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Key Figures Quit Franklin Probe Resignations Shake Inquiry - July 14, 1989 - Omaha World-Herald

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Jul 14, 1989 Key Figures Quit Franklin Probe Resignations Shake Inquiry; [Sunrise Edition]
James Allen Flanery. Omaha World - Herald. Omaha, Neb. pg. 1

Full Text (1363 words)
(Copyright 1989 Omaha World-Herald Company)

A legislative committee's probe of the failed Franklin Community Federal Credit Union was "wounded" Thursday when the panel's vice chairman, counsel and chief investigator all resigned, State Sen. Dan Lynch of Omaha said.

"I'm not sure yet whether this is fatal," said Lynch, one of six remaining members of the committee that the Legislature created Jan. 10.

"It's like starting all over again," said State Sen. Jim McFarland of Lincoln, another remaining committee member.

"I hope we don't abandon the whole thing and forget it," said another remaining member, State Sen. Dennis Baack of Kimball.

Resigning abruptly Thursday morning were State Sen. Ernie Chambers of Omaha, the committee vice chairman; Kirk E. Naylor Jr. of Lincoln, the committee attorney; and Jerry Lowe, the panel's chief investigator.

'Arrogance'

Chambers said State Sen. Loran Schmit of Bellwood, the committee chairman, had displayed "arrogance" by asserting Tuesday that the panel could not verify child-abuse allegations reportedly tied to Franklin's former manager, Lawrence E. King Jr. of Omaha.

Chambers also blasted Schmit for directing Naylor and Lowe to refocus the probe on Franklin money matters without consulting the full committee.

Naylor said Schmit "didn't consult me or anyone on the committee before he announced this (new) direction." He said Schmit's directive culminated a long period in which Schmit had failed to communicate with him.

"The committee can only work effectively when it maintains public respect," Naylor said in an interview Thursday night. "That won't happen when ill-advised statements like that (of Schmit) are made.

"The worst thing you can do in an ongoing investigation is announce publicly you don't have a lock on any of the allegations. Once he (Schmit) did that, it made it extremely difficult to get sources to come forward.

"I was not in a position to carry out the role I was hired to carry out, and I could not be effective," Naylor said.

Chambers said, "I cannot allow my name to be associated with what it seems the committee is about to do - changing the focus of the investigation."

Chambers said he had talked with some of the victims of alleged abuse and concluded "there was enough to continue investigating before making a definitive statement there was nothing there."

'Concerned'

Schmit could not be reached at home in Bellwood, at his office in Lincoln or in Omaha, where he attended a wake Wednesday night for Frank Koziol, the brother of State Sen. Bernice Labedz of Omaha, another committee member.

Naylor, who prosecuted former State Attorney General Paul Douglas for perjury, was hired by the committee in February. Lowe, a white-collar crime specialist for the Lincoln Police Department, was hired the same month.

Lynch said Chambers, Naylor, Lowe and Schmit knew the most about the committee investigation, and now three of them no longer are part of it.

"I am concerned about it," McFarland said. "I need to assess what to do over the weekend. I think a resignation is a last resort. But this does cause tremendous problems. We're facing a problem of hiring new counsel who will come in without the benefit of all the extensive knowledge."

Naylor said he would try to cooperate with whoever replaces him.

Lynch and Baack said they had no plans to resign, although Baack said, "It seems to me he (Schmit) has gone beyond the powers of the chair."

Baack, Lynch and McFarland said the panel's primary focus should continue to be on the alleged abuse.

"If we're going purely with the money, I think we've missed the boat," Baack said. "I tend to think the feds are doing that part of it."

Some $38 million is said to be missing from the credit union.

Burrell Williams of Omaha, chairman of the State Foster Care Review Board, the agency that received reports of child abuse linked to Franklin and asked several law enforcement agencies to investigate, said he was "shocked and surprised" by the resignations.

"I don't know if this will damage the way people look at the system," Williams said. "Some people put everything on the line by trusting this committee and hoping everything would be investigated."

Naylor said difficulties began as he was preparing a draft of a progress report the Legislature had ordered from the committee by July 1.

Naylor said Schmit did not talk with him as he prepared the report. And after the report was submitted to committee members July 3 (July 1 fell on a Saturday), Schmit was unreachable for several days, Naylor said.

The morning of July 6, Naylor said, Schmit told a reporter that he felt the report lacked sufficient detail and offered nothing new.

That afternoon, Schmit summoned the committee to a closed-door meeting at the State Capitol. Chambers, Naylor and Lowe were there from the outset. Lynch and McFarland showed up later for a session that lasted about two hours.

During the meeting, Chambers said, Schmit wanted documentation for an assertion in the report that the State Attorney General's Office had done almost nothing to investigate the alleged abuse before late November 1988.

"Loran said there was nothing in the report that countered the Attorney General (Robert Spire's) assertion that there was nothing to the allegations," Chambers said. "He (Schmit) wanted to get something in there to counter that."

Attached Commentary

When the meeting ended, Chambers said, he had expected Schmit to modify the report to strengthen Naylor's tentative conclusion about the attorney general.

Instead, Schmit on Tuesday attached a three-page commentary to the report that said none of the abuse allegations could be verified. He also said the committee had been preoccupied with what had turned out to be an "over-abundance of rumors."

In the future, Schmit said, he intended "to clearly direct committee staff to follow the trail of the money . . . Ultimately, this committee is not a prosecutor . . . The bottom line is that we are lawmakers."

Chambers said he found it inconceivable that Schmit, who earlier this year had shed tears during a committee hearing exploring alleged abuse, would "be so quick to want to shift the focus."

Chambers said, "Something happened between the time of the (July 6) meeting and the time he (Schmit) put this (Tuesday's statement) out to the media."

Naylor said, "Schmit was keeping his own counsel or the counsel of someone outside the committee."

Schmit's statements damaged the committee's credibility, Chambers said.

"There are some people who spoke to Jerry Lowe only because of the confidence they have in me, and I had kind of interceded for Lowe," Chambers said.

"Some of them are wondering now what is going on and indicate they would not be willing to have anything else to do with the investigation because (Schmit) already determined that what they're saying is not true."

Conclusions Challenged

Chambers said, "The committee's posture seems to be the same as we criticized the Omaha Police Department and Attorney General's Office for. Instead of completing an investigation, we're drawing sweeping conclusions."

Chambers said he would not divorce himself from abuse matters altogether, however. He said he still might introduce legislation that would lead to better investigations of child and sexual abuse.

"There are literally hundreds of kids being chewed up by the same system that allows some of the bad things to happen to some of these kids we've been dealing with," Chambers said.

"With the approach Naylor and I were taking, kids at last had people speaking on their behalf who were knowledgeable, articulate, not afraid and moving in the direction we needed to be going."

He said someone on the committee is now "going to have to pick up the ball and do at the (next committee) hearing July 27 what I did the last time."

At the committee's hearing last month, Chambers was the most demanding and seemingly most prepared member of the committee.

Chambers said the alleged abuse relates not just to King but others.

He said witnesses and lie detector tests have supported alleged victims' statements about some of the other abuse.

Chambers and Naylor said the committee has no real power to compel the release of federal documents that would allow a genuine pursuit of "the money trail."

Chambers Naylor Schmit Lowe

Credit: World-Herald Staff Writer

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