The Franklin Credit Union scandal began in November 1988, when federal regulators shut down the Franklin Community Federal Credit Union in Omaha, Nebraska, and discovered roughly $39 million missing under the management of Lawrence E. King Jr.1The Washington Post. Credit Union Ex-Manager Pleads Guilty Within weeks, the financial case was overtaken by allegations that King had run a child sexual abuse ring involving prominent Omaha and national figures. A Douglas County grand jury called those allegations a “carefully crafted hoax” in 1990, and one accuser was later convicted of perjury.2The New York Times. Omaha Grand Jury Sees Hoax in Lurid Tales But the death of the legislature’s chief investigator, a sworn reversal by one of the recanting witnesses, and the refusal of two accusers to back down have kept the case contested for more than three decades.
The Credit Union Collapse
Franklin Community Federal Credit Union was a small institution serving Omaha’s predominantly Black north side. Its manager, Lawrence E. King Jr., lived far beyond what his job title should have allowed, throwing lavish parties and traveling extensively. He was also politically connected enough to sing the national anthem at the 1984 Republican National Convention.
When federal agencies raided the credit union in November 1988, auditors determined that about $39 million had vanished. King was indicted on federal charges of conspiracy, embezzlement, and making false statements. On February 11, 1991, he pleaded guilty to reduced charges and was sentenced to 15 years in federal prison.1The Washington Post. Credit Union Ex-Manager Pleads Guilty His wife, Alice King, pleaded guilty to filing a false tax return and received a three-year sentence.3Orlando Sentinel. Ex-Credit Union Manager Gets 15 Years for Fraud
How the Abuse Allegations Emerged
The financial case did not stay financial for long. State Senator Ernie Chambers publicly raised reports linking the credit union scandal to child sexual and physical abuse, and the FBI’s Omaha office confirmed it had independently received abuse reports and that the matter was part of its criminal inquiry into the credit union.4The New York Times. A Lurid, Mysterious Scandal Begins Taking Shape in Omaha
Four young people came forward as alleged victims: Alisha Owen, Paul Bonacci, Troy Boner, and James “Danny” King. They described an organized scheme of child sexual abuse, drugs, and prostitution orchestrated by Larry King and involving prominent Omaha figures, including a local police chief and the publisher of the Omaha World-Herald. They described parties at the Twin Towers apartment complex where minors were exploited.5Justia. State v. Owen, 510 N.W.2d 503
The Nebraska Legislature formed a special investigative body known as the Franklin Committee, led by State Senator Loran Schmit. The committee hired private investigator Gary Caradori, who gathered extensive videotaped testimony from the alleged victims.
The Grand Jury’s “Hoax” Finding
A Douglas County grand jury was impaneled on March 19, 1990, to investigate both the financial collapse and the sexual abuse allegations.5Justia. State v. Owen, 510 N.W.2d 503 That summer, it rejected the abuse claims entirely, concluding they were “a carefully crafted hoax, scripted by a person or persons with considerable knowledge of the people and institutions of Omaha.”2The New York Times. Omaha Grand Jury Sees Hoax in Lurid Tales
The jurors pointed to concrete evidence against the accounts. Financial records showed King did not rent units at the Twin Towers complex until 1987 or 1988, contradicting Alisha Owen’s claims of abuse there in 1983 and 1984. DNA testing established that the police chief Owen accused was not the father of her child, as she had claimed, and medical evidence of distinctive surgical scars on his body contradicted her testimony that he had no body markings.5Justia. State v. Owen, 510 N.W.2d 503
Two of the four accusers, Troy Boner and Danny King, recanted. They told the grand jury they had taken part in the allegations at Owen’s encouragement, motivated by the prospect of book, television, and movie deals.6Chicago Tribune. Sex Scandal Rumors Won’t Die in Omaha A separate federal grand jury reached a similar conclusion in September 1990, finding the sexual abuse and drug trafficking stories “unfounded.”7The New York Times. Omaha Tales of Sexual Abuse Ruled False
Rather than indicting any of the prominent people the accusers had named, the Douglas County grand jury charged two of the young accusers, Alisha Owen and Paul Bonacci, with perjury.2The New York Times. Omaha Grand Jury Sees Hoax in Lurid Tales
Alisha Owen’s Perjury Conviction
Owen’s trial lasted five weeks and produced more than 4,000 pages of testimony and 182 exhibits.8vLex. State v. Owen, 510 N.W.2d 503 On August 8, 1991, she was convicted on all eight counts of perjury and sentenced to nine to fifteen years in prison, structured through consecutive groupings of the counts, each carrying a term of three to five years.5Justia. State v. Owen, 510 N.W.2d 503
Owen never changed her story. She continued to assert her allegations against the people she had named, including specific physical details about the police chief, and Paul Bonacci likewise stood by his statements.5Justia. State v. Owen, 510 N.W.2d 503 On appeal, the Nebraska Court of Appeals affirmed her conviction on most grounds but ordered an evidentiary hearing on allegations of jury misconduct and improper communications between the judge and jury during deliberations.8vLex. State v. Owen, 510 N.W.2d 503
The Death of Gary Caradori
In July 1990, roughly 19 months after the legislative probe began, Franklin Committee investigator Gary Caradori and his 8-year-old son were killed when their small plane broke apart in midair over rural Illinois.6Chicago Tribune. Sex Scandal Rumors Won’t Die in Omaha The crash came shortly after Caradori had expressed safety concerns and said he had gathered significant evidence.
