King's Ventures Called Not Highly Profitable - Jan 1, 1989 - Omaha World-Herald
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Jan 1, 1989 King's Ventures Called Not Highly Profitable; [Sunrise Edition]
Paul Goodsell. Omaha World - Herald. Omaha, Neb. pg. 1.A
Full Text (2933 words)
(Copyright 1989 Omaha World-Herald Company)
For several years before the National Credit Union Administration alleged that Alice and Lawrence E. King Jr. took money from the Franklin Community Federal Credit Union, some people wondered how the Kings managed to support their spending habits.
For some the answer seemed to fall into two categories:
1-King's catering and restaurant businesses generated the income needed to pay for the shopping trips, houses in Omaha and Washington, D.C., and travel.
2-Alice King's family in Jamaica was wealthy and had given the Kings an inheritance, a trust fund or some kind of financial support.
"For a long time, we harbored the same illusion - that his lifestyle was dependent on his businesses," said J. Leonard Skiles, regional director of the NCUA. "But once we got into the credit union, we found instead that at least some of the (Franklin money) seems to be funneled back into his businesses."
In its $34 million civil lawsuit against Lawrence King, the NCUA has alleged that King diverted money from Franklin for personal or business purposes. A separate lawsuit against Mrs. King has alleged that she participated in the misappropriation of funds.
'Very Little Money'
Employees, former business associates and others familiar with King's businesses said in World-Herald interviews that King - who was paid $16,200 a year as Franklin's chief executive - was not particularly successful in his outside ventures.
"They never did make any money," said one person familiar with King's finances.
Four other people knowledgeable about the King Co. catering business said many of the events catered were King's private parties or fund-raising events for which King donated his services.
"Very little money was coming in," one former employee said.
As for Alice King's ties to Jamaican wealth, World-Herald checks with people on the Caribbean island failed to turn up evidence of an affluent family - although a number of Omaha acquaintances said they heard the Kings talk about such ties.
Nor have Alice King and her husband mentioned any trust fund or similar income during federal court testimony or in sworn depositions. Mrs. King declined to be interviewed last week about her family or Jamaican ties.
William E. Morrow Jr., attorney for the Kings, said he believes it is true that Alice King "did tell people her family had money in Jamaica."
Morrow said he has been told that a World-Herald reporter making inquiries in Jamaica about Alice King's family didn't locate "the right people," those with information about Mrs. King's family there.
"I don't know who the right people are,'' Morrow said. He declined to elaborate.
Asked if it is correct that King's businesses haven't been profitable, Morrow said: "I don't know whether that's true or not."
Over the years, King has been involved in at least six restaurants or lounges, a catering business operating in Omaha and Washington and a lawn service operation.
Here is a look at those enterprises:
Purchased for $150,000 in late 1987, the restaurant at 7555 Pacific St. used to be operated by Omaha restaurateur Rusty Harmsen.
"He was looking for a restaurant," Harmsen said of King.
King spent thousands on redecorating and other changes, such as the addition of a baby grand piano.
"He did quite a bit to it," Harmsen said.
The NCUA has alleged King used money from the credit union for the improvements, as well as for the $10,000 earnest deposit on the purchase agreement.
One person familiar with the business said the restaurant did not turn a profit. In contrast, the person said, King has had to put capital into Cafe Carnavale to keep the restaurant going.
Since Franklin's closing - and ostensibly the end of the alleged subsidies from the credit union - the restaurant's financial situation apparently has deteriorated.
In a Nov. 11 letter to churches and other organizations, King blamed "negative publicity" for a decline in business at the restaurant. King wrote that the slowdown "may indeed jeopardize the Cafe and the retention of its employees."
"They had too many employees," said one Cafe Carnavale employee. "There were employees everywhere. I can't imagine that they were making money."
On a given night, the employee said, the restaurant had 10 workers in the kitchen, five waiters, five busboys, a bartender, piano player and two managers.
Sometimes the restaurant has been busy, the employee said. Other nights, many of the customers were King's guests, the employee said, recalling that King sometimes would have 25 to 30 guests at the restaurant and would pay for their meals.
Before he sold to King, Harmsen said, he considered Cafe Carnavale a good restaurant but not a profitable one.
Like the Cafe Carnavale, the Showcase Lounge at 2229 Lake St. was a recent King acquisition. It was purchased for $52,000 in March 1988. The two establishments were operated by Restaurant Food Service of Omaha Inc., with King as president and Alice King as secretary and treasurer.
King redecorated the Showcase and began to book jazz and blues performers from around the country.
A King employee at the Showcase Lounge said King paid high prices to attract entertainers. Roy Ayers, originally scheduled to play six shows at the Showcase over New Year's Day weekend, was to be paid $20,000, the employee said.
The contract also required the Showcase to pay for six hotel rooms, meals, sound and lighting systems, equipment rental and transportation in Omaha.
Even if the Showcase sold out all six shows at $15 a seat, ticket revenues could have covered only half of Ayers' fee and expenses, the employee estimated.
