New Alabama One Details Surface
Following years of regulatory inspections, allegations of fraud and lawsuits, John Dee Carruth, president/CEO of the $598 million, Tuscaloosa, Ala.-based Alabama One Credit Union, said he has proof of a state government conspiracy against him, several of his colleagues and his financial institution.
Carruth shared dozens of emails, depositions and other documents with CU Times, which he said is evidence that attorney Justice D. “Jay” Smyth, III conspired with his political friends to force Alabama One to settle lawsuits for millions of dollars.
Smyth has denied these allegations, and drama could ensue in a lengthy court battle.
Email exchanges discussed or took place between Smyth's friend and former law partner David Byrne, who is now the chief legal advisor for the governor of Alabama; Alabama Governor Robert Bentley; aides for both of them; State Sen. Gerald Allen (R-Tuscaloosa); Alabama Credit Union Administration Administrator Sarah Moore; an FBI agent; a retired judge and several others.
That He May Lift You Up
Alabama One filed a federal lawsuit June 29 against Byrne, Allen, Moore, Smyth, law firm Albert Lewis Smyth Winter Ford LLC, Lewis, Tuscaloosa attorney Bobby Cockrell, former ACUA Administrator Larry D. Morgan and Doug Key, president/CEO of the $140 million Mutual Savings in Hoover, Ala., who served as a temporary CEO for Alabama One in 2014.
Alabama One alleged in the suit it received letters of commendation from the ACUA and NCUA in April of 2013, as well as a positive Examination Report dated Dec. 31, 2013. Morgan suspended Carruth and three other Alabama One employees in February 2014, but reversed the order in March and abruptly resigned. He was replaced by Moore, who issued a cease and desist order April 2 requiring Carruth and other executives to resign. Alabama One fought the order in court.
The NCUA said that per agency practice, it could not comment on matters relating to supervision.
A number of Alabama One members began filing suit after former member Danny Ray Butler's arrest over losses they said they had suffered because of loans the credit union made for Butler in their names – suits the credit union has now declared are part of an alleged conspiracy against Alabama One. According to the complaint, Smyth represented five of those lawsuits against Alabama One, et all. The complaint alleged that a suit filed by Jerry and Brenda Griffin, and Sammy and Tommie Colburn, were settled with no monies being paid by Alabama One to the plaintiffs.
However, CU Times previously reported, court documents revealed that the Griffin suit resulted in significant cost to the credit union.
According to the settlement agreement, the credit union modified the Griffins’ loans and loan terms, renewed or extended loan agreements, made additional loans at advantageous interest rates, canceled debts, released and sold property and improvements, canceled injunctions and refunded bonds, and released claims against the couple.
The complaint filed by Alabama One also alleged member Wally Price voluntarily dismissed his lawsuit before a motion to dismiss could be decided by the court, but refiled it 14 months later. A representative for Alabama One said it was also dismissed on limitation grounds.
The complaint said Alabama One and its co-defendants received a summary judgment in the lawsuit on all claims except one.
The most recent lawsuit, filed by Richard Turner, is pending; however, a new email was brought to light in regard to his case, as well as another email pertaining to Moore.
“The first two months [of 2014] were smooth months,” Carruth said. “Everything was signed off by the regulators.”
What Carruth didn't know at the time was that emails between Smyth and state officials continued, he said, plus a new player had been thrown into the email chain mix: Carrie McCollum, a state deputy legal advisor.
Smyth said Alabama One's lawyers “… have now moved into a new dimension of bad faith …” as they began to prepare subpoenas to fight the lawsuits. In emails dated during December 2013, Smyth accused Alabama One's lawyers of serving notices of intent to serve subpoenas on certain non-parties, such as law firms representing his clients, which Smyth said in the email were protected by both attorney work product and client attorney privilege.
On Jan. 22, 2014, Smyth wrote to Bryne's assistant Pam Chesnutt and copied ACUA General Counsel Mark Williams, stating, “Not trying to push on the Alabama One petition, but I forgot to tell you that Circuit Clerk Tiffany McCord will only be in the office until noon today … if you’ll let me know something from David (Byrne) on his approval of the drafts, I will call Mark Williams to advise him of the status.”
Smyth even reached out to regulators at the NCUA stating he was “concerned about the pace,” and that his clients were “suffering a slow death as a result of the Alabama One/Danny Ray Butler fraud scheme.”
According to an email from Smyth to Allen dated Jan. 24, 2014, he met in the “Lt. Gov's conference room with David Byrne, Mark Williams, Larry Morgan and ‘troubled credit union’ investigators from both the (ACUA) and the NCUA.” Smyth then said he wanted to speak to Allen to give up an update prior to the “Saturday breakfast.”
