The Federal Savings and Loan Insurance Corp....

The Federal Savings and Loan Insurance Corp. has sued a congressman, his two sons and other former officials of a failed thrift, claiming they negligently allowed financier C. H. Butcher Jr. and his associates to make fraudulent loans. The lawsuit, filed in federal court in Knoxville, Tenn., seeks $15 million from Rep. John J. Duncan Jr. (R-Tenn.), his two sons and 13 other former officials of the Knox Federal Savings & Loan. The suit claims Duncan’s sons and others engaged in a 1981 conspiracy by which control of the thrift was surrendered to Butcher in exchange for eliminating one son’s debts to banks controlled by Butcher’s brother, Jake Butcher. The Butcher brothers’ banking empire failed in 1983 and Knox Federal was declared insolvent and closed a year later.