As it turned out, Ayers' appearance was cancelled because of poor ticket sales.
The NCUA has alleged that King paid entertainers and other Showcase expenses from Franklin funds. At times, cash allegedly was taken from teller drawers to pay entertainers and not charged to King's business accounts at Franklin, according to a former employee of Franklin.
In a sworn deposition obtained by The World-Herald, however, King said in November that he took the cash believing that it came from his business account.
"It was to be charged to the Showcase," he said.
The King Co. has operated the employee cafeteria in the Peoples Natural Gas building, 1815 Capitol Ave., since August 1987.
"We just pay them to provide services," Peoples spokeswoman Jan Zimmers said. She said she did not know whether Al's Place - described by King as his wife's business - turned a profit.
Peoples has been negotiating with the King Co. on a new contract to replace one that expired Dec. 31.
King and his wife own half of the restaurant in the ParkFair shopping center, together with Sylvester and Kikue Jetter of Bellevue. The Kings handled the finances, while Mrs. Jetter cooked and ran the restaurant.
Since the business began four years ago, Mrs. Jetter has not received any profits from her share of the operation, her attorney said. The attorney said he did not know whether the restaurant was profitable because King had not shown Mrs. Jetter a financial statement or an income tax form for their company, MASA Inc.
The NCUA has alleged that rent payments for the restaurant were paid out of Franklin money.
Akasaka has reported gross sales of $4,000 to $6,000 a month, according to ParkFair property manager Ray Scalise.
After Franklin closed, Mrs. Jetter set up her own bank account to handle restaurant finances.
E.J.'s Continental Cafe
King owned 25 percent of this now-closed restaurant at 6311 Center St., owner Jay David Murrell said. He said King bought his interest in the restaurant for $25,000, and later loaned Murrell another $10,000.
In a deposition, King said Murrell still owes him $35,000 to $40,000. The money was not mentioned in the file of Murrell's 1988 federal bankruptcy case, but Murrell said last week that he owes King the money.
E.J.'s opened in 1981 and needed King's investment during the restaurant's start-up period, Murrell said. King, in turn, apparently wanted to get started in the restaurant business; Murrell said King's catering business was not very large until after 1982.
"When he came in with me, he said to me he knew nothing about the food business," Murrell said. "He was looking for knowledge."
King often entertained large groups at the restaurant which closed in January 1985, said one person familiar with E.J.'s operation. It was never clear whether King fully reimbursed the restaurant for those meals, the person said.
King managed the food and beverage service for the now-closed dinner club at 6553 Ames Ave. but did not make money on the operation, said a person familiar with the business.
King got out of the business before it closed in 1986.
King's catering business, operating as the King Co., is based in a converted house at 2021 Wirt St. It has catered King's own parties, black-tie fund-raising dinners and other events.
According to King's deposition, the King Co. also catered some events in Washington, D.C.
But King and Germaine Attebery, who managed his Washington house, said the Washington business was not substantial.
"It's not that large a business," King said in his deposition. "I was trying to get it started. It hasn't been in existence that long."
King said he did not have a manager of the Washington business and said Mrs. Attebery was responsible for setting up catering functions.
Mrs. Attebery said she didn't know exactly how many events the King Co. did in Washington, beyond King's personal parties.
"There was not much of anything except for him," she said.
In Omaha, 90 percent of the King Co.'s business was done for fund-raising activities or other events for which the King Co. received no payment, a former employee said.
The company did only about 10 percent of its business with paying companies or individuals, the employee said.
A person who formerly worked with King in arranging fund-raising activities said it wasn't unusual for King to spend $10,000 for food and liquor for a single fund-raiser.
Both said King would serve expensive food - oysters in the shell, king crab legs, tenderloin, caviar and the best brands of liquor.
"There is no way it (the King Co.) could be profitable," the fund-raising consultant said.
Caterer Hap Abraham, who sometimes bid against King for business, said he doesn't see how King's company could have been profitable because it didn't charge enough for the food it provided.
Overall, Abraham said, King has not been a major factor in the Omaha catering market. "I didn't feel the competition," he said.
Old Vienna Cafe owner Walter Hecht, who catered large parties for King in 1982 and 1983, said he once sent King a bill for $2,700. King mailed him a check for $3,700, he said. Hecht called King to say he must have made a mistake. King responded, "The rest is for you," making it clear he had intended to include a $1,000 tip, Hecht said.
When King held a party, he ordered the best food and champagne, Hecht said, adding: "He never asked the price."
L & M Services Inc., which later became the King Co., was started by King in 1977 as a lawn service company. King told the Midlands Business Journal in 1983 that the firm worked mainly at apartment complexes.
The current extent of the lawn service business could not be determined. In his deposition, King did not mention any lawn service activity.
Alice King was born in Chicago in 1946 to Leon R. and Lilith S. Ploche. Dr. Ploche was a physician and dentist who practiced in Chicago at least part of the time between 1919 and his death in 1953 at age 59.
