TUSCALOOSA, Ala.–The conservatorship of Alabama One Credit Union here has raised a number of new questions around the status of litigation the credit union had filed against high-ranking state officials, including the governor, especially since the action now means that the state regulator is both a defendant and, technically, a plaintiff in the lawsuit.
The development comes as the Alabama CU Administration is reporting it will not be naming an interim CEO and instead will be managing the institution itself after replacing a number of members of the management team.
As CUToday.info reported here, the Aug. 27 conservatorship is just the latest step in what has been a tumultuous and high-profile couple of years for the credit union, which has fought previous cease-and-desist orders from the Alabama Credit Union Administration and argued that the state regulator is only acting on behalf of powerful interests in state government who have personal financial reasons behind their actions.
The $598-million Alabama One CU, however, has been struggling to turn a profit. According to its June 5300 report filed with NCUA, it posted a $3.188-million loss for the second quarter, and a $1.947-million loss during the first quarter. It also reported $7.8-million in losses for 2014.
Some of the credit union’s losses, as well as the litigation it has filed, are related to a high-profile case here involving Danny Ray Butler, a former Tuscaloosa used car dealer and real estate developer who is currently serving a federal sentence for fraud, and who at one time had as much as $25 million in loans from the credit union. Butler has since also filed for bankruptcy.
The credit union lost an earlier lawsuit challenging an April cease-and-desist order from the ACUA.
In a statement to CUToday.info, John Dee Carruth, the CEO of Alabama One who has been removed as part of the order of conservatorship, said, “Yesterday's action is exactly what we feared would be the result of the illegal conspiracy that we alleged among the defendants in the lawsuit that Alabama One and I filed on June 29 of this year and it is unwarranted and unfair. The regulator has made a number of general and broad allegations but has refused to provide us with the sufficient details to respond to them. What is especially disturbing about the actions taken is that numerous good employees, and our long-term volunteers, who have all devoted their lives to the credit union, have been summarily discharged. Our safe and sound financial institution, which has been repeatedly praised by the state for our compliance mechanisms, has now been put in this position because of the alleged conspiracy among politically connected attorneys, public officials, and the very office charged with defending community institutions like ours. We will fight this decision with every ounce of our effort and expect to prevail.”
Regulator Tells Law Firm It's Dismissed
Jeven Sloan, an attorney with the law firm Loewinsohn Flegle Deary, LLP, which was representing the credit union and Carruth in its lawsuit against state officials who include, in addition to the governor, Alabama CU Administration Administrator Sarah Moore, said the state regulator on Aug. 27 informed the firm it had been dismissed as part of the conservatorship. Loewinsohn Flegle Dreary was not Alabama One’s corporate counsel and had been retained for the federal lawsuit only.
One day after the conservatorship, Sloan said he and the firm were still working to create better clarity around the status of the case. One key question: the status of ACUA Administrator Sarah Moore, who is a defendant being sued personally in the case, but now, as the result of the conservatorship, is also simultaneously a plaintiff.
In an e-mail to CUToday.info, Moore declined to comment on that aspect of the conservatorship.
Sloan did say that Carruth plans to continue to pursue the suit and that the former CEO and others who were dismissed also intend to challenge the conservatorship order.
Last week, Alabama One Credit Union added Alabama Governor Robert J. Bentley and his deputy legal advisor to a federal lawsuit it filed earlier this year. That suit alleges that public officials, enabled by the personal and direct participation of Gov. Bentley, conspired to attempt to coerce tens of millions of dollars in legal settlements from the credit union through improper and unwarranted regulatory sanctions after it received clean bills of health from state and federal regulators, according to a statement issued by the credit union. The full story on the lawsuit can be found here.
In addition to Carruth, the ACUA said that Alabama One COO Martie Patton, Business Lending Manager Tammy Ewing and two other employees that it declined to identify are “no longer” with the credit union. In addition, the board has also been dismissed. The ACUA is running the day-to-day operations of Alabama One; it declined to identify who is the acting CEO.
Additional reporting and details can be found here.