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" Bankers who hire money hungry

g e n iu se s sh o u ld n o t a lw a y s
e x p re ss su rp rise a n d a m a ze m e n t
w h e n so m e o f th e m tu rn a ro u n d
w ith b rillia n t, cre a tiv e , and
ille g a l m e a n s o f m a k in g m o n e y . “

L in d a D a v ie s
The Butcher Brothers and
the United American Bank
Group Members
• Abdul Rehman
• Arif Bashir
• Chaudary Waqar
• Jasim Hussain Azam
• Hassaan Wasim
• Waqas Saleem

• Introduction
• Link to khilafah reading

• Born in Dotson's Creek in Union County in
• Son of Cecil H. Butcher Sr.
– a general store owner and organizer and
president of the Union County Bank of
• Attended the University of Tennessee
and Hiwassee College and served in the
U.S. Marine Corps.
• Founder of Bull Run Oil Company, an
Amoco distributorship, and engaged in
commercial farming.
• On New Year's Eve 1961 he met up-and-
Bro intro
• Cecil H. Butcher Jr
Involvement in banking
• Work in his father's bank named
• In 1968 he and his younger brother
Cecil H. Butcher Jr. began acquiring
banks, borrowing large amounts of
capital to finance their purchases of
bank stock
• By 1974 the brothers controlled eight
banks in Tennessee along with
other business properties
• used borrowed capital to purchase
stock in Hamilton National Bank,
Knoxville's largest banking institution,
with 39 percent of the city's total
banking reserves.
– changed the bank's name to United
American Bank.
• By 1982 the United American Bank
accounted for over half of the
business loans in Knoxville.
• In that year Jake Butcher declared a net
‘Politics’ in Politics
• After failing to win the Democratic
Party's gubernatorial nomination in
1974, he won the nomination in 1978,
only to lose in the general election to
Republican Lamar Alexander.
• Butcher supported Knoxville Mayor
Randy Tyree, who defeated State
Senator Anna Belle Clement O'Brien
for the Democratic nomination.
• Interestingly, the Knoxville Journal
reported that Jake's brother C.H.
supported Tyree's Republican
opponent, sitting Governor Lamar
Alexander. Governor Alexander won
The Alleged Fraudulent
• According to the government, Schledwitz was a
"player" or a "nominee" for the Butcher brothers in
a scheme based on numerous fraudulent bank
loans. Schledwitz allegedly agreed to receive loans
from the Butcher-controlled banks with no intention
of ever repaying them. Instead, these loan proceeds
were allegedly used for a variety of improper
purposes to benefit the Butcher brothers personally,
such as for manipulation of the Butchers' bank stock
and satisfaction of the Butchers' personal debts.
Additionally, the government contended that the
loan proceeds were used to promote an alliance
between the Butcher brothers and then-
Congressman Harold E. Ford, who was Tennessee's
most powerful African-American politician at the
time. In return for Schledwitz's role in the scheme,
the Butchers provided Schledwitz with business for
his law practice and allowed him to keep some of
the loan proceeds for his own use.
The Alleged Fraudulent
• In total, the Butcher-controlled banks loaned
more than $1.5 million in Schledwitz's name.
Many of these loans were unsecured, and
were made to Schledwitz at a time that he did
not have the personal income to justify such
loans. For example, in 1980, due to his loans
from the Butcher banks, Schledwitz was billed
$89,709.69 in interest, while he reported only
$28,385 in total income. J.A. at 200. In 1981,
the total interest due on his loans was
$122,647.91, whereas his total income was
only $31,994. Id. at 200. In 1982, his interest
obligations were $172,957,57, but his total
income was $52,163. Id. at 203. In fact, the
1982 interest obligation alone exceeded
Schledwitz's total income for the combined
years of 1978 to 1982.
The Investigation and the Ford
• An investigation by federal regulators
following the collapse of the
Butcher banks revealed that
Schledwitz owed $1.5 million to the
Federal Deposit Insurance
Corporation ("FDIC"); and $485,000
to the Southern Industrial Banking
Corporation ("SBIC"), an uninsured
state-regulated thrift. Schledwitz
eventually settled those obligations
for $90,000 and $30,000,
Both brothers behind bars
• In 1983, the Butchers' banking empire
collapsed. Charges were brought against
each of the Butcher brothers. For his part
in the scheme, Jake Butcher pled guilty to
bank fraud in 1984 and was sentenced to
20 years in prison. He served six years
and eight months at a federal prison, and
was paroled in 1992. After being acquitted
of related charges.
• C.H. Butcher pled guilty to five counts of
bankruptcy fraud in April 1987. He agreed
to cooperate with federal authorities in
their cases related to the collapse of the
Butcher banking empire, and eventually
served seven years in prison.
The Greeneville Trial and Direct
• January 21, 1992. Schledwitz was
then charged with eight counts of
mail fraud, in violation of 18 U.S.C.
1341 and 1342, for bilking the
Butcher banks and defrauding the
FDIC and SBIC in their attempts to
recoup the lost loans
Out of eight, three counts
1.that Schledwitz allegedly used the loans to
assist Jake Butcher's manipulation of UAB
stock in banks controlled by the Butchers
2.that Schledwitz allegedly borrowed $40,000
from the City and County Bank of Roane
County (which was controlled by the
Butchers) to repay C.H. Butcher's Las
Vegas gambling debts
3.that Schledwitz borrowed $115,000 from the
City and County Bank of Anderson
County (which was also controlled by the
Butchers) to promote the Butchers'
political interests in West Tennessee.
Bank Failures and
Assistance to Open Banks
• There were 45 bank failures and 3 assisted
mergers of mutual savings banks, a post-
Depression record. That number included
several large institutions, which resulted
in a substantial increase in the volume of
failed bank assets held by the FDIC, as
• In order to handle those assets more
efficiently, the FDIC decentralized its
liquidation operations. It opened and
staffed five new area liquidation offices,
with each office responsible for ten states.
The offices were located in Atlanta,
Chicago, Dallas, and San Francisco, (the
1982 - 1983: FDIC at a Glance ($ in
  12/31/82 12/31/83 Percent Change