Records filed with the American Medical Association and the American Dental Association show that Dr. Ploche was born in Santiago, Cuba, in 1893; graduated from Kingston (Jamaica) High School in 1909; and completed dental school at the University of Illinois in 1919.
For the next 12 years, Dr. Ploche was enrolled at various Chicago-area schools and was a dentist in a blue-collar residential part of Chicago. In 1931, he graduated from Rush Medical College and was licensed as a medical doctor, state records show.
The AMA records list only one location for Dr. Ploche's medical practice: the 1649 Grand Ave. address in Chicago where he had been a dentist.
ADA directories from 1947, 1950 and 1953 indicate that Dr. Ploche - or perhaps his practice - had moved to 2958 North Ave. in Chicago, described as "a very nice middle-income neighborhood" by a woman who grew up in the area at the time Dr. Ploche was there.
Dr. Ploche died of cardiac failure Feb. 1, 1953, in Kingston, Jamaica, AMA records show. A death notice in the Daily Gleaner newspaper in Kingston did not list survivors but said services would be conducted both in Kingston and in Chicago, where Dr. Ploche was to be buried.
Morrow has said Alice King lived in Jamaica for a period of time before returning to her Chicago birthplace. The Kings were married in Chicago in 1968, but apparently did not live there. King worked for First National Bank in Omaha for a short time before taking the job with Franklin in 1970. Mrs. King worked for the United Way as volunteer coordinator.
Even 10 years ago or so, the Kings attracted attention in Omaha because they seemed to entertain more frequently, give larger gifts and spend more money than their incomes appeared to justify.
Friends and acquaintances said they inferred - or, in a few cases, were told directly by the Kings - that Alice had family money.
Hecht, for example, said he once talked to Alice King about her family background in Jamaica. "She told me her family owns a rum factory in Jamaica," he said.
Later, Hecht said, he received information about Alice King's family that convinced him that her relatives didn't own a rum factory.
A former friend said King spoke about receiving $25,000 every three months from a trust fund.
Another acquaintance said Alice King described her father as a former government official in Jamaica and spoke generally about having to flee to the United States to avoid some sort of civil unrest.
The NCUA, in its lawsuit against Mrs. King, has accused her of "representing and supporting her husband in his representation to third parties that their apparent wealth was a result of money from her family."
"That was just a ruse," said one official close to the investigation of King and the credit union.
The World-Herald interviewed journalists, historians, Jamaican officials in both Jamaica and the country's U.S. Embassy, and U.S. Embassy officials in Jamaica.
Those interviewed said it would not be unlikely that Dr. Ploche was Jamaican, despite being born in Cuba. Many Jamaicans migrated to Cuba to seek work in the late 19th century, they said.
But only two people recalled hearing the Ploche name: Brigadier Dunstan Robinson and his brother, Leacroft Robinson.
The Robinsons said they know the Kings and may even be distantly related to Alice through her father, although the brothers did not agree on that point.
The Kings have stayed with the Robinsons in Jamaica, and Leacroft Robinson said he has visited the Kings in Omaha.
Dunstan Robinson said he was the "major general" whom the Kings visited in an August 1974 trip to Jamaica, according to a World-Herald article. The article said the general and other Jamaican officials were related to Mrs. King.
Dunstan Robinson was chief of staff of the Jamaican Defense Force during part of the 1970s under Prime Minister Michael Manley.
Leacroft Robinson, a lawyer, was attorney general of Jamaica from 1972 to 1976.
Leacroft Robinson said he believes that he was "distantly related" to Alice King.
"I gathered that Alice's father was a cousin, or second or third cousins, of my mother," Robinson said. "Alice's parents left Jamaica probably before I was born (in 1916)."
But Dunstan Robinson said he knew of no blood relationship with the Ploche family. The Ploches were friends of his parents.
"Because her parents were such close friends of my parents, Alice likes to think she is related to us," Robinson said. "She has that feeling of kinness."
That isn't unusual for Jamaica, he said. He said it is customary for close family friends to be described as "aunts" or "uncles."
In any case, the Robinsons said, they know Alice King and her husband.
"Certainly they visited us several times," Dunstan Robinson said. "They spent a week or so in my home."
Leacroft Robinson said Alice King stayed with him for two days in 1988 while attending a wedding in Jamaica.
In his deposition, King told the NCUA's attorney that neither he nor his wife own property in Jamaica.
The Robinsons said they did not know of any investments or property that the Kings had on the island. They said the Robinson family is not giving the Kings any money.
"My family has not been a wealthy family," Dunstan Robinson said.
Said Leacroft Robinson: "The attorney general's salary in Jamaica is nowhere near the salary of a good bus driver in the United States."
People familiar with the Robinson family said they are well-off, but do not appear to have great wealth.
Neither Robinson said they knew of any other relatives, aside from the Robinson family, that Alice King had in Jamaica.
"The only relatives that Alice had would be us," Leacroft Robinson said.