Jake Butcher, disgraced East Tennessee banking kingpin, dies

Jake Butcher, who helped bring the World's Fair to Knoxville and then left for prison in disgrace after the collapse of the family banking empire he helped build, died Wednesday. He was 81.

Butcher had spent the past six months struggling with cancer, according to his family.

"He was always a visionary and a big thinker," said Karl Schledwitz, a Memphis attorney who helped manage Butcher's unsuccessful 1978 campaign for governor and plans to speak at his funeral next week. "As far as his legacy, just look at the Knoxville skyline."

From carnival to collapse

Family members hope that's the memory that prevails.

"His legacy to us and his countless friends that loved him is much larger than the news bits of 30 years ago," the family said in a statement. "We adored him."

But for the average East Tennessee native, the Butcher name still brings to mind the $1.5 billion bank fraud scheme that cost some investors their life savings and defined a decade locally.

"Jake Butcher certainly wasn't all bad," said John Gill, a former U.S. attorney for East Tennessee who helped send Butcher to prison for federal bank fraud. "He did a lot of good things. But overall, the bad did more harm than the good things did good."

Brothers in banking

Butcher and his brother, C.H. Butcher Jr., grew up on a farm in neighboring Union County, the sons of the county's only banker. Together they spun the business started by their father into a billion-dollar web of banks, loan companies and dummy corporations -- one that federal authorities later determined to be a high-stakes shell game that preyed on unsuspecting investors.

Friends recall Jake Butcher as a born salesman and politician, a man who never saw a hand he wouldn't shake or came up with a plan he couldn't pitch.

"Jake was the front man, and C.H. was the back-room man," recalled Jesse Barr, the brothers' longtime friend, confidant and adviser, who served prison time for the banking scheme as well. "Jake could meet you today, not having seen you for 20 years, and still remember your name."

More:The world came to Knoxville in May 1982

The Butcher brothers' acquisitions began with the purchase of a small bank in Lake City (now Rocky Top) in 1968. Three years later, they applied for Knoxville's second new bank charter since the Great Depression. City & County Bank opened for business in a trailer in Powell, with branches springing up in the years that followed.

In 1975, the brothers pulled together $16 million in loans for Jake to buy a third of the stock in the city's Hamilton Bank, which he renamed the United American Bank of Knoxville.

'We did it'

Along the way, Butcher cultivated a persona as a hillbilly boy turned self-made millionaire, with big dreams for himself and others. He ran twice for governor as a Democrat. He leaned on his personal friend, President Jimmy Carter, to help bring the World's Fair to East Tennessee in 1982 and presided over the building of Knoxville's tallest skyscraper, the downtown headquarters of the now-defunct United American Bank (now First Tennessee Bank Plaza).

His backing of the fair, initially conceived as an international energy exposition, helped secure improvements to Knoxville's interstate and renewed interest in downtown property. At least two other landmarks bear witness to Butcher's legacy -- the iconic Sunsphere at World's Fair Park and Whirlwind, the abandoned 25,000-square-foot mansion off old Emory Road in Anderson County that he once made his home.

"The World's Fair would not have come here if not for Jake," Barr said. "People said we couldn't do it, and we did it."

A Valentine's Day crash

As soon as the fair closed in October 1982, agents of the Federal Deposit Insurance Corp. descended on Knoxville. Records revealed UAB's finances depended on one bank loaning to another to cover stock in a third in a tangle of financial incest that took 180 FDIC agents -- about 10 percent of the agency's workforce at the time -- to unravel.

"They could have made a fortune just playing it straight, but that wasn't enough for them," said Gill, the former federal prosecutor. "They took advantage of the situation to enrich themselves and their friends."

Friends say the brothers took on too much debt as they bought up one bank after another, giddy with success, and handed out too many unsecured loans, including a $30 million handout to help bankroll the World's Fair.

"Jake thought he could build this conglomerate that was highly leveraged, and he just couldn't do it," said Bill Ramsey, a Nashville attorney who represented Butcher after the collapse. "The debts he saddled himself with, he just couldn't handle."

On Valentine's Day 1983, agents padlocked the UAB doors.

Bankruptcy and prison

Advance notice afforded by previous audits had always given the brothers time to shuffle enough paper between banks to lend the illusion of solvency. With the assets frozen, bank after bank failed with no cash to back up the worthless loans.

 Eight banks failed in all, with deposits of about $1.5 billion total.

Bank depositors recovered their money through the FDIC. But those federal guarantees didn't cover customers of the Butcher-owned Southern Industrial Banking Corp., which started as a loan company.

SIBC offered not a single penny of FDIC insurance to its 6,300 depositors, some of whom lost their life savings.

The brothers ultimately pleaded guilty to federal charges of conspiracy and bank fraud, with each serving a little less than seven years in prison before release on parole.

Ramsey, who once watched Jake Butcher face a crowd of angry investors with a smile, still remembers his client as the most popular man in the federal prison.

"Somehow he always kept a good attitude," Ramsey said. "He never lost his temper. He had to know what he was doing when he did it. But I think his dreams were just too big."

C.H. Butcher died in 2002 after falling down some stairs at his Georgia home. Jake Butcher spent the years after his release in various ventures from selling cars to real estate in the Atlanta area.

"Although he had regrets in his life, he remained a champion of positivity, optimism and generosity," the family wrote.