TUSCALOOSA, Ala.–A lawsuit filed by Alabama One Credit Union against CUMIS Insurance Society has been settled, according to the parties.
As CUToday.info reported here, the suit filed against Cumis Insurance Society alleges actions that led to the conservatorship by the Alabama Credit Union Administration led to a significant decline in the credit union’s assets. The credit union sued for loan losses suffered under a Fidelity Bond issued by the insurance company, which recently settled the lawsuit for $2.25 million, according to a news release. That same release said a credit union loan officer willfully violated credit union policy and participated in dishonest acts regarding several loans.
The released statement noted that under the fidelity bond, the credit union was insured by CUMIS for any dishonest acts and willful violations of policies that led to those losses, but the company failed to pay on Alabama One’s claim.
The lawsuit is part of a long-running saga at the credit union, whose former management team filed suit against the regulator after it was removed. Allegations of illegal and unethical activities by a former governor related to the conservatorship were also made, with much of the trouble traced to loans made to a local businessman, Danny Ray Butler.
In its released statement, the credit union said that during 2008 and 2009 AOCU’s Tammy Ewing originated and administered and, along with other officers, approved loans to Fosters Water Treatment LLC, an Alabama company owned by Butler that had a maximum value of less than $2 million at the time.
Butler borrowed more than $7 million in loans to finance the construction of the water treatment plant, but was later convicted of using the majority of the proceeds for numerous personal expenditures, including the purchase of a beach-front condominium.