Number of Bank Failures * 34 45 32.35%
Assistance to Open Banks 8 3 -62.50%
Total Failed and Assisted Banks 42 48 14.29%
Total Assets of Failed and Assisted  $11,722.6 $7,191.7 -38.65%
Losses on Failed and Assisted Banks $1,168.6 $1,407.0 20.43%
Losses as a Percent of Total Assets 9.97% 19.56% 96.29%
Assets in Liquidation $2,155.1 * $4,259.6 97.65%
FDIC Staffing 3,504 3,846 9.76%
Number of Problem Banks 369 642 73.98%
Deposit Insurance Fund Balance $13,770.9 $15,429.1 12.04%
Deposit Insurance Fund Balance as a  1.21% 1.22% 0.83%
Percent of Insured Deposits

Source: FDIC, 1983 Annual Report and Reports from FDIC Division of Finance and Division of Research
• Two lawyers and an accountant were
also charged in the indictment
– Karl A. Schledwitz, a Memphis lawyer, is
described in the indictment as a close
associate of the Butchers who helped
them make payments to Mr. Ford.
– Douglas R. Beaty, a lawyer, is charged
with creating a company, Tenn-Ford
Inc., to receive and distribute
concealed funds to Mr. Ford. The
indictment said the funds came from a
financial institution, the Southern
Industrial Banking Corporation,
controlled by C. H. Butcher Jr. and a /1987/04
close /25/business/tennessee
associate, David -congressman
a .html
certified public accountant.
World’s Fair
• Name given to various large public
exhibitions held since the mid-19th
century. They are the third largest event
in the world in terms of economic and
cultural impact
• Jake Butcher served as the driving force
behind bringing the fair to Tennessee.
Many Knoxvillians called it "Jake's Fair.“
• 1982 Fair was widely considered a success
as it brought in more than 11 million
people over its six-month run.
• The World's Fair site is still in use today as a
municipal park in downtown Knoxville.
Debacle of UAB
• U.A.B. was on the "problem list" of the
Federal Deposit Insurance Corporation
throughout 1982.
– AS butcher brothers had issued numerous
fraudulent bank loans
• In November more than 200 federal bank
examiners swept into all five of Butcher's
banks, as well as 24 smaller banks
controlled by his brother C.H.
• According to FDIC regional counsel in
– We wanted to see how much bad paper was
really there. The situation at U.A.B. was
very grave indeed.
– The FDIC concluded that $90 million in loans
• U.A.B. announced a loss of $2.3 million in
January 1982
• U.A.B. 's board refused the FDIC demands of
reporting high losses.
• Through an external audit the bank was
found in solvent.
• On its last day of business, between $17
million and $25 million in deposits were
withdrawn in a run on the U.A.B.
• The other 28 banks controlled by the
brothers were judged to be solvent.
Nevertheless, worried customers have
with drawn several million dollars from
C.H.'s Southern Industrial Banking Corp
Acquisitions of UAB
Linking to khilafah reading
• Thanks to the acquisition, U.A.B.'s 135,000
depositors will not lose a penny. First
Tennessee will also absorb up to $86.5
million in uncollectible U.A.B. loans. Any
more than that will be covered by the
FDIC, which believes the total may reach
$160 million. The biggest loser is Jake
Butcher; he owned $15 million in U.A.B.
stock that is now worthless. The
flamboyant entrepreneur, who five years
ago was Tennessee's Democratic
candidate for Governor, and who was the
driving force behind last year's Knoxville
World's Fair, has clearly lost more than a
Wiki conclusion
• Also in 1982, there were rumors about Butcher's
banking practices. Knoxville federal and state bank
investigators had long suspected that Butcher was
engaged in unlawful banking practices. On
1 November 1982, 180 federal bank regulators from
