The SBA and Alabama One Credit Union were among the victims of check kiting and other fraudulent activities allegedly committed by Danny Ray Butler, a businessman and real estate developer.
According to a statement from U.S. Attorney Joyce White and FBI Special Agent in Charge Richard D. Schwein Jr., in Birmingham, Ala., Butler was recently charged with making false statements connected to schemes to defraud financial institutions and the SBA, among other charges.
In the 51-count indictment, Butler allegedly engaged in a check-kiting scheme that led to a $1.275 million loss at the $620 million Alabama One CU in Tuscaloosa, Ala., after defrauding the SBA of $1.76 million through a loan to build a grocery store.
In 2010, Butler contacted West Alabama Bank and Trust in for a $5 million loan to build the grocery store, according to the indictment. He received bank approval for half the amount of the loan with the SBA agreeing to finance 35% of the project and Butler providing the remaining 15%. However, after construction was completed, Butler defaulted on the bank and SBA loans.
It was discovered that Butler submitted false, forged and altered documents to get the SBA loan, according to the indictment.
In 2011 and 2012, Butler was allegedly involved in a check-kiting scheme that carefully timed deposits and checks between his grocery store account at West Alabama Bank and Trust and his Butler Wholesale account at Alabama One CU to artificially inflate the account balances, the indictment read.
Checks totaling approximately $45 million were deposited from one account to the other at the two financial institutions.
Comments from Alabama One CU and the SBA were not immediately available.
According to the indictment, Butler was also allegedly involved in another scheme involving securing loans from Next Gear Capital to buy used vehicles for his car lot. He allegedly represented cars that were part of the dealership’s inventory even though the cars were already sold.
Several people who had business relationships with Butler have also filed civil suits against him, the indictment read.