Andersen: We Didn't Advise Management Advisory Board Sought Aid for Franklin - Nov 30, 1988 - Omaha World-Herald
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Nov 30, 1988 Andersen: We Didn't Advise Management Advisory Board Sought Aid for Franklin; [Metro Edition] Paul Goodsell. Omaha World - Herald. Omaha, Neb. pg. 21
Full Text (1038 words)
(Copyright 1988 Omaha World-Herald Company)
A board of business people that worked with the Franklin Community Federal Credit Union was created to generate financial support for the credit union and never offered any advice to its management, the board's chairman, Harold Andersen, said.
Besides Andersen, publisher of The World-Herald, members of the advisory board included attorneys, bankers and executives at Union Pacific, ConAgra and Northwestern Bell.
Andersen said the advisory board - which was separate from Franklin's board of directors - did not review Franklin's books or investigate its financial condition.
Closed Nov. 4
Instead, he said, the group, which has been inactive for some time, was more of a "development committee" to help Franklin and its chief executive, Lawrence E. King Jr., attract more depositors. The credit union then was to loan the money to its low-income customers, Andersen said.
"We assumed that it was the regulatory authorities' responsibility to regulate," Andersen said. "If those of us who work in the field of fund raising had to take the additional responsibility of monitoring, I think you'd find people would get out of the philanthropic business fairly quickly."
Franklin was closed Nov. 4 by the National Credit Union Administration and was declared insolvent a week later. The federal agency has filed a $3 million civil lawsuit against King in U.S. District Court, alleging that King diverted money from Franklin for personal and business use.
FBI and Internal Revenue Service agents also are investigating the matter, and authorities have said evidence gathered will be presented to a federal grand jury.
Andersen said he doesn't regret his role in encouraging corporate investments in Franklin, soliciting donations for Franklin's building expansion and promoting the credit union in television commercials.
"Until the day it closed, Franklin was performing a useful purpose," Andersen said. "My regret is that there was a whole other story. All the alleged activity on the side - it's tragic. I wasn't aware that was going on."
Andersen said he could not recall exactly when he became involved with Franklin. He said he was "approached by Larry King to be of help" and agreed because he knew from others that Franklin was doing a good job and providing an essential service in north Omaha.
"I was willing to do what I could," he said.
Andersen said he believes none of the $75,000 raised for Franklin's building project was misused. The money was used to renovate the Franklin building at 1723 N. 33rd St. and increase its size from 4,000 square feet to 9,661 square feet.
Andersen was chairman of the fund-raising drive, and The Omaha World-Herald Foundation contributed $25,000. Thomas Skutt, then-vice chairman of the Mutual of Omaha board, and now-retired Municipal Judge Elizabeth Pittman assisted in the fund-raising effort.
The fund drive originally was to raise $.35 million. The extra money would have been used to provide an endowment for Consumer Services Organization Inc., a non-profit Franklin affiliate that offers financial counseling and other services. CSO, headed by King, also owns and operates the Franklin building.
$.3 Million Portfolio
Andersen said the fund-raising effort raised only enough money for the building. A plaque in the lobby bears a picture of Andersen and states that the building would not have been possible without his support.
The credit union was handing out a list of advisory board members as recently as last summer.
A 21-member roster of the advisory board was given to the City Planning Department in July when Franklin submitted its proposal to continue administering the city's $.3 million portfolio of housing renovation loans. The city rejected the proposal. City Planning Director S.P. Benson said the submission of the list had no effect on the decision.
The list included Douglas County Board Chairman Michael Albert, who said he had been asked to join the board but never attended a meeting.
City Public Works Director Lou Lamberty also was listed, but he was identified as Douglas County surveyor - a job he has not held since 1983. Lamberty said he attended two meetings about five years ago but dropped his involvement when he was appointed to head the State Department of Roads.
Dana "Woody" Bradford, an Omaha lawyer and another advisory board member, said he believed that the advisory group disbanded after its first few meetings.
"I haven't been involved in that capacity for some time," he said.
Dale Wolfarth, a retired vice president at Murray State Bank, said he stopped going to advisory board meetings after a short while.
"I just didn't think we were accomplishing much," he said.
The credit union advisory board had mixed success in attracting more corporate deposits for Franklin, Bradford and Wolfarth said.
Andersen said The World-Herald invested "$00,000 to $00,000" in interest-bearing Franklin accounts through the company, its foundation and The World-Herald Good Fellows. He said the company is reviewing federal laws governing such deposits to determine whether all of the money in them is covered by national credit union insurance fund. The fund generally insures deposits up to $00,000 per account.
"We're looking into that as to how the deposits were divided," he said.
When the advisory board asked local businesses to deposit money in Franklin, Andersen said, it did not encourage deposits over the $00,000 limit. He said it seemed "prudent" to keep the accounts under the insurance protection.
Andersen said the deposits that his committee encouraged apparently will be covered by insurance.
Andersen said he had no idea that more than $3 million in certificates of deposit may have been issued but not recorded by Franklin, which he and others believed to be a small credit union. Franklin's books, at the time of closing, showed assets of about $.5 million.
After Franklin's closing and the subsequent allegations about King, Andersen said, "I wrote everyone who had contributed to the building fund."
The letters said he felt that the building still could be an asset in the north Omaha community and that he hoped a new credit union could be started to offer similar services.
Andersen said he was gratified by the responses he received from people who agreed that "there's still a need there" and offered to help with future efforts.
"It's essential that we help that community," he said.Credit: World-Herald Staff Writer