Franklin Credit Union Scandal

The Franklin Community Federal Credit Union was shut down by federal regulators on November 4, 1988. The National Credit Union Administration (NCUA) determined that $39.4 million had been stolen from the institution, making it one of the largest credit union embezzlements in U.S. history. The credit union's operator, Lawrence King Jr., was a prominent figure in Nebraska Republican Party circles who had sung the national anthem at the 1984 Republican National Convention and served on the advisory committee for President Ronald Reagan's second inauguration.¹

The financial fraud investigation was accompanied by allegations, surfaced during a Nebraska legislative inquiry, that King had operated a child prostitution network extending from Omaha to Washington D.C. Two grand juries convened in 1990 concluded the abuse allegations were fabricated. The attendant circumstances - the legislative investigator's death in a plane crash, the suppression of a British documentary, and the CIA-adjacent connections of Washington figures named in victim testimony - generated a substantial secondary literature asserting a cover-up, though the documented primary-source record does not support the specific allegations of a Washington network.²

Lawrence King Jr.: Financial Crimes

King served as manager of Franklin Community Federal Credit Union in Omaha. At the time of its collapse he had developed a profile within Nebraska Republican politics: he chaired the Nebraska Black Republican Council, served as vice chairman for finance of the National Black Republican Council, and was documented in Reagan Presidential Library records as a member of the advisory committee for the January 1985 inauguration. He hosted parties at the 1988 Republican National Convention in New Orleans at an estimated cost of $100,000.¹

Following the NCUA raid, King was indicted on 40 counts including conspiracy, embezzlement, and making false statements. In February 1991, he entered a guilty plea to reduced charges of conspiracy, embezzlement, and making false statements. He was sentenced to 15 years in federal prison. He served approximately ten years before release.¹

His wife Alice King also entered a guilty plea to reduced charges related to the embezzlement. The federal civil case is documented at GovInfo under USCOURTS-ned-8_88-cv-00819 (National Credit Union v. King et al).¹

Nebraska Legislative Inquiry

In December 1988, the Nebraska Legislature created a special investigating committee under State Senator Loran Schmit (chair) and Senator Ernie Chambers (vice-chair) to examine both the financial collapse and emerging abuse allegations. The committee hired private investigator Gary Caradori to conduct the investigative field work. Caradori conducted videotaped interviews with approximately 60 individuals claiming knowledge of or participation in the alleged abuse networks; transcripts of a portion of these interviews are accessible at the Internet Archive.²

On July 11, 1990, Caradori died along with his eight-year-old son Andrew when his aircraft suffered in-flight structural failure and broke apart near Ashton, Lee County, Illinois. The National Transportation Safety Board determined the probable cause to be structural failure; investigators found no physical evidence of explosive devices or external sabotage. Committee chair Schmit subsequently described the Douglas County grand jury's report as "a strange document."²

The Grand Jury Findings

On July 23, 1990, the Douglas County grand jury issued its final report. It concluded the abuse allegations constituted "a carefully crafted hoax" that was "scripted by a person or persons with considerable knowledge of people and institutions of Omaha." The report identified alleged victim Alisha Owen as a primary instigator and alluded to financial motives related to anticipated book deals, film deals, and civil litigation. The grand jury indicted Owen on eight counts of perjury.³

In September 1990, a separate federal grand jury reached the same conclusion, also finding the allegations unsubstantiated and also indicting Owen on eight counts of perjury.³

Alisha Owen

Owen was convicted by a Douglas County jury on June 21, 1991, on eight counts of felony perjury under Neb.Rev.Stat. § 28-915. Judge Case sentenced her on August 8, 1991, to nine to twenty-seven years in prison. She served approximately four and a half years before release. The Nebraska Court of Appeals in 1993 affirmed most aspects of the conviction but vacated the trial court order denying a new trial and remanded for an evidentiary hearing on alleged jury misconduct (State v. Owen, 510 N.W.2d 503; available at law.justia.com/cases/nebraska/court-of-appeals/1993/a-91-836-8.html).³