Authorities characterized the crash as an accident. No official finding has ever substantiated the suspicion of foul play, but the timing turned Caradori’s death into a permanent element of the Franklin story.
Troy Boner’s Reversal
The grand jury’s conclusion rested in part on Boner’s and Danny King’s recantations. In 1993, Boner complicated that record. He signed a sworn affidavit dated October 27, 1993, stating that his original account to Caradori was “substantially the truth” and that his later grand jury testimony characterizing it as a hoax was the lie.9Archive.org. Troy Boner Affidavit
Boner alleged that FBI agents and his court-appointed attorney had coerced him into recanting, threatening him with lengthy perjury sentences and rehearsing him before his testimony at Owen’s trial. He described his situation as one of “lie or die,” claimed his brother Shawn had been killed as a warning to him, and said the FBI possessed photographs corroborating his original allegations.9Archive.org. Troy Boner Affidavit
Paul Bonacci’s Civil Case
Bonacci, who like Owen never recanted, pursued civil litigation. He filed a federal civil rights lawsuit under 42 U.S.C. ยง 1983 against multiple defendants, including the Omaha Public School District, alleging that school counselors had failed to act after he reported sexual abuse to them. The Eighth Circuit Court of Appeals affirmed the dismissal of the case, holding that the school district had no constitutional duty to protect Bonacci from private violence and that counselors had met their statutory obligation to report suspected abuse to law enforcement.10Law.resource.org. Bonacci v. King, 962 F.2d 12
Why the Case Is Still Disputed
The grand jury’s finding did not settle the matter publicly. A KETV television call-in poll found viewers disagreed with the grand jury by a margin of more than ten to one, and a radio poll on KAFB found that 72 percent of respondents were “incredulous” about the hoax finding. University of Nebraska-Lincoln political scientist Michael Steinman said the grand jury report “failed to still the rumors and has added to the controversy.”6Chicago Tribune. Sex Scandal Rumors Won’t Die in Omaha
Senator Schmit called the grand jury report “a strange document.”2The New York Times. Omaha Grand Jury Sees Hoax in Lurid Tales The Omaha World-Herald, by contrast, called the Franklin Committee itself “a disgrace to Nebraska.” The grand jury also criticized the committee for wasting public resources and acting on “hidden agendas,” including an allegation that a former state senator had pursued the investigation for “personal political gain and possible revenge.”6Chicago Tribune. Sex Scandal Rumors Won’t Die in Omaha Assistant United States Attorney Thomas Talken, who led a separate federal inquiry, said after the grand jury report that his investigation would continue.
Attorney John DeCamp, who represented several of the accusers, published The Franklin Cover-Up: Child Abuse, Satanism, and Murder in Nebraska in 1992, arguing the abuse was real and had been suppressed. Investigative journalist Nick Bryant published The Franklin Scandal in 2009, arguing the case involved an interstate pedophile network reaching into high-level political circles, and has drawn parallels to the later Jeffrey Epstein case.11ISSTD News. An Interview With Nick Bryant, Part I: The Franklin Scandal
The official record is settled: a grand jury found the abuse allegations fabricated, one accuser was convicted of perjury, and the credit union’s manager went to prison for financial crimes. The surrounding record, Caradori’s death, Boner’s sworn reversal of his recantation, and the two accusers who never backed down, is why the Franklin case continues to be litigated in print rather than only in court.