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King Replies to Questions On Expenses- Jan 1, 1989 - Omaha World-Herald

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Jan 1, 1989 King Replies to Questions On Expenses; [Sunrise Edition] Robert Dorr. Omaha World - Herald. Omaha, Neb. pg. 1.A

Full Text (1758 words)
(Copyright 1989 Omaha World-Herald Company)

Lawrence E. King Jr., top executive of the failed Franklin Community Federal Credit Union, has told a government attorney that he does not understand financial statements, did not know his salary at Franklin and, when he went to the credit union, generally worked only three hours a day.

Under questioning by a National Credit Union Administration attorney, King, the credit union's manager and treasurer, said he was unfamiliar with many of the expenditures and financial dealings of Franklin.

"You have to understand, I don't read financials (financial statements) very well," he said.

King said he generally worked from 9 a.m. to noon at the Franklin office. Some weeks he was not at the credit union at all, he said. He estimated his salary at $12,000 a year. A Franklin board member has said it was $16,200.

King said repeatedly under questioning for a deposition that he remembered little about how large amounts of money were spent - money the credit union administration contends belonged to Franklin but was spent by King.

During the questioning, King discussed a $5,191 birthday party for his wife, Alice, and talked about limousine service and flowers costing tens of thousands of dollars.

Party in 1987

This exchange between Omaha attorney C.L. Robinson, representing the NCUA, involved a payment for a June 1987 party at Claudia's Restaurant in Omaha:

Robinson: Do you recall whether the payment of $5,191 is the amount that you paid for that party?

King: No, I don't, but . . .

Robinson: But it sounds right?

King: Yes.

Robinson: What kind of a party was it, what kind of an occasion?

King: It was a birthday party.

Robinson: For whom?

King: For my wife.

The NCUA has filed a lawsuit alleging King diverted $34 million in Franklin Credit funds to pay his personal and business expenses and to pay interest on certificates of deposit issued earlier.

The lawsuit listed numerous items on which the NCUA said King spent Franklin funds during parts of 1987 and 1988. One listing was $1,033,875 to buy apparel, jewelry and other items that were charged on an American Express credit card.

As a preliminary action in that lawsuit, Robinson questioned King under oath Nov. 18 in the presence of a team of four of King's attorneys headed by William E. Morrow Jr.

Transcript

The questioning took place 14 days after federal regulators closed Franklin. About $39 million of Franklin's funds are missing, federal regulators have said.

A transcript of Robinson's questions and King's answers indicates that the NCUA attorney repeatedly tried to show that money was spent for King's own purposes and not to benefit the credit union.

Robinson asked King about a $43,000 item charged to an American Express card.

Robinson: Can you tell us what that would have been?

King: I don't know.

Robinson: Do you know whether that's one of - that's your personal (expense) or not?

King: No, I don't.

Robinson: As manager of the Franklin Community Federal Credit Union, did it ever come to your attention that someone had charged $43,000 to a credit card for the credit union?

King: No.Washington Trips

King made many trips to Washington, D.C., where he rented a large house, and to other cities. When he was gone, King said, the person in charge at Franklin was E. Thomas Harvey Jr., director of accounting.

About his own role at Franklin, King said: "For the last two years, I was more of a figurehead." He said he was "not at all" familiar with Franklin's computer system.

NCUA officials have said a sophisticated computer scheme was used to hide the sale of $39 million in Franklin certificates of deposit.

Asked how much his annual salary was at Franklin, King said: "This would purely be a guess, and I'd say around $12,000."

A member of Franklin's board of directors earlier told The World-Herald that King was paid $16,200 a year as manager-treasurer of Franklin. King was paid $1 a year as head of the affiliated Consumer Services Organization, which provided financial counseling and other services.

Attorney Robinson asked King whether he sometimes leased aircraft on behalf of Franklin. King said he did.

Robinson: Even though it's only a two-and-a-half million dollar institution, you're leasing private jets for it? (Franklin listed assets of $2.5 million when regulators closed it.)

King: Yes, we do.

Robinson: Do you know whether this is your personal (expense) or the credit union?

King: I don't know.

Republican Convention

King said he took 12 or 15 people in three private jet planes to August's Republican National Convention in New Orleans.

At that convention, King organized a party for about 1,000 people held inside the building where floats for Mardi Gras are stored. King's catering company provided food, and an Omaha florist took a staff to New Orleans to set up displays of exotic flowers.

King acknowledged under questioning that a $35,000 floral bill resulted at least partly from the New Orleans flowers. A Washington public relations consultant earlier estimated all expenses of the party amounted to $100,000.

Regarding another flower bill, this exchange took place:

Robinson: Janousek Florists, have you bought flowers from them?

King: Yes.

Robinson: Would that be for your personal businesses?

King: Could be.

Robinson: It wouldn't be the credit union?

King: It could be.

