TUSCALOOSA, Ala. – In the fall of 2011, well before the latest round of regulatory and legal actions surrounding the $602 million Alabama One Credit Union in Tuscaloosa, Ala., three former members of the credit union's board met with officials from both the NCUA and Alabama Credit Union Administration to share their experiences at the controversial credit union, the former board members said.

The NCUA's Region III director Myra Toeppe attended the meeting, as did the NCUA's problem case officer Kim Brown, then ACUA Administrator Larry Morgan and an ACUA examiner named Robert J. “Jeff” Russell.

The former Alabama One volunteers included Tom Fanning, a retired mental health services administrator; Doyle Love, also a former administrator in mental health services; and Gloria Shaw, a former information technology administrator who also worked in mental health services.

“We related what we had seen on our more than two years as part of the leadership structure of Alabama One,” Fanning, who along with Gloria Shaw actually attended the meeting with NCUA and ACUA officials, recounted. “We shared what concerned us and they listened to us very cordially, thanked us for our time, took our contact information and then we never heard from them again.”

Love, who was traveling at the time, was unable to attend the meeting but submitted written comments and received briefings about the meeting afterwards, he said.

The NCUA confirmed the meeting with CU Times, and agency spokesperson John Fairbanks explained that the NCUA did not call the three individuals because they were no longer board members at the time when the meeting took place, therefore the NCUA was not able to tell them anything. Fanning said that he and the others understood that and were not offended.

“We realized we lacked any official capacity,” Fanning said.

Shaw had been a member of Alabama One's Supervisory Committee; Love was an associate director and Fanning was a full director.

Previously, the three were board members at Alabama First Capital Credit Union and arrived at Alabama One as the result of a merger between the two credit unions. At the time of the merger, Alabama First Capital was a roughly 10,000-member, $45 million credit union that had been rooted in the state mental health services industry and saw its field of membership begin to shrink, according to the board members.

“We were looking into the future and could see we were going to begin to have some issues with being able to grow with our current field of membership,” Fanning explained. “We hired a new CEO, Bill Myer, to help us evaluate our options for moving forward, and he eventually brought us the recommendation that we go with the then federally chartered Alabama One, which was then known as the Credit Union of Alabama.”

Fanning and the other former board members explained that at the time, they saw Alabama One as one of the “big boys” among the top 10 credit unions in the state, and hoped the merger would bring Alabama First Capital members the kinds of financial products and services it would have otherwise struggled to provide.

Credit Union of Alabama was the name Alabama One chose after abandoning its original name, BF Goodrich Credit Union, which it received upon its founding by unionized workers at the BF Goodrich tire plant in Tuscaloosa. However, the credit union had to abandon the name Credit Union of Alabama in favor of Alabama One after another Tuscaloosa-based cooperative named Alabama Credit Union filed a complaint in court.

Per the terms of the merger, three of Alabama First Capital's seven board members were asked to join Alabama One's board for at least two years, the former board members said. Their first board meeting was in February 2011, and Fanning explained that the three former Alabama First Capital board members soon found they joined an organization that was very different from the one they had left.

Read more: Life on a passive board proves to be frustrating …

First, Fanning explained, there was a lack of transparency regarding what the board did. Fanning described how board members would receive an agenda for each month's meeting a few days beforehand, but that it was written in such a way that made it difficult to discern what the board would be doing, discussing or voting upon.

“The meetings felt very stage-managed,” Fanning said. “We had a sense that nothing the board did would be a surprise to those who planned the meeting, but that the board members themselves might be very surprised.”

Another difference soon became apparent. The three First Alabama Capital board members had left a culture characterized by curious, engaged, challenging and sometimes obstreperous boards, and that was not at all the case at Alabama One.

“We were always respectful,” Fanning maintained. “But we didn't mind putting the CEO on the grill if we wanted an explanation about something or to find out about something. We had a very inquisitive, active board and that was not at all what we found at Alabama One.”

