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King Tells W-H Franklin Kept No Secret Books - Mar 26, 1989 - Omaha World-Herald

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Not for commercial use. Solely to be used for educational purposes

Mar 26, 1989 King Tells W-H Franklin Kept No Secret Books; [Sunrise Edition] Robert Dorr. Omaha World - Herald. Omaha, Neb. pg. 1.A

Full Text (4421 words)
(Copyright 1989 Omaha World-Herald Company)
Franklin Community Federal Credit Union kept two sets of financial records, Lawrence E. King Jr. said, but neither set was secret.

"The way the bookkeeping was handled, there was another set of books," King said during his first extensive interview with The World-Herald since the credit union failed. "But I don't think it was a second set of secret books," he said.

King, top executive of the credit union, declined to discuss the second set of books further.

Federal officials have said they discovered that $38 million in Franklin money was missing when they found a second, secret, computerized set of records showing large sales of certificates of deposit.

Those CD sales didn't appear on the credit union's normal records, which showed deposits of $2 million, officials have said.

During the 90-minute interview last week, King said he was a hands-off manager who trusted his employees until shortly before the credit union was closed.

He said he is now struggling to keep his catering and restaurant businesses going. In contrast to his former affluent lifestyle, he has to iron his own shirts these days, he said.

King also said the National Credit Union Administration, the federal regulator and insurer of deposits, was aware his credit union had deposits that may have reached $15 million during 1987.

Asked about that comment and others made by King, NCUA General Counsel Robert Fenner said from Washington, D.C.:

"He's a pathetic, sick human being."

King said he wasn't directly involved in soliciting deposits, but he believes he remembers deposits totaling $12 million to $15 million in mid-1987. The NCUA knew of those deposits - far exceeding the $2 million when the credit union was closed - and kept advising the credit union to reduce its deposits, he said.

The federal regulators believed that it was risky for Franklin to have such large amounts of CDs because the credit union paid high interest to attract those deposits and the deposits could be quickly withdrawn, King said.

King's account is at odds with previous statements by NCUA officials on what they knew about Franklin before its collapse. "We thought we were dealing with a small financial institution," NCUA regional director J. Leonard Skiles has said.

Fenner responded Friday that Franklin's financial reports did show occasional short-term increases in sales of certificates of deposit. It probably is correct that NCUA officials advised credit union officers that they were following a risky course and should reduce those deposits, he said.

"But there never was anything like $15 million (on Franklin's normal books)," Fenner said.

Fenner said the largest total shown on any Franklin monthly report was $4.6 million in February 1988.

In retrospect, it is clear the credit union wasn't reducing its deposits in response to NCUA pressure, Fenner said. Instead, Franklin had stopped listing them on its open financial records and transferred the listing into the secret set of records, he said.

Fenner described King's explanation of the $15 million in deposits as sounding "like a bunch of babble to me. It just isn't true."

King was dressed immaculately in white shirt and tie during the interview in his office at the King Co., his catering concern, at 2021 Wirt St. He wore no rings, a contrast from the two or three rings of past years including one with a large cluster of diamonds.

Some of the questions and answers follow. Some answers were edited for space reasons:

Q: How are you doing?

A: I'm surviving. That's about all I can say. The businesses are good some days and bad some days. It depends a lot upon what they read in the paper and what they hear on TV. When stories are very degrading, people are afraid to come around (to King's remaining businesses: King Co. catering, Showcase Lounge and Akasaka Restaurant).

We're slowly beginning to attract people again. There were so many rumors out that we were closed, that we had lost the business. That's what happened to (now-closed)

Cafe Carnavale.

Q: One person we talked to said that in the past you would change clothes three or four times a day, and your daily cleaning bills were $50 or $60. Is that right?

A: I don't think that's right, but I do change clothes a lot. I'm a big person. I like to look neat. I may bathe three or four times a day. I had large cleaning bills, possibly $50 to $75 a week. I do a lot of my own cleaning now. And I do all my own ironing. I have a lot more time to do it. And ironing gives me a lot of time to think.

