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THE FRANKLIN COVER-UP -- CHILD ABUSE, SATANISM, AND MURDER IN NEBRASKA |
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CHAPTER 7: THE FRANKLIN COMMITTEE On Friday, November 4, 1988, four days before George Bush was elected President of the United States, agents of the Federal Bureau of Investigation, the Internal Revenue Service, and the National Credit Union Administration (NCUA) swooped down on the north Omaha headquarters and branches of the Franklin Community Federal Credit Union and its affiliate, the Consumer Services Organization, and shut their doors. It was a case of swindles on a vast scale. At the time of the raid, the Franklin Credit Union listed $2 million in deposits, of which $1.2 million was in certificates of deposit. Yet within a week of the doors being padlocked, claims were filed for $15 million in CD's. Ultimately, close to $40 million was determined to be missing from this credit union that claimed to have a scant $2.6 million in total assets. The obligations were listed on a second, secret set of books. *** In Nebraska's unicameral Legislature, a handful of senators moved to begin a probe into what happened to the Franklin money. The two main initiators of this legislative investigation, the one that would persist when law enforcement balked, were Senator Ernie Chambers, Democrat of north Omaha, and Senator Loran Schmit, Republican of Bellwood. Senator Chambers represented the district where the Franklin Credit Union was founded in 1968, by community activists, with the proclaimed goal of making credit available for businesses and individuals in the African-American community of north Omaha. (It was by qualifying as a "low income credit union," that Franklin could sell certificates of deposit to non-members, the means by which it swindled millions.) Larry King became its manager in 1970. Chambers was in receipt of numerous complaints against King. People talked about his high spending ways, and about the teenaged boys who got in and out of limousines with King. During 1988, Chambers received some of the Foster Care Review Board reports, that abused children had named Larry King. Senator Schmit, as a Republican, knew of suspicious behavior by King out of town. In early years, Larry King was a Democratic Party activist, and headed Black Democrats for McGovern in 1972, but after he shifted registration in 1981, King made his name in the GOP. As Schmit's friend and personal attorney, I shared with him my own recollections about how I had noticed the two faces of Larry King, which I later summarized in writing: "I had personally been a delegate to the Republican National Convention in 1984 and 1988 and been a witness at the massive spending and luxury at the Larry King parties in both Dallas and New Orleans, and as chairman of the legislative Banking Committee had observed with a jaundiced eye the Franklin operation, which no information could be obtained on because it was a Federal Institution." At these two conventions, I attended the two biggest parties ever sponsored by Larry King. It was the first of these that brought King to my attention. The year was 1984. I was attending the Republican National Convention in Dallas, Texas, having been elected as a delegate pledged to support Ronald Reagan. Nebraska was seated in the front row in the convention hall. I had the first seat in the row. The feeling of excitement and power was awesome. The man sitting next to me, Senator Rex Haberman of Imperial, Nebraska, informed me that the portly black man standing at the podium as the convention was set to begin, was from Nebraska and was the fastest rising black star in the Republican Party. "Who the blazes is he?" I asked, "And how come I haven't heard anything about him?" "Larry King," Senator Haberman told me, "and you and I are attending his party tonight." "I had planned on going to a good movie," I told Haberman. "Can't," Haberman explained. "Not if you are going to be a good Republican. You are from Nebraska and this is a party being put on by a Nebraskan to honor another black Nebraskan, DuBois Gilliam, who is going to be getting one of the highest appointments any black person has ever gotten in government. You've got to be there." So, we went. I drove Rex out to the party, which was being held at Southfork Ranch, famous as the setting for the TV show "Dallas." It was the most impressive party I have ever witnessed. The attendance by top politicians was remarkable; names and faces you only hear or see on television were there in number. At the center of the excitement was Larry King. Draped over him like a blanket throughout the evening was a heavyset woman, who I learned was Maureen Reagan, the president's daughter. From what I saw, this party had to have cost far more than the one or two hundred thousand dollars I have heard as an estimate. At a public meeting in 1990, I recalled my thinking at the time: "I got to wondering: Here's this little credit union, and here's Larry King, obviously in the highest reaches of the Republican Party. ... And I just wondered, how does he do this supposedly on a salary of $16 thousand a year?" Such conspicuous consumption as I had witnessed, earned Larry King the tag "flamboyant" in just about any mention of his name. The NCUA's civil suit against King, filed November 14, 1988 in the wake of the raid, put some price tags on his lifestyle. It itemized $4 million of King's personal expenditures, paid out of credit union funds during the previous thirteen months, including: $1 million in American Express bills, $148,000 to Old Market Limousine, $70,000 to Floral Concepts, $61,000 to Mastercard, $39,000 to Citibank, $37,000 to himself, $27,000 to Omaha Jewelry, and so on. *** As the disclosures began to flow, on how King's $2 million dollar credit union had tens of millions of dollars in deposits unaccounted for, and on the secret second set of books, I suggested to Senator Schmit that he talk to some other legislators about investigating whether some state laws were violated. Why was I concerned? Because, from my experience as chairman of the Banking, Commerce, and Insurance Committee of the Legislature, I knew that with all the regulatory controls existing for a federally insured institution, it was impossible for such a theft to occur without cooperation by higher up officials. Larry King could only have accomplished this massive theft with the help or cooperation of regulatory officials or politicians at the highest levels. That meant that institutions of government must have been compromised. Senator Schmit had his own reasons for thinking that a legislative probe of the Franklin collapse was in order. He had heard from friends of his in the black community, that Larry King spent money like a drunken sailor, but was not making any loans in the community. When I discussed a possible investigation with Schmit, I had no idea that anything other than theft, and the possible protection of illegal financial transactions, would be involved. As the investigation was launched, no one, except possibly Senator Ernie Chambers, knew where it might lead. *** On November 18, 1988 the Legislature passed Schmit's resolution in favor of an investigation. In front of special hearings of the Legislature's Executive Board, the strands of evidence against Larry King were finally pulled together, for the first time, before officials who would pay attention. After the first session, on December 12, 1988, Senator Chambers made a dramatic announcement about the probe. The investigation would go into not only financial wrongdoing, he said, but also the physical and sexual abuse of children by persons connected with Franklin. People holding official jobs might be affected, added Senator Schmit. At the three and a half hour Executive Board hearing on December 19, 1988, Carol Stitt, Dennis Carlson, and Burrell Williams of the Foster Care Review Board summarized the abuse complaints centered around Franklin's top officer. They presented their files on the Webb foster home and on Loretta Smith. CARLSON: The nature of these allegations are something that is going to shock the Committee. They deal with cult activities, they deal with sacrifices of small children, they deal with sexual abuse, and there's a correlation between these two different reports. We have, the Boys Town report ... prepared by a worker from Boys Town named Julie Walters, ... (which) contains the allegations of the children that were in the Webb foster home, Nelly primarily. Years later, well, two years later, we have Loretta Smith in Richard Young Hospital who's making allegations against Larry King and as far as we know there is no relationship between Nelly and Loretta Smith. ... Both reports talk about the Omaha Girls Club, both reports mention a specific individual who is the superintendent of schools. ... SENATOR REMMERS: [T]he question that came into mind, it's been in my mind since you've been testifying and I think you've answered part of it just now, is you're talking about about these abuses from children from Boys' Town and Girls' Club and so forth, now is there a common thread that goes over here to the Credit Union deal that we are investigating? In other words to the Franklin Credit Union? Is there a common thread there that kind of leads to that? CAROL STITT: Well, the common thread is Larry King. SENATOR REMMERS: Yes, that's what I mean. It all goes back to him? OK. "CAROL STITT: Yes, he seems to be more the organizer, or the high-class pimp, I mean if that helps fit this together. ... Stitt also clarified what she had written in her June 1988 letter to Attorney General Spire, about a Kansas City connection of Larry King. She testified that she had cross-checked with the Kansas City detective, who reportedly inquired of Kirstin Hallberg about when Nebraska was going to crack down on King. The officer, said Stitt, "confirmed that Larry King had been there, had contributed money to a group home and when he left, three boys came forward and said that they had been abused by him while he was there." The Executive Board also received from the FCRB the handwritten report by Julie Walters, on her interview with the teenaged victims during 1986. In the December 21, 1988 Omaha World-Herald, reporter James Allen Flanery recounted a telephone interview with Walters at her home in another state, in which she told him how their testimony had seemed at first "too bizarre to be true." But the more experience she gained with troubled children, Walters added, "working in probation, I'm more sure than ever that there is more truth than not in their accounts. The conclusion I reached was the kids I spoke with were not lying." What the senators heard at the closed December 19, 1988 meeting shook them to the bone. "The information brought tears to my eyes," Schmit