Robinson: Thirty-eight thousand dollars worth?

King: No.

Limousine Services

The NCUA contends at least $148,375 in Franklin Credit money was used to pay Old Market Limousine for services in Omaha and other cities in 1987 and 1988.

Robinson showed King what he said was a bill from Old Market Limousine.

Robinson: That is a bill, is it not, from Old Market Limousine Service for limousine service in Washington, D.C., and New Orleans? Were you in Washington in February of 1988?

King: Probably.

Robinson: And so this would be your personal bill?

King: Yes.

Later, the limousine bills came up again:

Robinson: I believe the record shows that the credit union paid almost a hundred thousand dollars to Old Market Limousine (during 1987) . . . Would you know any reason what the credit union would be paying that kind of a bill for limousine service?

King: No, I don't.

Jewelry Purchase

This exchange involved a purchase from Borsheim's Jewelry in Omaha:

Robinson: Do you recall a Borsheim's bill on Dec. 31, 1987, for $12,000?

King: No, but it's possible . . .

Robinson: Do you recall what you bought?

King: No.

Robinson: Would it have been jewelry?

King: I don't know.

This exchange took place over a cable television bill:

Robinson: Cox Cable, does the credit union buy from Cox Cable?

King: Yes.

Robinson: But you personally do, too?

King: No.

Robinson: You don't personally subscribe to . . .

King: Oh wait, Showcase (Lounge) does have - no, it doesn't. No, it doesn't. I don't like TV, so . . .

Robinson: Well, somebody liked it $20,000 worth in 1987.

The Showcase Lounge is a King-owned business.

King acknowledged he had established a trust fund to benefit his son, Prince. He said he couldn't remember the amount of money in the fund. Robinson asked if the amount might be $600,000.

Negative Balance

King said he doubted that amount was correct.

Robinson said one of King's accounts at Franklin - the Franklin Corp. 8888-1 account - had a negative balance of $570,278 on Sept. 1, 1988.

Franklin Corp. was a non-profit concern headed by King that never did anything, King's attorney, William E. Morrow Jr., said earlier.

King said he wasn't aware that Franklin Corp. account had a negative balance. He said Harvey, Franklin's accounting head, had the duty to notify him "if any of my accounts became short."

Robinson: Was he (Harvey) instructed where he was to obtain the funds?

King: The funds were there. . . . . When bills would come in, they would go into accounting. If there was a doubt or a question about it, then Tom (Harvey) would ask me. I did not know what accounts - I mean, what accounts he would take it from unless he had a question. Then I would instruct him.

King said he made deposits daily into his accounts at Franklin by giving money and checks to Harvey. He said he never saw any statements of his own accounts. "If I wanted to know something, I would ask or they would tell me," King said.

Handled King's Accounts

Harvey handled the accounts at Franklin of King-owned businesses and did much of the accounting work for those businesses - Showcase Lounge, Cafe Carnavale and the King Co., King said.

Reached at his home Saturday, Harvey declined to comment on King's description of Harvey's duties.

Harvey's attorney, James E. Schaefer, said Harvey's work at Franklin did involve day-to-day accounting work. Beyond that, he declined to comment.

King also said he paid $150,000 for Cafe Carnavale, 7555 Pacific St., in September 1987. He said he took money out of his accounts and also borrowed approximately $100,000 from Harvey to pay for Cafe Carnavale.

Schaefer responded that Harvey "absolutely did not loan King $100,000 or any amount to buy Cafe Carnavale."

Robinson showed King an entry on a 1986 financial statement that an accountant prepared for King. The entry indicated King owned jewelry worth $250,000.

King said he recently sold some jewelry to a Washington, D.C., store and used the money to pay salaries, although it wasn't clear whose salaries. They were salaries "that the Credit Union Administration wouldn't pay," King said.

King said he sent the jewelry to Washington with Omaha security agency owner Doug Jasa.

Holding Jewelry

In December, the court-appointed receiver for King's assets said Jasa reported he was holding 115 pieces of jewelry owned by King's wife.

Jasa said he delivered 25 other pieces of jewelry, a 174-piece set of silver-plate flatware, a silver-plate punch bowl and other items to an antique firm in Chevy Chase, Md., a Washington suburb, to be sold. The items had not been sold, Jasa said.

Both King and his wife have been barred by court orders from selling, transferring or concealing any of their property.

The NCUA attorney asked King whether he was given from $200 to $600 a day from Franklin's cash drawer.

King said that isn't correct.

Robinson: What is the truth in that regard?

King: I don't think it's per day, and I - it wasn't given to me.

Robinson: Who was it given to?

King: It could have been given to petty cash, to the secretary (apparently a reference to King's secretary) or something like that, but it wasn't given to me.

Robinson: Are you saying that wasn't given to you as pocket money?

King: It was not.

Credit: World-Herald Staff Writer

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