Q: There's a change in your lifestyle?

A: No. I still take baths three times a day. And I still change clothes. I just iron my own shirts. I don't get to change suits as often as I want, but I wear a lot of wash-and-wear clothes now and I change them.

Q: Have you lost weight?

A: Yes. Thirty-seven pounds.

Q: Due to worry?

A: Due to not sleeping.

Q: Did you formerly have your swimming pool cleaned every other day?

A: Sometimes. I did a lot of parties around my pool. That would be part of the cost of the party.

Q: Was it necessary to clean it every other day?

A: If you were going to have a party at my house, wouldn't you want the pool clean?

Racism Charged

Q: Have some people been out to get you?

A: It's not so much out to get me as much as it is out to get anyone who has a position like I had in this community. You have to understand the majority of people in this community who are so-called leaders work for somebody, so they speak with the authority of the company they work for. I spoke with my own authority. And I think that bothers people.

I really feel a lot of this is out-and-out racism. I think it's blatant. I think they're sending a message to Omaha's minorities. Don't try to be too big. Don't try to hold your head too high. . . . We can bring you down and we can disgrace you.

Q: Yet one of your principal critics is (State Sen.) Ernie Chambers, who is black.

A: I have not noticed that. I think he has said that he wanted to get to the bottom of it, and if I were guilty I should be punished. I want to get to the bottom of it. As far as I'm concerned Ernie has not blatantly said, "I think you're guilty."

I feel too much time and energy has been spent on hearsay gossip and rumor and nothing has been done to deal with exactly what happened at Franklin and how was it going to be handled.

They (NCUA officials) have quit talking to me and are talking to everyone but me. I don't think they want to know what happened. I think I'm an easy target. I'm a minority who has money, who has prestige.

But a lot of people that I've worked with throughout the years are now trying to help me.

Q: What have they done?

A: They've sent letters, cards. And I appreciate that. God knows we need money. And they may not have had much, but they've sent that. My businesses need money. The only thing I can take out (of his businesses) is what I can survive off of, and I really can't survive on what I take out.

Q: How many letters have you received?

A: Hundreds. We have them in baskets. I love to read them when things get really, really bad. Everybody says, "I'm praying for you." I drive down the street, and people honk at me and wave and say: "We're praying for you. We're in your corner." That makes you feel good.

I still like to help people, and if I can I will. If I had $3 in my pocket and somebody was standing on the corner asking for money I'd give them some money. It wouldn't be as much as in the past because I don't have as much, but I'd still help.

I've had more time to work in the church. The church means a lot to me. My church community (Calvin Memorial Presbyterian Church) has been terrifically supportive.

Wife's Family

Q: Will you lose your house on North River Road?

A: Maybe.

Q: Are you getting financial help from your wife's family?

A: No. When this first started, some reporters besieged some of her family, and they're people who don't like spotlights.

Q: Are you trying to find a new attorney? (Erickson & Sederstrom, the law firm that formerly represented King, has received court permission to withdraw.)

A: I'm speaking with one, but I don't have an attorney as of yet. I felt for a long time that they were going to find out that they were wrong about everything. I've changed that attitude. I've come to the conclusion that everybody has pushed it so far they can't turn it around. They have to find something. They came to Franklin because of rumors there were some illegal activities going on in that building. One person said the money has probably gone to the contras, to Nicaragua, really crazy things that people say.

Q: What about the child sex abuse allegations?

A: It's so unreal, especially in the black community, for people to even consider anything of that nature.

Q: But at least two young girls who allegedly were victims of child abuse were black.

A: If you look at their history, they've had some emotional and mental problems. When you go for help, you get a lot of things thrown at you. So you can hallucinate and dream up anything. I know who they are, but I don't know them as acquaintances. My picture's been on TV a lot. When they made those allegations, I bet they didn't even know who I was.

