TUSCALOOSA, Ala.–While Alabama One Credit Union has been released from conservatorship by the state regulator, it remains the subject of several lawsuits filed by its former president and board members, as well as a new complaint.
According to the Birmingham Business Journal, a new suit has been filed against Cumis Insurance Society that alleges actions that led to the conservatorship by the Alabama Credit Union Administration led to a significant decline in the credit union’s assets.
That latest suit, like so much involving Alabama One, has its foundation in loans that were made to local businessman Danny Ray Butler, including the sale of used cars through his company, Butler Wholesale Inc., the Birmingham Business Journal reported. Butler was involved in numerous loans at the credit union that eventually went sour due to fraud for which he was eventually convicted. As the Birmingham Business Journal noted, the new lawsuit argues that the credit union’s former management engaged in creating "straw loans" to borrowers for the benefit of other member-owners, who otherwise would not have been permitted to receive financing, as well as management's participation in a check-kiting scheme that eventually caused Alabama One to lose more than $1.25 million.
"The complaint alleges that a group of officers literally cost the credit union millions of dollars through dishonest acts and conflicts of interests," Andy Campbell, partner in the law firm Campbell Guin, told the Birmingham Business Journal. "We intend to recover those losses from the insurance company that insured the client against those wrongful acts."
According to the complaint, "Cumis has an obligation to diligently investigate the facts, fairly evaluate the claim, and act promptly and reasonably," and "Alabama One is legally entitled to recover under the bond for the losses it suffered."
The Birmingham Business Journal reported the complaint further states, "Cumis has breached its covenant of good faith by, among other things, (1) refusing to cover the losses; (2) demanding that Alabama One violate applicable statutes by producing protected regulatory information; and (3) failing to act promptly and reasonably to investigate the claim."