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Philadelphia Inquirer: 22-Month Rumor Stream Besieges Midwestern City - April 4, 1990 - Omaha World-Herald

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Apr 4, 1990 Philadelphia Inquirer: 22-Month Rumor Stream Besieges Midwestern City; [Sunrise Edition] Andrew Cassell. Omaha World - Herald. Omaha, Neb. pg. 15

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(Copyright 1990 Omaha World-Herald Company)

The following ran in the Philadelphia Inquirer about two weeks ago. The online version is longer than the published one.

They don't have the Trumps of Spy magazine. But the citizens of this Missouri River metropolis concede nothing to New York when it comes to gossip:

A letter comes to the local newspaper contending that five well-known people are involved with child prostitution. The letter isn't printed, but 10,000 homes subsequently receive mailed copies.

Callers begin deluging radio talk shows about the letters. Radio hosts keep nervous fingers on the bleeper button to prevent anonymous accusations from being aired. One broadcaster doesn't push fast enough and loses her job.

Over coffee at a downtown hotel, a woman lowers her voice. She hears, she tells a visitor solemnly, that a teen-age girl has told of attending a party where somebody "who looks just like James Woods the actor" supplied illegal drugs. "Have you seen pictures of our mayor?" she concludes, knowingly.

"We have hurricane force rumors," protests Omaha lawyer James Martin Davis. "If it doesn't stop, Omaha's going to be the first city in history to gossip itself to death.

"Flamboyant Entrepreneur"

Beneath all the talk is a genuine scandal: the 1988 collapse of a credit union set up to aid Omaha's poor, predominantly black north side, and the indictment of its manager, Lawrence E. King Jr., on embezzlement charges.

King, 45, a flamboyant entrepreneur once hailed as a black role model and embraced by the national Republican Party, is accused of using the Franklin Community Federal Credit Union as his personal treasury. Prosecutors and federal regulators say he looted about $37 million in depositors' funds, spending lavishly on clothes, gifts and parties.

But it isn't King's financial dealings that have Omaha riveted with what people now abbreviate simply as "Franklin."

Rather, it is a 22-month stream of rumors, leaks and semi-official allegations linking King and others - including members of Omaha's civic establishment - with a teen-age prostitution ring, whose existence, if it did exist, may have been ignored by local and state police, and the FBI.

'Sociological Nitroglycerine'

"We have into one caldron placed child abuse, allegations of law enforcement cover-up, allegations of media cover-up, gossip and politics," said Davis, a former prosecutor who has advised a legislative committee probing the affair. "And we've stirred it around and created sociological nitroglycerine."

The scandal has spawned its own institutions. An ad hoc committee, ostensibly formed to protect child victims, has attracted a membership of 150. A local television station produces a weekly show summarizing the latest developments.

Federal and state grand juries and the Nebraska Legislature are investigating. None has named targets or produced indictments, though the head of the Legislature's investigative panel insists there ought to be some.

"Children have testified that they were abused by persons associated with Franklin," State Sen. Loran Schmit said. "I have no doubt in my mind that many of the crimes they described actually took place."

Even before regulators closed the Franklin credit union in November 1988, members of a state panel that oversees foster homes had received reports that children in a home run by a relative of King's had been recruited to attend parties where they were paraded nude or offered as sexual favors to guests.

Dennis Carlson, a member of the foster-care board and an officer in the Nebraska Bar Association, said he first took the charges to an Omaha police detective and the state attorney general.

Legislators Pressed On

"I was assured that an investigation was taking place," Carlson said. But "as far as I can determine, the Omaha Police Department did nothing, the Attorney General's Officer did nothing. Only after Franklin went down did anybody get interested."

Even then, there was little conclusive action. Police and the FBI said in February 1989 that they had found no sex-related crimes to prosecute.

But legislators pressed on, and in November Schmit announced that his committee had videotaped testimony from two men and a woman in their early 20s, whom he did not name, who reportedly said they had been taken to parties given by King here and at an expensive home rented near Embassy Row in Washington.

As the committee's tapes were shown to local police and prosecutors, word leaked that the witnesses had named prominent people they supposedly had seen at the parties. That opened the speculative floodgates.

In his heyday, from 1983 until late 1988, King was ubiquitous here. In addition to the credit union, he owned fashionable restaurants, rode around town in limousines and mixed with the city's arts, business and Republican establishments. A polished tenor, he sang the national anthem at the 1984 GOP convention in Dallas and threw huge parties for black Republicans there and at the party's 1988 convention in New Orleans.

Field Day for Paper's Critics

"Probably everybody who would be counted as part of the Omaha power structure would have considered themselves a friend of King, and they all attended a King party at one time or another," said G. Woodson Howe, editor of The Omaha World-Herald.

To its current embarrassment, one of King's biggest friends was The World-Herald itself. Former Publisher Harold W. Andersen promoted the Franklin credit union as a worthy minority-run effort to help poor people, appeared in its television ads and personally raised funds to help it build a new office.

As a result, the independently owned conservative paper has found itself spending almost as much energy fending off charges of complicity in the affair as it has reporting it.

The paper's longtime critics had a field day, particularly after a former legislator dared it to print his letter naming five "central figures" in the Franklin probe. After editors declined, another local politician mailed 10,000 copies to voters in his district.

"It's terrible," said reporter Gabriella Stern. "People are just assuming that we're covering up, when actually we're spending all our time trying to find out what happened."

'Public Went Wild'

But because the newspaper, following common journalistic conventions, refused to print the names of those making allegations on grounds that they may be sexual-assault victims, or of those being accused on grounds that the allegations were unsupported and anonymous, its stories have encouraged readers to speculate.

"It just left the public a vacuum to fill in the names and what the allegations are. And the public went wild," said Davis.

When the paper finally did print some names, they were embarrassingly close to home. First, World-Herald entertainment columnist Peter Citron was arrested Feb. 22 on charges that he had sexually fondled two young boys in his neighborhood. At his arraignment, his lawyer said that Citron was a "target" of the Franklin committee's probe.

Then on March 2, Andersen, who retired as publisher in December, was named along with Citron, King and five others on a federal grand jury subpoena seeking information about the Franklin affair. The March 4 paper carried a statement by Andersen denying any involvement.

"It's really a pretty tacky scene," sighed Howe.

Credit: The Philadelphia Inquirer

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