In the spring of 1871, soon after taking office for his third term, eleven articles of impeachment were brought against him. The first charged him with misuse of some $16,000 from the state school fund. Butler had allegedly made personal use of this money to purchase lots in the new city of Lincoln. He was suspended from office by the Supreme Court and subsequently tried by the State Senate. He was convicted on the first charge, although the remaining ten were dropped. The Supreme Court then removed him from office on June 2, 1871.