Indictment Cites Ex-Manager Of Credit Union --- Grand Jury Charges at Least $12 Million Embezzled At Franklin Community - May 22, 1989 - Wall Street Journal
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May 22, 1989 - Wall Street Journal - Indictment Cites Ex-Manager Of Credit Union --- Grand Jury Charges at Least $12 Million Embezzled At Franklin Community By Robert L. Rose. Wall Street Journal. (Eastern edition). New York, N.Y.: May 22, 1989. pg. 1
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Copyright Dow Jones & Company Inc May 22, 1989
A federal grand jury in Omaha charged Lawrence E. King Jr. with embezzling at least $12 million over a four-year period from the now-closed Franklin Community Federal Credit Union in Omaha.
The 40-count indictment, returned Friday, also charges Mr. King with conspiracy, mail fraud, wire fraud, bank fraud, making false entries in credit union records and filing false tax returns.
Also indicted were Mr. King's wife, Alice, and three former employees of the credit union. Two other people who cooperated with federal investigators agreed to plead guilty to income tax evasion and bank fraud, according to Ronald D. Lahners, U.S. attorney for Nebraska.
Mr. King, 44, was manager and treasurer of Franklin before federal regulators closed it last November. His troubles have been watched with a mixture of interest and dismay in Omaha. Mr. King was a politically connected benefactor who contributed time and money to various causes while maintaining a flamboyant life style.
The credit union was established in the 1960s to serve the poor in northern Omaha. Neither Mr. King, who ran the institution since 1970, nor Mrs. King could be reached for comment.
Franklin's closure marked the second largest credit union failure in history. Mr. Lahners said in a statement Friday that the National Credit Union Administration has counted losses so far of about $40 million. Most of the depositors have been repaid from the insurance fund administered by the agency.
The indictment alleges that between 1984 and 1988, the King Family received $10,223,217 in credit union funds and that their businesses received another $1,901,653.
According to the indictment, the alleged scheme grew more complicated as time went on. It says the credit union's chief accountant noticed in 1976 that funds were used to pay some of Mr. King's personal expenses, but was told by Mr. King that the shortages would be recovered when new grants came in.
It says Mr. King and the accountant, Earl Thomas Harvey Jr., would meet after business hours to prepare fake ledger cards, and Mr. King "would rub them on the carpet in his office" to make them look older to federal credit union examiners.
Mr. Harvey, who cooperated with federal investigators, couldn't be reached for comment. He allegedly used credit union funds to pay some of his own bills.
According to the indictment, Mr. King's "appetite for personal funding increased and the shortages escalated" in 1978, when the credit union was authorized to sell certificates of deposit. When the two realized that they couldn't get enough grants to cover the shortage, the manipulation of records became permanent, according to the indictment.
The indictment says Mr. King applied pressure for increased sales of CDs, and sales representatives were hired to hawk them at above-market interest rates. Among other things, the indictment also claims Mr. King would carry briefcases of cash on his travels and that he would pay for clothing, jewelry, travel and other expenses for male friends.
Each of the counts carries maximum penalties of five years in jail plus a $250,000 fine. Each false tax return count carries a maximum penalty of three years in jail, and a $250,000 fine.
The Kings, arrested Friday, were released on their own recognizance. They told the U.S. magistrate that they couldn't afford an attorney.
Mr. Lahners, the U.S. attorney, said the federal criminal investigation began with information from a civil tax audit of the Kings' personal income taxes.
The National Credit Union Administration has sued Mr. King, alleging he stole from the credit union to finance his lavish life style. National Credit Union Administration officials, who cooperated with the Federal Bureau of Investigation and Internal Revenue Service in the investigation, say they have little hope of recovering much of the assets.Credit: Staff Reporter of The Wall Street Journal