said, according to the Lincoln Journal. "I do not cry easily and I was not the only person that was moved." Chambers echoed the witnesses' outrage about delays: "With this type of information it is inexcusable that action had not been taken of an investigative nature. People were not contacted that should have been. Leads were not followed up that should have been followed up. My feeling is that the whole thing is being sat upon and nothing was done." The question of a cover-up of Franklin-linked crimes came up at the outset, in this way. Omaha Police Chief Wadman and state Attorney General Spire offered a lame protest. "Every step that should have been taken was taken," Wadman told the Journal. Spire said, "We did receive some sensitive information in July. My office acted promptly and professionally and nothing was sat on. I am confident that law enforcement -- both federal and state -- is doing its job in the situation. ..." *** The Legislature's Franklin committee hired its first investigator, former Lincoln policeman Jerry Lowe, in February 1989. Attorney Kirk Naylor came on as Special Counsel. On February 15, Lowe sent a memo to the committee on the results of his first comprehensive evaluation of the case, including its handling by law enforcement. Lowe wrote: This matter is indeed a complex and complicated one, commencing with the closing of the Franklin Credit Union . .. and mushrooming into a situation where additional allegations (other than the financial improprieties) have arisen, including influence peddling, child abuse and neglect, child sexual abuse, pornography, substance abuse, homicide, and inaction and possibly malfeasance on the part of law enforcement agencies, public agencies, and public officials for events dating several years back. More importantly, there seems to be a growing public perception that many of the affected agencies and/or officials are participating in a cover-up. ... The task which the Committee has undertaken will not be an easy one. ... The allegations regarding the exploitation of children are indeed disturbing. What appears to be documented cases of child abuse and sexual abuse dating back several years with no enforcement action being taken by the appropriate agencies is on its face, mind boggling. In this and other early reports, Lowe made clear that every aspect of the Franklin case was politically hot. Larry King had become wealthy and influential thanks to quite a number of "big people," he commented. Moreover, Lowe reported, there were indications that King was involved in guns and money transfers into Nicaragua, of involvement by the CIA, and possibly "a White House connection." There appeared to be "some type of connection between the money missing [from Franklin], the crisis in the Savings and Loans, and the funneling of money to Haiti and Nicaragua." Lowe wrote that there was evidence Omaha Police Chief Robert Wadman had stayed at Larry King's residence in Washington, D.C. Lowe retraced the leads contained in the documents assembled by the FCRB. In March, he interviewed Loretta Smith three times. In April, he talked with Cornelia (Nelly) Patterson, who had taken back her original name after she escaped from custody of the Webbs. *** With Lowe' s investigative reports in hand, the Franklin committee convened hearings. When some state officials were called before them, the senators met with a stone wall. Testifying on June 22, 1989, Attorney General Spire appeared still unchastened. Just as his office had dallied in the face of Carol Stitt's plea for action on complaints against Larry King the year before, Spire now said about Franklin-linked child abuse, that "based on conclusions and reports of the FBI, the Omaha Police, and the Nebraska State Patrol, all three of those have concluded that the reports do not have substance ..." Someone was working at cross-purposes outside the hearing room, as well. While the Legislature's Franklin committee was getting started at the end of 1988, the NCUA selected a firm called Financial Advisory Group, of Council Bluffs, Iowa, to make its own determination about what had happened to Franklin's missing millions. FAG was a partnership formed by John Queen and Robert Kirchner, whose earlier appointments included the one they got from Governor Kerrey -- state regulators to oversee the liquidation of the Commonwealth Savings and Loan. In their 1989-1990 audit of Franklin Credit Union, Queen and Kirchner would conclude that Larry King spent nearly all of it on flowers, limousines, gold watches, and his generally extravagant lifestyle. Even as he proceeded with the audit of Franklin, Queen was serving during 1990 as deputy receiver for Commonwealth, overseeing the liquidation of the bank's remaining assets and the disbursement of the proceeds. On August 14, his chief assistant in the receivership, Kent Johnson, was arrested by the FBI for stealing over a million dollars in Commonwealth funds. Although Queen's co-signature was on every check Johnson wrote to steal the money, Queen claimed that his name had been forged. His career, in any case, was tightly intertwined with Johnson's. Johnson worked for him in the Commonwealth receivership, on the Franklin audit, and at an Omaha corporation he owned, Phoenix Sign Corp. This was a venture Queen launched by buying up the assets of Globe Neon, a bankrupt firm. One of Queen's fellow holders of a $50,000 share of Globe Neon before it folded, was