Magazine article American Banker

FDIC Sues Jake Butcher, Charging Diversion of Bank Loans

Magazine article American Banker

FDIC Sues Jake Butcher, Charging Diversion of Bank Loans

Article excerpt

KNOXVILLE, Tenn. -- The Federal Deposit Insurance Corp. has sued bankrupt financier Jake Butcher, charging that he diverted $11.5 million in loans from his banks to shell corporations and ultimately to his own benefit.

The FDIC also accused the former chairman of the failed United American Bank here of lying under oath and falsifying financial records.

Mr. Butcher diverted the proceeds from a $2.7 million loan to a non- Butcher company and paid $917,350 on an $8 million loan he received from Mercantile National Bank of Dallas that was to be used to buy a bank in Chattanooga that was never purchased, the FDIC charged.

The suit, filed here last week, also said that part of the same loan was used to pay off an $811,550 loan at United American to Jesse Barr, a convicted bank felon who had been executive vice president in charge of lending at Union Planters National Bank in Memphis. Mr. Barr was a close friend of Mr. Butcher. The balance went into a bank account in the name of J.A. Barr, trustee, the suit added.

The suit was filed in federal bankruptcy court here as the FDIC sought to deny Mr. Butcher discharge of his debts. Through such a denial, creditors could continue to pursue his assets in efforts to recover what the creditors say are $181 million in debts.

Under bankruptcy law, a debtor is usually excused from repaying most of his debts in exchange for turning over all his property and cooperating with the creditors. If the debtor is found to have tried to defraud or hinder creditors, however, he can be denied his discharge. …

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