Credit Union Plans of King Didn't Take Off Little Too Flashy,' One Official Says Law Firm Quits as Agent For King Corporation - Jan 22, 1989 - Omaha World-Herald
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Jan 22, 1989 Credit Union Plans of King Didn't Take Off Little Too Flashy,' One Official Says Law Firm Quits as Agent For King Corporation; [Sunrise Edition] Robert Dorr, James Allen Flanery. Omaha World - Herald. Omaha, Neb. pg. 1.A
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(Copyright 1989 Omaha World-Herald Company)
Two stories on one Basis record.
When Lawrence E. King Jr. went to Minneapolis in 1986 to sell his ideas on running a neighborhood credit union and reducing poverty, something "just didn't seem right," a Minneapolis participant recalled.
King "was a little too flashy, with too much jewelry," said Leonard Nadasdy, a retired Greater Minneapolis Chamber of Commerce official who arranged for King to meet with a dozen representatives of key Minneapolis corporations.
"We're very conservative up here," Nadasdy said from Minneapolis. "And he (King) was exhibiting a little too much showmanship. You don't want to arrive in a big limousine."
The credit union King wanted to establish in Minneapolis, to be modeled after Omaha's Franklin Community Federal Credit Union, never got started.
Last Nov. 4, federal authorities shut down the Omaha credit union. A federal agency has filed a lawsuit against King, Franklin's top executive, alleging he improperly diverted $34 million of the credit union's money to pay personal expenses as well as costs of running his businesses.
An estimated one-third of the money allegedly diverted by King went to pay off previously issued certificates of deposit and to pay interest on those CDs.
That Minneapolis trip was part of King's effort extending over at least a decade to become a national consultant on how to start credit unions in low-income neighborhoods.
King apparently experienced some success. In 1979 he went to New York City and conducted a workshop for the Church of the Intercession, an Episcopal congregation in Harlem that wanted to start a credit union.
"Within a short time, Larry had charmed everyone in the room," the Rev. Frederick Williams, rector, said in a videotape produced later to promote King's consulting company.
With King's help, the Harlem Heights Federal Credit Union got started and still is doing fine, Williams said in a phone interview from his church office last week.
The Harlem credit union has 300 members and $200,000 in assets. A negligible number of loans - five totaling less than $1,000 - have defaulted since the start, he said.
Williams said he couldn't have started the credit union without King's advice. "He did a very fine job for us," he said.
King received $9,000 in consulting income during 1983, according to his tax return submitted by the National Credit Union Administration as an exhibit in its lawsuit against the Franklin executive.
In March 1986 King formed Franklin USA as his non-profit consulting company.
To gain national exposure for Franklin USA, King placed three pages of advertising in Ebony Magazine, a magazine intended mainly for black readers, from 1986 to 1988.
The most recent Ebony ad, covering a full page in May 1988, cost $31,490, Ebony advertising director Dennis Boston said from Chicago.
The ad carried the headline, "How to stop poverty. Ask Franklin USA."
Franklin USA's goal, the ad said, is "to teach communities how to reduce poverty." It continued: "You learn how to set up and model your local financial center after the success of the Franklin model, which shows people how to save money in Omaha, Nebraska."
William E. Morrow Jr., King's attorney, said he didn't know where the money came from to pay for those ads.
Little actual consulting work resulted from those ads, two people knowledgeable about Franklin USA said.
A former Franklin employee said: "Franklin USA never really got off the ground . . .. It was the most obvious sham I've ever seen."
When questioned recently by an attorney for the National Credit Union Administration, King said this about Franklin USA:
"We haven't done anything - we've traveled around trying to sell it to people, to get people involved, you know, enthused in it, but . . ." King's answer was broken off by another question from Omaha attorney C.L. Robinson, representing the NCUA.
King couldn't be reached for additional comment.
Franklin USA's 1987 report to the state, its latest, shows King was president and treasurer and Mary Jane Harvey was secretary.
Mrs. Harvey, a retired administrator in the Omaha region of the Presbyterian Church USA, is the mother of E. Thomas Harvey Jr., who worked as Franklin Credit's accounting director. She couldn't be reached for comment.
Barbara J. Moore, listed as a Franklin USA director, declined to comment. She also was a director and a manager of Consumer Services Organization, an affiliate of Franklin Credit.
Clifford Rosenthal, top executive of the National Federation of Community Development Credit Unions, said from New York he doesn't know of any community credit unions that King has helped start since he established Franklin USA. Harlem Heights opened several years before Franklin USA was organized.
It has become increasingly difficult the last few years to establish low-income neighborhood credit unions, Rosenthal said. Since 1982, no federal technical assistance grants have been available, he said.
In Minneapolis, King's free spending sent the wrong message, three of those involved said.
King flew about eight people in a chartered jet for the May 22, 1986, meeting at the Marriott City Center in Minneapolis.
They traveled to the hotel in two limousines. Nadasdy said he and others wondered whether limousines were proper for a group supposedly trying to help poor people. "We were suspicious," he said.
The dozen representatives of Minneapolis corporations didn't understand when King suggested "you could make money helping poor people," Nadasdy said. "That just didn't seem right."
Another executive, who spoke on the condition that he not be identified, said, "We were impressed the wrong way."
Jeff Schneider, who represented Minneapolis Mayor Don Fraser at the meeting, said: "He (King) said he had friends in high places. He offered drinks and dinner on the house and made a very splashy presentation, with very glitzy brochures.
"He had a first-class presentation, but I kept wondering what was in it for him," Schneider said.
Schneider said King's people were so eager to sell Minneapolis on a credit union that "they offered to fly me to Omaha" to continue discussions.
"I felt I needed to do a little research to make sure I was not getting the mayor (Fraser) involved in something that would be inappropriate," he said.
Schneider said he telephoned two or three Omaha city government officials as well as an Omahan outside city government. He said these conversations "re-enforced the skepticism I had coming off the luncheon and made me suggest to my boss that we low-key our own involvement with the project."
Schneider informed Nadasdy. No further discussions took place, Nadasdy said.
Law Firm Quits as Agent For King Corporations
Byrne Associates, an Omaha law firm headed by Joseph Byrne, has resigned as registered agent for Franklin USA and two other corporations headed by Lawrence E. King Jr.
The other two firms are Franklin Corp. and Neighborhood Retail Centers Development Corp.
A corporation's registered agent receives legal notices on behalf of a corporation, Nebraska Secretary of State Allen Beermann said.
Byrne said he resigned because he no longer has contact with principals of the corporations headed by King.
A corporation whose registered agent resigns must obtain a new agent within 30 days or its right to do business in Nebraska is suspended, state law says.
State records show King, chief executive of the failed Franklin Community Federal Credit Union, was president of Franklin USA, Franklin Corp. and Neighborhood Retail Centers in 1987, when the latest corporation reports were filed.
Franklin USA was King's consulting company. Franklin Corp.'s principal apparent function was to maintain an account at Franklin Credit. Neighborhood Retail Centers was formed to promote the use of cooperatives, its articles of incorporation say.
Byrne said he also has resigned as registered agent for Franklin Housing Corp.
State records show Mary Jane Harvey was president of Franklin Housing in 1987. She is a retired Presbyterian Church USA administrator whose son was Franklin Credit's accounting director.
Franklin Housing was formed to further the welfare of elderly, handicapped and low-income persons, its incorporation papers say.Credit: World-Herald Staff Writers