Staff Writer