The complicated Alabama One Credit Union saga will continue when John Dee Carruth files an appeal to reverse the conservatorship and be reinstated as the cooperative's president/CEO. That filing could come as early as Friday.

On Thursday, attorney Jeven Sloan told CU Times that Carruth removed Alabama Credit Union Administration Administrator Sarah Moore from a federal lawsuit in order to pave the way to file the appeal. Under Alabama law, the fact that Carruth had claims pending against Moore in the federal lawsuit could have potentially served as an impediment to certain claims and arguments Carruth could make in his appeal of the conservatorship.

“She was dismissed without prejudice to ensure that Mr. Carruth would have available all claims and remedies that he could make in support of the appeal of the conservatorship,” Sloan said.

Sloan will not be representing Carruth in that appeal, but is still representing him in the federal lawsuit against Governor Robert Bentley and other state officials. Dismissing Moore without cause means Carruth could add Moore to the federal lawsuit as a defendant later on.

Sloan had previously represented Alabama One in the federal lawsuit, but his firm was terminated from representing the financial institution the day it was conserved by the ACUA. At the time, it meant Moore was a defendant in a lawsuit initiated by a credit union while also being the administrator of its conservatorship in what Sloan previously called a “very unique situation.”

Sloan told CU Times on Monday that after seizing the credit union, Moore asked for the files pertaining to the lawsuit.

“[She asked for] a number of documents related to the very case in which she is [was] an individual defendant,” Sloan said. “She made a request of us that we cannot comply with without harming the confidentiality and attorney-client privilege that Mr. Carruth enjoys with our firm. That's an issue that's going to have to be dealt with.”

Moore's attorney, Robert P. Reynolds, did not say what would happen to the federal lawsuit as a whole that was jointly filed on behalf of Alabama One and Carruth, but confirmed in an email to CU Times that the “old attorneys will withdraw from representing the credit union” and that “new attorneys will appear in due course.”

The old attorneys also include the law firm of Burr & Forman, which represented Alabama One while the credit union was being sued by its own members and were referred to in several emails by attorney Justice “Jay” Smyth. In emails he wrote to state officials, Smyth often referred to getting rid of the “Burr Forman machine.” Those emails are what sparked the credit union's federal lawsuit and accusations of a state government conspiracy.

Representatives from the records department at Burr & Forman were not immediately available to confirm that they have withdrawn or will withdraw as Alabama One's attorneys.

A phone call to Moore with a request to confirm the name of Alabama One's interim CEO was not immediately returned.

In an interview with CU Times, Carruth denied several of the allegations made by the ACUA when it seized Alabama One. He said the conservatorship was likely pre-planned, and that nothing the employees did would have likely made a difference.

On Aug. 27, the day of the conservatorship, Carruth attended an ACUA meeting in Montgomery, Ala., with his attorneys and the credit union's board members. Montgomery is about two hours away from the credit union's Birmingham headquarters.

There, Alabama One gave a presentation that demonstrated the solvency of the credit union, Carruth said. Afterwards, the ACUA board went into an closed executive session for more than four hours. Within 10 minutes of returning, agents had arrived at the credit union's headquarters and began escorting employees out one by one, he said.

That day, Carruth, Chief Operating Officer Martie Patton, Chief Information Officer Tim Powell, Comptroller Denise Crawford and Mortgage Compliance Officer Tammy Ewing were fired. The board members, according to Carruth, did not receive phone calls from the ACUA but rather from the remaining employees at the credit union to let them know they were dismissed from their positions and had to return any credit union property.

alabama one “All these employees just like me woke up Friday with no livelihood,” Carruth said. “It's their careers. It's very sobering for that to happen. It's unbelievable that a credit union of our strength, our capital, would be conserved. That a board with an average of 10 to 20 years would be removed. That five employees would be removed. And we've just got to know why.”

According to the ACUA, the “why” is because the cooperative lost nearly $11 million over 18 months beginning in January 2014 and ending in June 2015, and that executives took advantage of board or committee members' positions to conduct outside advertising at the credit union free of charge. In addition, the agency found, the cooperative granted preferential treatment to the brother of a credit union executive in connection to a member business loan. Further, the agency stated the credit union hid that loan when it became delinquent and failed to act against the borrower. Carruth has denied all of these allegations.

“We have had some losses due to a lending relationship that we had that everyone's well aware of,” Carruth said when asked about the losses. “It's been well documented. But we dealt with those losses and our capital still remains real close to 10% – above many other credit unions in the state of Alabama. One of the large impacts in the losses we've had have been our attempts to comply with the ACUA mandate that they've given us that we've got to hire all these third parties to come in and do multiple reviews of multiple types of loans.”

The ACUA also said in its justification for conservatorship that credit union officers and employees had exhibited persistent patterns and practices of allowing insiders to have loans on preferential terms and conditions, falsified loan information for insider auto loans and accepted things of value in exchange for making loans, among other charges.

Carruth said there is no evidence to support those allegations.

CU Times attempted to reach out to former employees of Alabama One who said they have evidence of or could recount from personal experience that Alabama One employees took part in wrongdoing. One of the former employees told a CU Times reporter she was worried about telling her story on the record, while another stopped returning phone calls after initially agreeing to go on the record.

However, former BSA compliance officer Lori Baird did share a statement through her attorney, Jay Smyth.

“As the former Bank Secrecy Act (“BSA”) Officer at Alabama One, Ms. Baird was responsible for the oversight, monitoring and reporting of credit union transactions which appeared to be suspicious; which appeared to possibly involve money laundering or other illegal financial dealings and which conceivably could have reflected the presence of unlawful terrorism-related activities,” the statement read.

“When she concluded that her working conditions were no longer tolerable, and that her advice was being ignored, she resigned as the compliance officer. While she declines to be interviewed today due to the pendency of litigation with Alabama One, she does wish to emphasize that it was Alabama One which originally filed suit against her, not the other way around. Ms. Baird has always contended that it is more important for systemic problems at Alabama One to be identified and corrected than for the focus to be on individual facts connected with her prior employment,” the statement continued.

Instant Insights /

Carruth to Appeal Alabama One Termination

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