none other than Larry King! Queen and Kirchner enjoyed the sympathy of investigator Jerry Lowe, who wrote in his February 15, 1989 case summary for the Franklin committee: A private consulting firm headed by Omaha residents John Queen and Bob Kirchner, both formerly associated with the receiver for Commonwealth Savings in Lincoln, Nebraska, was retained by the National Credit Union Association (NCUA), in early 1989 and given the responsibility to trace all the funds flowing into and out of the Franklin Credit Union. ... I am familiar with both Mr. Queen and Mr. Kirchner due to my involvement as a Lincoln Police Department investigator in the Commonwealth matter. ... I can personally attest to the thoroughness and capabilities of Mr. Queen and Mr. Kirchner and the people assisting them and believe an association with them would save us an enormous amount of time in following the money. *** I have been Senator Loran Schmit's personal attorney for a number of years. When we were both senators, we frequently worked together on major issues. At other times, such as when we disagreed on the issue of telephone deregulation, we led opposite sides, and fought each other tooth and nail. During the early months of the legislative investigation of Franklin, I personally had serious doubts as to the validity of what was being alleged. I provided a minimum of legal advice to Senator Schmit during this period, but he did insist that I be available to provide him such advice. Schmit had the experience of a previous investigation, involving drug-related matters and the State Patrol, which ended up with him and other senators, including myself, being sued by some of the individuals investigated. He wanted to make sure that he made no error that would cause any legal liability for him. Even though we had won that earlier suit against us, Senator Schmit wanted to exercise all caution, to protect himself from lawsuits. Therefore, like many other state and national politicians, he quite properly had private legal counsel -- me. In the spring of 1989, after the Franklin committee had been conducting investigations for some time, Senator Schmit sought my legal advice. He wanted to know the legal liability involved, if he supported a planned report of the committee, which was to suggest that there was child abuse committed by prominent individuals -- not to be named -- which had not been properly investigated by agencies of government. I asked for no names and he provided no names of the individuals he was talking about. In point of fact, there were enough rumors floating in the legislative corridors and on the streets of Omaha, that at least a dozen prominent persons could have been the subject of these accusations. I gave him the same advice then, that I would give now: "Accusations of child abuse are the worst accusations you can make against an individual. That is because, no matter what the truth of the matter, once the accusation is made, it will never be able to be rubbed completely off, even if the individual accused is as innocent and pure as can be. Therefore, before you sign your name to anything that suggests that there is serious child abuse or before you suggest that an agency of government has failed in its duty to find or investigate child abuse, make sure you have the smoking gun that establishes that is what actually occurred. Not just for your legal protection, but because that is the right thing to do. To falsely accuse of child abuse is a terrible thing. To cover up child abuse, is worse than falsely accusing." I had my own personal experience of a false accusation of child abuse, which still burns in my soul. It was also a hideous example of the use of political office to intimidate, silence or destroy political enemies. The year was 1984, early January. I had announced my intention to run for the United States Senate. As chairman of the Legislature's Banking Committee, I was actively seeking to investigate the collapse of Commonwealth Savings, which had just occurred. In an Associated Press listing of the ten most powerful people in Nebraska, as ranked by media editors and publishers, I was number 5, behind the governor, U.S. Senator J.J. Exon, Omaha World-Herald publisher Harold Andersen, and University of Nebraska President Ronald Roskens. Polls showed me as the leading candidate for the Republican senatorial nomination. Then, I received a message from Republican Party leaders. It was simple: "GOP strategists at the highest levels believe this is the year the Republicans can beat J.J. Exon. Opinion poll analysis shows that such a victory can only come, if the candidate is a woman and has no political 'baggage.' (Remember, 1984 was the year of Democrat Geraldine Ferraro's candidacy for U.S. Vice President, the 'Year of the Woman' in politics.) Republican leaders are fearful that you, John DeCamp, will be able to win the primary, but because of 'baggage' and controversiality, you will not beat Exon in November. Therefore, Republican leaders ask you to withdraw from the primary. If you do not drop out voluntarily, you will have to be stopped some other way. And stopped you will be, because this race means so much to Republican leadership, at the highest levels in Washington." I did not listen. I continued to campaign for the Senate seat. Shortly thereafter, a tenant in one of my apartments, who was delinquent on her rent, lodged an anonymous complaint to the