Q: Senator Chambers and others have indicated there may be something to those allegations. Do you discount all of that?

A: Well, I know what I've done and I know what I didn't do. It's unfortunate that public officials have gotten themselves involved in this. I would think they might be interested in what happened at the credit union, but this other stuff is almost insidious, degrading. Surely by now they know that it has no validity.

'People Are Nasty'

Q: How has this affected your (8-year-old) son, Prince?

A: He doesn't understand what's going on. It's very difficult for him as a child to have to go through this. People are nasty, adults more than children. His friends have been very loyal to him.

If I had to go through this simply by myself it would have been a lot easier. It's very difficult to see what this has done to my parents, to my sisters and brothers, my aunts and uncles.

Q: How were you so successful in getting community leaders to serve on Franklin boards and other volunteer activities?

A: I served on boards with them. The key to getting anything done when you're in a low-income situation is getting power people to help you, and so I spent a lot of time trying to do that.

I was hopeful some of those people would have come to the forefront when this all started, but they didn't, and I think the reason they didn't was because of all the sexual charges and things like that. That really scared a lot of people. I try to understand those things.

I don't understand some other things. I have done some parties for some very influential people. Those people have never paid us and they're of the wherewithal, any of them, to write a check and pay me right now. But they won't do it, and they tell me they're working with the receivers (court-appointed attorneys handling assets that might be claimed by NCUA).

I talk to the receivers and they've never heard from them. So they're playing games and I resent that. I don't believe in kicking people when they're down, and that's what I think some folks are doing.

Q: How much are you owed?

A: It's well over $100,000 that people owe me, that I cannot collect on.

Q: You say you don't have your records, that they were taken by federal authorities when Franklin was closed and you don't know where the records are. What will the records show?

A: I think it will show my lifestyle and that what I spent was paid for by my businesses instead of the allegations that have been made to the contrary.

Credit-Card Bills

Q: The NCUA's $34 million lawsuit against you contends $1 million was billed to American Express over a 13-month period, and alleges that Franklin funds were used to pay that amount. Even if your businesses were doing well, how could they spend such a large amount?

A: I have gone through those, and am still going through them, and all of those are not my expenses. And that's all I can say on that. On the surface it looks scandalous and astronomical. The NCUA, anything they didn't know what it was, they attributed it to me personally.

Q: How could you and all your businesses combined, run up $1 million?

A: They weren't me personally or my businesses.

Q: Who else?

A: I'm just telling you they weren't. I can just tell you it's not true.

Q: Why would a business need limousines? (The NCUA lawsuit contended King and his businesses spent $186,395 of Franklin's funds to rent limousines in 13 months.)

A: I think you're reading more into that, as have a lot of people, that is not there. I don't want to argue this case in the newspaper, but I think a little common sense and little logic and a lot of that stuff would fall into place instead of trying to make it, as I call it, sensationalism.

Q: Some employees said you got weekly reports that showed hundreds of thousands of dollars in deposits.

A: I don't think some employees said that. I think one employee said that. And I haven't seen that, and I could tell you a lot about that employee. But I don't want to. I think that should come out in court. But there's good reason that should be taken with a grain of salt.

Q: You never saw reports?

A: I saw reports as the board (of directors) saw reports. Our development officers (employees who sold CDs in Franklin's name to investors) were very independent, and they did not like anyone being into what they were doing.

I felt that was because they wanted to protect their clients, the people they were working with. I don't think they did anything that was illegal. I really feel they were good people.

Q: Were you unaware millions of dollars were coming in and going out of Franklin?

A: I'm unaware of the amounts the NCUA is talking about. And I still don't believe the amounts are that great. I may be wrong. When this first happened I went to the NCUA regional director and said I want to be as helpful as possible to you in finding this money. He looked at me like he was looking through me and he never asked me a question.