the Federal Deposit Insurance Corporation
simultaneously raided all of the Butcher brothers'
29 bank branches and offices, thereby preventing
transfers of funds to cover their tracks.[2] Bank
records ultimately led investigators on a paper trail
of illegal loans, forged documents and various other
forms of fraud. The United American Bank collapsed
on 14 February 1983. It was the fourth-largest bank
failure in US history up to that time.[2] [3] Several
other Butcher-controlled banks, such as the
Southern Industrial Banking Corporation, also
became insolvent. Later that year, it was learned
that Butcher was also insolvent; his assets were
listed at $11.9 million and his liabilities at $32.5
Enclyclo conclusion
• Federal bank examiners had long suspected that the
Butcher brothers' three-billion-dollar empire was largely
a paper empire operating under improper management.
On November 1, 1982, 180 FDIC investigators descended
on all the Butcher banks simultaneously, thus preventing
the transfer of assets from one bank to shore up another.
Ultimately they found that bank acquisitions had been
made through loans from Butcher-owned banks and
uncovered a pyramid of unsecured loans, forged loan
documents, and bank fraud. On February 14, 1983,
United American Bank, the capstone of Jake Butcher's
financial empire, failed; in August 1983, he was
involuntarily declared bankrupt with listed assets of
$11.9 million and liabilities of $32.5 million. In May 1985
he pled guilty to federal charges of bank fraud and was
sentenced to twenty years in prison. He was released on
parole in 1992, after having served almost seven years
of his sentence. Butcher accepted employment at a
Toyota automobile distributorship and lives in quiet
obscurity--his fortune of cash, real estate, automobiles,
houseboats, and property having been swept away in a
series of public auctions.
FDIC report
• The failure of the United American Bank (UAB), Knoxville, Tennessee on
February 15, initially made headlines because its owner, Jake Butcher, was
the principal organizer and promoter of the 1982 World’s Fair and twice was
a candidate for governor of the State of Tennessee. The deposit liabilities
and assets of UAB were transferred to First Tennessee Bank of Knoxville, a
subsidiary of First Tennessee Corporation, Tennessee’s largest bank holding
company. The transaction was noteworthy because it marked the first use of
the extraordinary acquisition provisions of the Garn-St Germain Depository
Institutions Act of 1982. Before the year was out, seven more Tennessee
banks controlled by Jake Butcher or his brother, C.H. Butcher, Jr., failed.
There were almost daily reports of an excessive volume of classified loans,
loans to insiders, loans far from the bank’s trade area, and evidence of
inaccurate or deliberately misleading accounting.
The Butcher organization, including approximately 40 loosely affiliated
banks and savings and loan associations, operated in two FDIC regions and
three Federal Reserve Districts. A total of seven different regulatory
agencies were responsible for supervising the institutions, making the
detection of problems within the combined organization extremely difficult.
The insolvency of United American Bank and, subsequently, of other
Butcher-related institutions, was discovered only because the FDIC
undertook a simultaneous examination of the major Butcher-affiliated banks,
committing to the task nearly 10 percent of its field workforce for almost
three months. At the end of 1983, the FDIC estimated that its losses in
connection with the eight failed Butcher banks would amount to
approximately $382.6 million.