Under legal pressure, the Alabama Credit Union Administration onThursday lifted suspensions on three employees from the $608million Alabama One Credit Union as it continues to investigatemember claims of loan fraud.

Larry Morgan, administrator of the ACUA, told CU Timesan investigation is underway at the state-chartered Alabama One,but he emphasized the Tuscaloosa-based institution remainsopen.

Numerous members filed two civil lawsuits alleging Alabama Oneand some of its employees concocted a straw loan scheme thatdefrauded members and benefited Tuscaloosa businessman Danny RayButler, the ACUA said.

Butler was indicted last year on bank fraud charges, including acheck-kiting scheme that caused Alabama One to lose about $1.275million, according to court documents.

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He signed a plea agreement with federal prosecutors on Feb. 27stating he would provide information about others he claimed hadknowledge of his crimes, according to the U.S Attorney'sOffice.

One day later, the ACUA issued suspension notices to fourAlabama One employees: John Dee Carruth, manager/CEO, MartiePatton, COO, Tammy Ewing, business lending manager and Celina Hood,a teller.

The ACUA also appointed Doug Key, president/CEO of the $133million Mutual Savings Credit Union in Birmingham, as interim CEOat Alabama One on Feb. 28, Morgan said.

Three of the suspended employees — Carruth, Patton and Ewing —filed a civil lawsuit March 3 against the ACUA and Morgan, claimingthey were wrongfully suspended and seeking a temporary restrainingorder that would allow them to return to work, according to courtdocuments.

Hood, the fourth suspended employee, did not join the suitbecause she opted to file an appeal, said Birmingham attorney JoelDillard, who represents Hood.

The suspensions against Carruth, Patton and Ewing were liftedMarch 13 after a Montgomery judge told the ACUA to state a reasonfor the suspensions if they were to remain in place, according tothe civil lawsuit.

“The three suspensions involved in the civil lawsuit wererescinded while the ACUA's investigation continues and the fourthsuspension is under appeal,” said David Martin, a Montgomeryattorney who represented ACUA in the lawsuit filed by the threereinstated employees.

However, of the four employees, only Patton is free to return towork at the credit union, Martin said. Carruth, Hood and Ewingremain on administrative leave with full pay and benefits,according to the ACUA.

Read more: Members sue alleging straw loan scheme…

The credit union still faces separate civil lawsuits filed bynumerous members who allege that Alabama One encouraged them totake out loans in their name and then loan the money to Butler,according to court documents.

One civil suit, filed by six Alabama One members, alleges forgedsignatures were used to funnel money to Butler.

“Our clients are the innocent victims of a serious financialfraud scheme and we expect them to prevail in the pendinglitigation,” said Tuscaloosa attorney Jay Smyth, whose firm LewisSmyth Winter Ford LLC is representing the six members.

“Fortunately, it appears from the facts that Alabama One is notan impaired credit union; it is simply a credit union which has hadimpaired leadership,” Smyth said in a written statement to CUTimes. “The State of Alabama is in the process of correctingthat problem.”

Smyth and his clients claim Alabama One employees beganapproaching wealthy members to provide personal loans to Butlerafter he had already borrowed more than $20 million from the creditunion, according to the civil lawsuit.

Federal and state credit union regulators began questioning thelarge amount of loans made to Butler several years ago becauseoverexposure to one borrower could put the credit union at risk,Smyth said.

To reduce Butler's loan balance with the credit union, AlabamaOne employees allegedly encouraged the members to take out personalloans, which Butler allegedly agreed to repay at a higher interestrate.

Butler eventually quit paying, which caused the members todefault on the loans. Alabama One foreclosed on the plaintiffs'property, the court documents said.