'I Trusted My Staff'

Q: What type of investments did Franklin make with its money?

A: I don't know. That was all done within the accounting department. Because I wasn't in the office a lot, I would get reports and when I would really check them is when we were going into meetings.

I trusted my staff completely. I felt that we had good people. They knew what they were doing and they took care of things, and when they told me this is what we've got to do I'd go along with it.

Q: You were chief executive officer, manager, treasurer. What responsibility do you feel for what happened?

A: Well, I felt we had departmentalized the office and that each department was doing a good job. The reports that I would get showed me they were doing a good job and everything was being handled properly. Now, I did know the accounting department was slow in its accounting. But they kept telling me that was due to the computer breakdowns.

Q: But do you feel you had any responsibility?

A: I met with my department heads regularly and I felt they were giving me correct information. What I feel now is if any of this is true - and no one has convinced me yet that the majority of the stuff that was said is true - then someone was giving me misinformation and (also) the board of directors.

Q: You left it up to the accounting department to invest that money, to get a good return?

A: Well, they would make reports to us monthly at the board meeting.

Q: What types of investments did they make?

A: I don't know. We were advised (by the NCUA) to develop a new policy for investments and we did that. They wanted to make sure we weren't paying any more for deposits than we could invest it for.

Q: They say you were paying investors 2 or 3 percentage points more than the going rate for your deposits.

A: That's what they say. I don't know that. There was an aggressive thrust to get deposits in. The big problem from what I saw, or as I was informed, was that deposits came in and they went out. They weren't long-term. They were three-month deposits.

It wasn't until shortly before all of this culminated that I was told by one of the staff that the development officers were getting very large checks. I said I just can't believe that.

It's very obvious that I knew nothing about this. Many of the people who know the operations at the credit union have not even been asked what happened.

Q: What responsibility do you feel for not finding that out and stopping it?

A: Well, we were in the process of doing three audits (of the Consumer Services Organization) when this all came about, and we had found out some things we were somewhat shocked about.

Q: What did you do?

A: As much as could be done at that time, last September or October.

Q: Did you fire anyone?

A: I sure did.

Q: How many?

A: I'd rather not say, and I also contacted the attorneys about it.

Incorrect Information

Q: In general, what did you find out?

A: I found out a lot of information I was getting was incorrect, and I was getting misinformation.

Q: What sort of information was incorrect?

A: I don't want to say. Misinformation on the monthly reports I was getting.

Q: Monthly reports on the financial condition of the credit union?

A: Yes.

Q: Were Franklin funds used to pay expenses of your businesses?

A: No. Some checks sent from Franklin were used to pay expenses of my businesses, but those checks were to be drawn on accounts I had at Franklin.

Q: Let me show you a check drawn on Franklin's account at FirsTier Bank that was paid to a certain Omaha company. The company owner said he is certain the money was paid for a copying machine that went to Cafe Carnavale, not to Franklin.

A: Every check that comes out of Franklin has Franklin Credit Union on it. Any check that comes out of Franklin will look just like that.

Q: There is no indication on the check that it was drawn on a Cafe Carnavale account.

A: It wouldn't be on there. That's where the (Franklin) accounting department goes through and puts them to the correct account. Somebody paying a utility bill, it would look just like that. (Franklin paid utility bills on behalf of some depositors from funds in the accounts of those depositors.) It wouldn't have the person's name on it. We're not a bank. We did not have personalized checking.

Q: So Franklin's accountant wrote the check and then subtracted that amount from the Cafe Carnavale account?

A: Yes, or whatever account. All my businesses had accounts at Franklin. Once I wrote a minister a check for using his summer house. He said, why is Larry using Franklin checks for his personal business? It took me almost three hours explaining to that man that every check from there looked the same.

'I'm Not Guilty'

Q: Do you believe you'll be indicted and convicted?

A: If the FBI and IRS do their work without jumping to conclusions, they won't have any reason for an indictment or a conviction. I know I'm not guilty.

