December 23, 2013
By Bob Coleman
Editor, Coleman Report
Danny Ray owned a couple of businesses in Tuscaloosa and he wanted to use an SBA 504 loan for the construction of a grocery store in Fosters, Alabama.
In early 2010, Butler borrowrf approximately $5 million from West Alabama Bank and Trust to build the store.
Almost immediately after construction was complete, Butler defaulted on the loans. SBA suffered a loss of over $1.7 million.
Butler was required to inject 15% of the project, $737,000.
Unfortunately says the DOJ, the borrower submitted falsified copies of ten canceled checks as proof for $565,000 of the equity injection.
“According to the Indictment, between March 2010 and October 2012, Butler devised and intended to devise a scheme and artifice to defraud SBA and to obtain money and property belonging to SBA by means of materially false and fraudulent pretenses, representations, and promises. It was a part of the scheme and artifice that Butler would and did submit false, forged, and altered documents to SBA in an effort to obtain an SBA 504 loan and receive over $1.7 million from SBA.
“Those false documents and representations included false, forged, and altered proposals, quotes, estimates, and bids submitted to SBA as evidence of the project’s cost, false, forged, and altered checks submitted to SBA as evidence of Butler’s cash injection, and false certifications on loan application forms that all information in the applications was true and complete.
“For instance, one count of the Indictment alleges that Butler submitted a construction company’s cost proposal for the grocery store project that Butler is charged with altering to increase the proposed cost from $2.3 million to $4.2 million. Other counts detail further false documents that Butler submitted to SBA.”
It gets better.
“The indictment also contains multiple bank fraud counts charging Butler with a check-kiting scheme in 2011 and 2012 in which he carefully timed deposits and checks between his Fosters Groceries account at West Alabama Bank and Trust and his Butler Wholesale account at Alabama One Credit Union to artificially inflate the account balances.
“Hundreds of checks, totaling about $45 million, were deposited from one account to the other at the two financial institutions, according to the indictment. When West Alabama bank discovered the check-kiting scheme in February 2012 and refused to honor a number of Fosters Groceries’ checks deposited into Butler’s Alabama One Credit Union account, the credit union lost about $1.275 million, according to the indictment.
“The third fraud scheme alleged in the indictment involves Butler’s misrepresentations to the company that provided financing for his inventory at Butler Wholesale. Butler received loans from Next Gear Capital to buy inventory for his car lot. Each loan from Next Gear was secured by a specific car, and Next Gear conducted monthly inspections of the dealership’s inventory. According to the indictment, Butler employed various schemes to defraud Next Gear Capital in order to continue receiving loans. His fraudulent representations included representing that cars were part of the dealership’s inventory even though the cars had already had been sold, and lying to representatives of Next Gear when they conducted inspections of his inventory. Butler’s scheme caused Next Gear Capital a loss of at least $50,000.”
Billy Ray faces hundreds of years in jail and forfeiture of millions of dollars.