Fanning described the Alabama One board as being the most passive he had ever seen in a long career sitting on various boards of credit unions, as well as local and statewide non-profit organizations.

The three board members stood out, Fanning explained, because they asked so many questions – for which sometimes there were no answers. A pattern quickly developed in which he or one of the other former Alabama First Capital members would raise a question for which no one would know the answer; then, President/CEO John Dee Carruth or Board Chair Bill Roberts would say the credit union would provide an answer in the next meeting, which it usually did not do.

One of the earliest areas of conflict involved loans the credit union made to Danny Butler to purchase some antique automobiles, Fanning said – examiners from the NCUA had expressed concern about the lack of documentation for those cars to serve as collateral for the loans and, in May 2009, the Pensacola, Fla.-based auditing firm Hutto & Carver also expressed concern based on their September 2008 audit of the credit union's loans.

“It turned out later that Butler didn't even own those cars,” Fanning said, adding that the credit union's leadership never revealed to the board what happened with those loans.

In general, Fanning said, Alabama One's governance appeared to follow the same general rules as other credit unions did, however, when it suited the leadership, Roberts or Carruth would say, “We don't bother with those kinds of rules here,” or “We have our own rules.” And in those cases, the cooperative's leaders would do whatever they pleased.

Read more: John Dee Carruth's contract was extended by ten years …

In one such instance in late 2010, the credit union called a special meeting, which unexpectedly turned out to involve extending CEO John Dee Carruth's contract by 10 years, Fanning said.

“As you know, special meetings are supposed to only address the topic of that meeting, and we dispensed with what we had been called to do in about five minutes,” Fanning said. “Then [Chairman] Roberts stood up and said that we should extend Carruth's contract by 10 years.”

However, Fanning said this was one of the rare occasions when Roberts failed to get his way because the credit union had failed to do its homework, and board members began to raise objections.

Someone asked, for example, what Carruth made each year, and no one knew the answer, Fanning said. Someone else asked when Carruth's current contract expired. No one knew the answer to that either, but then someone found out that he had four years remaining. Fanning added that he spoke up at that point, because current economic conditions made the idea of extending Carruth's contract particularly galling.

“I said and I didn't feel comfortable adding 10 years to John Dee Carruth's contract when some of our members were having financial trouble, and the idea was tabled because they were so many people with questions,” Fanning said.

He added, “Once it was tabled, Roberts leaned over the board table and said, 'John Dee Carruth is the smartest man who has ever worked for this credit union, and when the ACUA took over Mutual Savings Credit Union in Birmingham, the credit union had more room to maneuver because they had given their CEO an extended contract.'”

Fanning added that Roberts' comment didn't make a lot of sense because the ACUA wound up conserving Mutual Savings Credit Union and facing a legal fight with the former CEO, but they signaled to Fanning that Roberts understood the cooperative's legal situation was worse than he had been admitting.

However, Fanning added that the measure passed the next time they brought it to the table, even though he voted against it and the cooperative's reports to the IRS suggested the contract change turned out to be lucrative for Carruth.

The credit union's 990 filings to the tax authority reported that between 2011 and 2012, Carruth saw a more than $100,000 increase in his total salary package. From 2009 to 2011, the credit union reported that Carruth's base salary between roughly $191,000 and $195,000 per year, with extra pay totaling between $24,000 and $36,000.

But in 2011 and 2012, Alabama One reported Carruth's base salary jumped to just under $286,000 for 2012 and just under $295,000 in 2013. The cooperative reported salary extras for those years were roughly $43,000 for 2012 and roughly $45,000 for 2013.

In comparison, the cooperative reported COO Martie Patton's base salary in 2012 as just under $161,000 and just over $176,000 in 2013, with extra pay totaling almost $26,000 in 2012 and $28,000 in 2013.

Patton's salary does not appear on form 990 reports from 2009 to 2011.

Instant Insights /

Alabama One Board: An Inside Look at the Conflict

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