Jake Butcher Pleads Guilty to Bank-Fraud Charges

Jake Butcher, the entrepreneur whose glittering financial empire crumbled in one of the worst bank crashes in U.S. history, pleaded guilty to bank fraud Monday and agreed to plead guilty to additional charges in coming weeks.

The plea-bargaining agreement culminated a two-year federal investigation of Butcher-related bank failures that left the Federal Deposit Insurance Corp. holding $699 million in uncollectable loans.

Butcher entered guilty pleas to eight counts of bank fraud, and he told U.S. District Judge William K. Thomas of plans to enter guilty pleas in Memphis, Tenn., and London, Ky., on bank-fraud charges. He also will return to Knoxville to plead guilty to four counts of tax evasion.

Butcher, 48, accepted the agreement, in which he admitted defrauding his banks out of $40.8 million. As each paragraph of the plea-bargain agreement was read, Butcher rose in court to say “Yes sir,” when the judge asked him if the charges were correct.

Butcher, who rose from proprietor of a tiny gasoline distributorship to become a powerful two-time gubernatorial candidate and chief organizer of Knoxville’s 1982 World’s Fair, pleaded guilty in U.S. District Court to 16 counts of bank fraud and four counts of tax evasion.

In return for the pleas, all other charges will be dropped.

U.S. Atty. John W. Gill said the government intends to seek a maximum sentence of 20 years. If he receives the maximum sentence, Butcher would have to serve a minimum of 6 years.

By pleading guilty, Butcher admitted to funneling millions of dollars into his own pockets in the months before his $1.5-billion financial empire collapsed. He admitted having millions of dollars in loans drawn up in the names of fictitious companies, with the proceeds going to businesses he secretly owned. In some cases, loans were made to legitimate businesses without their knowledge and the proceeds were diverted to Butcher’s personal use.

The Feb. 14, 1983, failure of Butcher’s United American Bank of Knoxville was the third-largest bank failure since the Depression.