Wesley T. Butler , developer of the controversial Captian's Cove vacation home project on Virginia's Eastern Shore, was indicted yesterday in connection with a scheme directing the development's lot owners to send him more than $300,000 in mortgage payments that actually were meant for the development company.
A federal grand jury in Alexandria indicted Butler, who was arrested last month at his Fort Lauderdale Fla., home, on for counts of mail fraud, one count of wire fraud and one count of transportation of stolen corporation funds in interstate and foreign commerce.
The indictment alleged that Butler, 47, deposited the $300,000 in a Swiss bank account.
The indictment charged that Butler, former president of First Charter Land Corp. of Falls Church, was removed from his position by the company's shareholders last Aug. 31. Richard Nageotte, an attorney for First Charter, said Butler's removal was prompted by "certain irregularities found in the 1976 audited financial statement" of the company.
But the indictment alleged that Butler took with him some plost owners' deeds and contracts and transfered them from First Charter to Gateway Consultants Co., Inc., which was controlled by Frank Carcaise, a friend of Butler's in Florida.
Butler then sent letters to the Captain's Cove lot owners directing them to make their mortgage payments to the Gateway firm, the indictment charged. The money was in turn handed over to Butler who deposited it in the Swiss bank account, according to William B. Cummings, the U.S. attorney in Alexandria.
In addition, Butler sold Captain's Cove lots belonging to First Chapter and had the mortgage payments sent through the Gateway firm to himself, according to the indictment.
Butler is also charged with drawing $200,000 from company funds for his own use, the alleged interstate transportation of stolen corporation funds.
Butler could not be reached for comment.
First Charter said in a prepared statement that alleged losses it sustained co-owner B. Calvin Burns "borrowed nearly one quarter of a million dollars, pledging (his) home and farm as security," to insure the company's solvency.
Burns and First Charter were each indicted on 29 charges of illegal dredging of wetlands to create canal-front home lots at Captain's Cove in 1970. Two years later, Burns pleaded guilty to one count and the company four. All the other charges were dismissed.
The dredging and filling of wetlands at the 1,865-acre project in Chincoteague, Va., spawned a controversy between the lot owners and environmentalists that was finally settled last month bu the Armed Corps of Engineers.
The Corps said that for environmental reasons First Charter could not complete existing canals, construct additional canals or dredge access channels to existing or proposed canals. The canals would connect 625 lot owners to rhe Chincoteague Bay and private slips for pleasure boats.
The engineers also said the company and lot owners cannot fill in wetlands on the project without the Corp's permission, meaning that it is questionale whether about 600 of the 4,500 lot owners will be able to build homes on their property.
The lot owners, many of them from the Washington area, favored constructing the canals so they could protect their investments of between $7,000 and $15,000 on their lots. Many of the owners planned to byild summer vacation or retirement homes at the project, which is planned to include a golf course, a sailing marina and acres of woodlands.
Environmentalists said the project is poorly planned and potentiall dangerous to the shallow Chincoteague Bay and its surrounding salt water marshlands.
Environmentalists said the pollution in the bay has con tributed to problems with the production of Chincoteague oysters and the decline of other seafoods. They have said that dredging to create canals would further degrade the bay.
The pine-tree covered development is located in the northeastern-most corner of Virginia about 120 miles southeast of Washington.