TUSCALOOSA, Ala.–The Alabama Credit Union Administration has issued a strong rebuke to lawsuits filed against it by former employees and board members who have alleged the regulator was misguided and mistaken when it placed it into conservatorship.
In a filing with the Tuscaloosa County Circuit Court, the ACUA provided documents showing Alabama One Credit Union was steadily losing money and members over the four months prior to being taken over by the state in August.
The regulator reported that from April 1 through July 31 there had been a deposit outflow of more than $18 million, or about $1 million a week at the $597-million CU. While an outflow of deposits is not necessarily a negative, the ACUA response to the lawsuits also pointed to a delinquency ratio of 15.7% during the first six months of 2015.
The Alabama Credit Union Administration also pointed to peer group data, saying Alabama One performed worse than 99% of peer group CUs during the first two quarters of 2015, when it lost $3.1 million.
"The assertion that Alabama One was in 'sound financial condition' at the time of the conservatorship demonstrates Petitioners' departure from reality or failure to appreciate the actual financial condition of their own credit union," the state said in its filing in response to the two lawsuits it is facing.
One of the biggest indications of the CU’s troubled financial state, according to the regulator’s response: Alabama One's non-performing assets represented 46% of the credit union's net worth as of June 30, 2015. To put that into perspective: the ACUA told the court that figure is more than six times greater than the average non-performing assets of Alabama’s other nine largest credit unions.
As CUToday.info reported earlier, one lawsuit has been filed by 11 former employees and board members who were ousted as part of the conservatorship action, while another has been filed by its former CEO, John Dee Carruth. In both suits the former executives and board members are demanding they be returned to their former positions.
Another lawsuit that made a number of significant allegations against powerful people in Alabama, including the governor, which was filed by the credit union itself against the ACUA, is essentially at a dead-end, as the conservatorship means the regulator is both the defendant and the plaintiff in the action. The ACUA, which is managing the credit union itself, has previously informed outside counsel in that case that it will no longer be retained. In that case Alabama One alleged that government officials pressured the regulator to settle claims against the credit union that would have helped those individuals or parties connected to those individuals recover funds that were lost as part of development deal that had soured.
Referring to statement’s made in former CEO Carruth’s lawsuit, the ACUA responded, "Contrary to Carruth's assertions, Alabama One was not 'strong' at the time of conservatorship. Carruth's insistence that Alabama One was 'strong' only demonstrates his failure to appreciate the actual condition of his own credit union.
“ACUA has conserved the credit union to protect its assets from further dissipation due to the incompetence of Carruth and other terminated officers and directors and to protect the interests of its members."
AL.com reported that it received a statement from Carruth in response to the ACUA filing that read: "The filings today exemplify a desperate attempt by the state to justify their illegal and improper seizure of Alabama One and removal of the very management team and board that led the credit union through its most prosperous years. To argue that a credit union with more than $50 million in reserves and a capital ratio of nearly 10% is not a safe and sound financial institution will simply not hold up under close review. The ACUA has spent over one million dollars in taxpayer money pursuing its private agenda against Alabama One. The ACUA refuses to acknowledge that a significant portion of the losses incurred by the credit union this year are the direct result of pointless expenditures and actions mandated by the ACUA, itself, who disregarded its own previous reviews. These unnecessary and redundant directives required Alabama One to expend millions of dollars on new reviews so that the ACUA could try to reach a specific conclusion despite their inability to do so previously. As we are now learning, the full story about what has been happening in Montgomery has yet to be told."