Danny Ray Butler, who is currently serving a sentence fordefrauding the Small Business Administration and check kitingagainst the $613 million Alabama One Credit Union in Tuscaloosa,Ala., came face-to-face with credit union lawyers and executives onMay 22 in what legal observers at the meeting described as anintense hearing.

Butler pleaded guilty to the fraud in February 2014 and beganserving a 36-month sentence in September 2014. The court convenedthe hearing at the federal prison facility in Talladega, Ala.

Alabama One hadasked for a prison hearing in order to show Butler some ofthe documents and signatures that he claimed during a previousbankruptcy hearing never to have signed. However, observersfrom law firms who have an interest in the bankruptcy proceedingbut no direct stake in it observed the strategy may have backfiredon the cooperative.

Lawyers comprised the majority of the people at the hearing, butAlabama One CEO JohnDee Carruth attended, as did Butler's fiancée PaigeHoward.

Butler's responses to the questions were direct, clear andcarried the ring of truth, reported one lawyer who had beenskeptical of Butler before the hearing. Further, rather thanintimidate him, Carruth's presence in the room appeared to energizeButler. At many points, observers reported, Butler looked directlyat Carruth as he answered a lawyer's question and at several pointsbroke off to challenge Carruth directly.

During the course of the hearing, Butler identified more than 25documents that he had either never seen before, or that carriedsignatures that were supposedly his, which he said he did notrecognize and had never signed, observers said.

Observers reported that Butler had been particularly agitatedwhen he alleged Alabama One had includedhis brother Andy's house, which had been unencumbered, ascollateral in a fraudulent loan. Andy Butler, Danny Butler'syoungest brother, has a mental impairment, and Butler's parentsleft the home to Butler and his two brothers, allowing them toprovide Andy a place to live.

“'You know that was wrong,'” sources quoted Butler as saying toCarruth. “'You know I would have never done anything like that withAndy's house.'”

None of the sources who spoke with CU Times would do soon the record, citing the upcoming transcript of the hearing as amore complete source. John Dee Carruth has not yet responded toinquiries for comment on the day's hearing, but Alabama One's MikeHall, who is with the Birmingham, Ala. law firm of Burr Forman,remained optimistic.

“Alabama One Credit Union is confident that the transcript ofMr. Butler's testimony taken at the Talladega prison on Friday willprove helpful in the upcoming hearing to show Butler's forgery andfraudulent transfer claims have no merit,” Hall wrote in an email.“The hearing is scheduled for June 12th.”

An official transcript of the proceeding has not yet becomeavailable.