15 Years for Franklin Exec; U.S. Pushes to Recover Funds
A federal court on Monday imposed a 15-year prison term on a former official of the failed Franklin Community Credit Union, and the National Credit Union Administration said it is pressing ahead to recover funds in the case.
"This thing is by no means over," said Allan Meltzer, NCUA associate general counsel. "The effort to recover assets is ongoing." The failure 2 1/2 years ago of Omaha-based Franklin cost the agency's insurance fund a record $38 million.
Lawrence E. King Jr., who was sentenced Monday in U.S. District Court in Nebraska, pleaded guilty earlier this year to several felonies, including conspiracy, embezzlement, and making false entries in books of a federally insured institution.
Franklin, a credit union designed to help a low-income Omaha neighborhood rebuild after race riots, listed about $2 million in assets when it failed. But Mr. King, who managed the institution, and his associates allegedly accepted about $40 million in unrecorded funds from depositors.
The NCUA won a $38.9 million judgment against Mr. King last month, but that money is unlikely ever to be paid.
Widening the Search
Now the NCUA is concentrating on the activities of other individuals and firms connected with the failure of Franklin.
Mr. Meltzer declined to reveal the investigation's targets, but he said the agency wants to make those responsible for the losses "pay their fair share."
He said it was unclear when the investigation would be finished. "That is the $64 million question. We have been conducting investigations since the very beginning," he said. He added, however, that he hoped to be done in a year.
"We have all kinds of prospective suits going," said Robert E. Loftus, the NCUA's director of public and congressional affairs.
The NCUA's insurance arm, known as the National Credit Union Share Insurance Fund, is strongly capitalized and was not threatened by the Franklin failure.
Mr. Loftus said that almost nothing has been recovered from the Franklin failure. "It may be twice as big as any other loss we have had."