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Experts Offer Business Fraud Red Flags

Industry experts say due diligence can help credit unions avoid losses like those suffered by the $620 million Alabama One Credit Union in Tuscaloosa, Ala., and the Small Business Administration, which were defrauded of more than $3 million by a businessman.

By Michelle A. Samaad | Updated on November 06, 2013

Industry experts say due diligence can help credit unions avoid losses like those suffered by the $620 million Alabama One Credit Union in Tuscaloosa, Ala., and the Small Business Administration, which were defrauded of more than $3 million by a businessman.

Danny Ray Butler allegedly engaged in a check-kiting scheme that led to a $1.275 million loss at Alabama One. He also allegedly defrauded the SBA of $1.76 million through a loan to build a grocery store, according to a 51-count indictment and statements made Oct. 4 by U.S. Attorney Joyce White and FBI Special Agent in Charge Richard D. Schwein Jr., in Birmingham, Ala.

Butler was likely able to get away with the alleged check kiting scheme because he was well known in the community and had probably built a level of trust with the financial institutions involved, said Kent Moon, president/CEO of Member Business Lending LLC, a West Jordan-based CUSO.

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