Rumors and conjecture started the thing we're in. One gentleman said he would testify against me at the (federal) grand jury because I never treated him as an equal. He told some people he was deliberately going to lie.

A lot of this was just hatefulness. I hope you print this just as I'm saying it. All too often in the majority community people feel that if you are a black you cannot be successful in business and if you have money it has to be illegal money. They don't believe you can have brains and do it yourself.

The odd thing is the line of questioning of (Franklin) staff members. They were asked if they knew if I had received any money for CDs. They never asked if they knew of anybody else who received money for CDs.

Did they know anything about me with drugs? Did they know anything about me doing any sexual activities with people, or did they receive gifts from me?

On a trip with a person, if I would get myself something I would get them something, too. It may not be a great big thing. People put value on things that are so silly.

For example, the $65,000 watch I was supposed to have owned. Now who put that value on that?

Reporter: The federal marshal when he tagged it. (Federal officials said the watch was installed inside a diamond-encrusted $5 gold coin.)

King: I listened to them when they tagged the house. They'd look at something that came from Woolworth's and say this was (worth) $250. The people they had there evaluating, they really didn't know.

Q: How much did you pay for the watch, where did you get it, and where is it now?

A: The receivers have it. I got it in Las Vegas. I don't remember how much I paid, but it was nowhere near $65,000.

Q: Would you plead guilty to some minor charge?

A: I feel I'm going to clear my name. I almost feel they want me to say, just give us some easy way out and we'll take it. I won't do that. I haven't done anything.

I should have come out of (resigned from) Franklin after we built the new building (1984 and 1985). The board asked me to stay. I agreed because it's been my baby for 20 years.

If I could change anything I should have come out then because whatever has happened occurred since then, when I started giving (just) three hours a day (working at Franklin). Some weeks I wasn't even there because I was in Washington or other places.

Q: How would all those rumors get started?

A: Let me tell you this. Three or four years ago I went to IRS for a meeting, and the lady asked us about some money, and we told her we didn't think we had to report it because it was a gift.

And she says, "Can you prove it was a gift?" and I said we can work on it. The people who gave it to us may not want that known. But we'll work on it. She told me to my face that she was going to turn it over to special investigations because anything involving that amount of money looked like it might be drug money.

I said why would it have to be drug money, and she said, "Well you don't make that much money, and where would you get this amount of money from?"

Wadman Relationship

Q: What is your relationship with Omaha Police Chief Robert Wadman? Is he a friend?

A: I thought he was. I respect him and he must have some reasons for saying the things he is saying, so I'm just going to leave it alone. Whenever anything went wrong for him, I was in his corner 100 percent.

Q: What has he said that upset you?

A: I'm not going to say.

(Wadman has said he had no personal relationship with King other than to know who he was and to have periodic contact. He said he attended two parties in Omaha and one in Washington that were given by King and that were attended by hundreds of others.

("I saw the gaudy display of wealth that raised suspicions," Wadman said. But he added he saw nothing unlawful at any of the parties.)

Q: How were you selected to sing the national anthem at the 1984 Republican Convention?

A: I was working with the Republican Party, and I was asked to sing.

Q: By whom?

A: The same people that send all the letters from the RNC (Republican National Committee).

Q: Previously, did your lawyers advise you not to talk (to reporters)?

A: I was advised by several attorneys that anything you say, people are going to tamper with it, twist it around. . . . I made myself a promise when this started that I would never accuse anyone of anything, and that I would never take anyone down.

Yesterday, an announcer who was making this sneer thing on the radio was someone I knew well and had been a friend of. I felt like calling up and really going off. But I thought to myself, why should I stoop to their level, and that's one of the reasons I haven't talked up to now.

King

The Franklin Community Credit Building . . . King said he should have resigned as top executive when the new building was completed in 1985. "The board asked me to stay," he said. "I agreed because it's been my baby for 20 years."

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