On Jan. 25, 2014, Smyth emailed Allen, Lewis and a client to thank Allen for his “genuine interest in seeing the State of Alabama take the kind of meaningful corrective action at Alabama One that the Governor has now TWICE said he wants to see.” He then suggested McCollum be included in more meetings since Byrne was scheduled for surgery and McCollum “could be very helpful in making the meeting productive since she was a participant in the (four)-hour meeting (they) had at the Capitol (the previous day.)”
In Due Time
Carruth said he now believes Smyth was stepping up his efforts to avoid a court battle because he had been hoping to kick the credit union while it was down and expected a settlement.
Over the next several months, according to documents provided by Carruth, Smyth's emails increased in urgency and frequency, detailing the financial plight of his clients and warning state officials of the seriousness of the issue.
On Jan. 22, 2014, in an email from Smyth to Bryne, Chesnutt and Williams, Williams was told which documents needed Morgan's signature and advised to take them to the circuit clerk. Smyth then told Byrne that Williams is “fine with this approach for the protection of former BCA Compliance Officer Lori Baird. Nevertheless, he wants you to look over the draft petition and proposed Order to make sure that you approve.”
CU Times reached out to Smyth on the emails and allegations of intense lobbying for the purpose of replacing Alabama One executives with friendlier allies. Smyth was out of town at the time of the request, but agreed to answer two or three questions via email.
“Alabama One Credit Union is a member-owned financial cooperative regulated by the Alabama Credit Union Administration,” he wrote. “The clients we represent are members of this credit union. As such, they have a right to expect the ACUA to properly investigate and correct any known or suspected improper or illegal conduct which is either caused or allowed by the credit union management. Our clients urged the ACUA to investigate their complaints and, if the agency found Alabama One to have engaged in conduct that violated financial regulations or state law, to take prompt remedial action in connection with such findings. Members have an absolute right to make such requests to regulators.”
Smyth's email included the following quote from President Dwight Eisenhower: “Without God, there could be no American form of government. Recognition of the Supreme Being is the first – the most basic – expression of Americanism.»
According to his 2014 emails, Smyth also wanted to assist the FBI with providing information for criminal proceedings related to Butler. In an email to the U.S. Attorney's Office dated Feb. 12, 2014, Smyth invited staff and FBI agents to attend and monitor depositions related to the lawsuits against Alabama One, stating, “The information obtained through the depositions should be useful to you in comparison with statements of fact, which have already been obtained in regard to the Danny Butler criminal prosecution.”
That was the same month Butler pleaded guilty to the charges filed against him.
That same day, Smyth asked Chesnutt in an email for a status update from the governor and Byrne so that he could “make plans on how we (and the State) will be proceeding.” He said it was important because of “recent negative developments at Alabama One which are being evaluated by the U.S. Attorney's Office in (Birmingham).”
CU Times was not able to confirm that Alabama One was in fact being evaluated by the U.S. Attorney's Office at that time.
The following day, Smyth thanked Chesnutt for her help in an email and said, “now that everyone (perhaps with the exception of Larry Morgan) is on the same page re (sic) the Alabama One issues. I have confidence the governor will act decisively on this.”
Later emails state that Smyth had spoken with Northern District of Alabama Assistant U.S. Attorney George Martin, and believed that Carruth and his colleagues would receive a visit from the FBI.
Carruth denied that he was then interviewed by the FBI.
A media representative for the FBI said the agency could not comment on the details of any criminal investigation, unless it was public record, and also did not state whether anyone at Alabama One was being or had been investigated. While it is the policy of the Justice Department to neither confirm nor deny the existence of a criminal investigation to protect the rights of witnesses and potential subjects, as well as to protect the integrity of the investigation, the representative said the only incident that could be found that the FBI and local field office pursued was the case against Butler. One of the charges he pleaded guilty to was defrauding Alabama One.
On Feb. 19, 2014, Smyth emailed multiple state officials, asking them to review the correspondence from the lawyers Alabama One had hired and stated they were needlessly driving up costs.
“This kind of conduct should stop,” he wrote.
He did not say in the email why he chose to contact state officials rather than file a motion with the judge in the case.
On Feb. 22, 2014, Smyth emailed NCUA Problem Case Officer Kim Brown and copied several state officials, as well as the FBI agent and retired judge. In that email, he apologized to Brown for emailing her while she was on vacation, but said he had become very alarmed by recent developments, stating, “We understand that the governor and his lawyers conferred with ACUA Director Larry Morgan on Thursday about the gravity of these problems. While we very much appreciate the actions by the Alabama officials, we are gravely concerned about the pace of urgently needed remedial actions.” He then said his clients “may eventually decide to go and tell their stories to the news media …”
“We think that you and the NCUA can make a difference here, and that it's imperative for Larry Morgan to realize that his action (or his inaction) is receiving scrutiny from a whole range of different people,” he said.
Less than a week later, Morgan and state troopers arrived at Alabama One.