Paul Bonacci

Paul Bonacci was convicted on separate charges of child sexual assault unrelated to the Franklin allegations. He subsequently filed a federal civil suit against King and others including Peter Citron, Alan Baer, Harold Anderson, and Robert Wadman. King declined to respond to the civil complaint. On approximately February 27, 1999, Senior U.S. District Judge Warren K. Urbom entered a default judgment against King of $800,000 in compensatory damages and $200,000 in punitive damages ($1 million total). Urbom's order stated that King's failure to respond "has made those allegations true as to him." This is procedurally a default judgment under federal civil rules - the court did not evaluate the merits of the allegations against evidence - rather than a contested judicial finding on the facts. The case record is accessible at CourtListener (opinion 582386).⁴

Bonacci's testimony in various proceedings alleged that King transported him to Washington D.C. beginning around age 14 (approximately 1981), where he claimed attendance at parties arranged by Washington lobbyist Craig Spence. The Washington D.C. dimension of Bonacci's claims has partial independent corroboration through separate contemporaneous journalism on Spence (see below), but Bonacci's personal presence at the events he described is not independently corroborated in any public record.⁴

Craig Spence and the Washington Connection

Craig Spence was a Washington D.C. lobbyist and social figure whose activities were investigated independently of the Franklin allegations. On June 29, 1989, the Washington Times reported that Spence had been identified as a major client of a homosexual escort service under investigation; the reporting further documented that Spence had arranged late-night White House tours for clients, including a 1 a.m. tour on Sunday, July 3, 1988, at which two male prostitutes were present. The Washington Post independently confirmed Spence's unusual social access and political connections in a July 1989 profile. Spence was found dead on November 10, 1989, in Room 429 of the Boston Ritz Carlton; the death was ruled a suicide.⁵

Spence's connection to King was reported by the Washington Times in its Franklin coverage. That Spence maintained overlapping social networks with King in Washington is established by contemporaneous journalism. Bonacci's specific claims about what occurred at events attended by Spence are not corroborated beyond Bonacci's own testimony.⁵

Other Nebraska Convictions

Peter Citron, an Omaha World-Herald columnist, was convicted in July 1990 on child sexual assault charges. The charges emerged during the broader investigation but were independent of the Franklin allegations proper. He was sentenced to three to eight years. Alan Baer, an Omaha businessman, was indicted on two counts of pandering; he pleaded no contest to a single reduced charge of aiding and abetting prostitution and paid a fine.²

"A Conspiracy of Silence" (1994)

Yorkshire Television produced a documentary on the Franklin allegations under director Nick Gray and producer Tim Tate. The film was funded by the Discovery Channel and was scheduled for broadcast in the United States on May 3, 1994. During final editing, with broadcast imminent, the Discovery Channel withdrew its support and reimbursed Yorkshire Television approximately $500,000 (the full production cost). The documentary was never broadcast. The sole official explanation Discovery gave at the time was that the investigation had entered "an area inconsistent with the Discovery mission statement." Tate has maintained publicly that the withdrawal constituted censorship and has described receiving indirect signals that congressional pressure played a role; no documentary primary source corroborates the congressional pressure claim. Multiple versions of the unaired rough cut are accessible at the Internet Archive.⁶

John DeCamp and the Book

Nebraska state senator John DeCamp, who had served as a legal aide to CIA Director William Colby in Vietnam, published "The Franklin Cover-Up" in 1992, a year after King's federal conviction. A second edition appeared in 1996. DeCamp represented Bonacci and Owen as their attorney, a conflict of interest that is relevant to evaluating his assessments of the evidence. His book argues the abuse allegations were not a hoax and that a genuine network existed. He also drew connections between the Franklin case and The Finders, the Washington D.C. group whose CIA connections were documented in a 1987 U.S. Customs Service investigation. Nick Bryant's 2009 book "The Franklin Scandal" (Trine Day) opens with a prologue titled "The Finders of Lost Children" and incorporates U.S. Customs documentation on The Finders as primary source material.⁷

No publicly available government record establishes a documented operational or investigative link between the Franklin case and The Finders case. The two investigations were run as separate FBI matters. The "CIA internal matter" termination documented in the 1987 U.S. Customs Service memo regarding The Finders has no documented equivalent in the Franklin case files that have been made public.⁷