Nebraska Department of Social Services. She charged that I and my wife had "abused" my young daughter when she was five years old. A picture in a family photo album, showing my daughter in a pose like the Coppertone baby ads, was the basis for the complaint. Two investigations conducted immediately, one by the DSS and one by the Lincoln Police, found there was no child abuse and so reported. But a County Attorney, Mike Heavican, took matters into his own hands. Heavican was on the Republican search committee for a senatorial candidate, which ultimately picked a woman with no "baggage," and she lost to Exon. He also was someone whose name had come up as my Senate Banking Committee attempted to start probing the Commonwealth and State Security matters, as someone who may have granted illegal tax favors to involved parties. Heavican filed a petition, alleging that I and my wife had abused our daughter in the way we were educating and raising her. It was a civil, not a criminal, filing, but I am sure it was designed to gain statewide publicity. Heavican's action also exemplified how a public position can be abused. It comes as a shock to most Americans, that the lowliest county attorney has absolute immunity when he files complaints or charges against somebody, even if he does so knowing them to be false. His automatic immunity is supposed to protect the prosecutor, as an institution of government, from being deterred from effective action by the specter of future lawsuits. The abuse of this institutional privilege can be terribly destructive. Months of investigation resulted in a legal opinion from Judge W.W. Nuernberger, that there was no child abuse. Nuernberger concluded that if Mr. and Mrs. John DeCamp were guilty of child abuse, then so were a lot of families and so was the late President Kennedy, and perhaps every family in Nebraska would have to destroy its photo albums, if I were considered guilty of anything. While the investigation was under way, media coverage continued to smear my name with the charges. I maintained that the phantom child abuse was concocted by Heavican, using the County Attorney's office, for the political purposes of knocking me out of the Senate race and stopping my Commonwealth/State Security investigation. Six years after these horrible events, my suspicions were confirmed. On March 17, 1990, the Kansas City Star reported on the DeCamp child abuse allegation: ... Roland Luedtke, a former lieutenant governor and the mayor of Lincoln from 1983 to 1987, launched his own review of the charges. "The report that came back to me was that [DeCamp] was pure as the driven snow," Luedtke said, but, he added, whoever may have had it in their mind to get rid of DeCamp "accomplished their purpose." My 1984 ordeal came to mind in the spring of 1989, as I insisted to Senator Schmit that he exercise caution in the Franklin case. *** Senator Schmit offered an amendment to the committee report, written by himself, which stated, in essence, that at this point in the investigation, the legislative committee did not have the smoking gun that would establish the truth of any of the child abuse allegations or the failure of institutions of government. In July 1989, a controversy broke out on the Franklin committee, over Schmit's amendment and the course of the investigation. Some members maintained that Senator Schmit was not doing enough to fo1low up the child abuse. Schmit rejoined that the information gathered thus far by Lowe, while useful, was mostly second-hand, and that the committee should follow the advice he had been given by a friend in law enforcement: "Follow the money trail." There is almost no important crime that can be committed, said Schmit, echoing his friend's advice, without spending money, and spending money leaves a paper trail. It should be possible to move from hearsay to court-admissable evidence such as checks, credit card receipts, and flight manifests. Senator Chambers and Senator McFarland departed from the committee. Investigator Lowe and Counsel Naylor resigned. Schmit and the remaining four other members of the Franklin committee -- three farmers, a plumber and a grandmother, as Schmit described them -- hired private investigator Gary Caradori, a former state patrolman, to replace Lowe in August. In a review of his work for the committee, Caradori recalled his first impressions: From the onset it was apparent that I was up against a barrier regarding mistrust of the Franklin Legislative Committee. I was told repeatedly that people were afraid to divulge any information, not only because of retribution of the alleged perpetrators, but also because they feared they would be publicly discredited by the Omaha World-Herald. People were also becoming discouraged by the lack of progress made thus far on the investigation and they translated this to mean "cover up." Initially, the reports which Mr. Lowe had generated were reviewed in detail. It was evident that while there were a large amount of reports generated, that very little of substance had been gained by him regarding firsthand information. It was then decided that, while secondhand information had been valuable in that it presented an idea of the possible scope of abuse going on, that it was more important to locate individuals who had actually been abused and participated in the various activities that comprise this case.
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