The dispute arising over an unusual court challenge of a politically charged conservatorship of a Birmingham, Ala., credit union heated up last week with attorneys' charges and countercharges.
The state's top CU regulator, T. Glenn Latham, brought new claims that the former management of the failed $193 million Mutual Savings CU misrepresented loan-loss data. The state regulator seized the Birmingham credit union on July 31.
"There is overwhelming evidence, and the court will agree with me, that this credit union was poorly run at the end, engaging in unsafe lending practices and wild spending," said Latham, who is slated to appear on Oct. 26 as a defendant in a suit brought by Mutual's ousted CEO and its directors in a state court.
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The suit seeking an injunction to overturn the conservatorship was brought by Dale Dalbey and CU directors in Shelby County Circuit Court in Columbiana.
Dalbey is the former treasurer of the newly organized League of Southeastern Credit Unions and former chairman of the Alabama Credit Union League. Dalbey, who has forced to give up both his CU and league jobs, is also a former lobbyist for the Alabama group.
Many league leaders, including Patrick La Pine, the new president/CEO of the LSCU and a former Michigan League executive, have come to Dalbey's defense, questioning Latham's action and citing Dalbey's solid industry reputation and Mutual's earlier positive performance.
But Latham has dismissed the assessment as "false," contending that the CU was in trouble for some time "and in need of help." Mutual was in worse shape than the former management reported, Latham said, having extended bad commercial loans and losing money the last two or three years.
According to its June 2009 5300 report, the Birmingham-based MSCU had an 8.16% net worth and reported $105,115 net profit as of June 30. Latham, however, contends the 8.16% statistic is inaccurate and instead stands at 6%.
In countering Latham's charges, attorneys for Dalbey, Mutual's Chairman Barbara R. Luckett and other directors argued that Latham is distorting the facts on Mutual's true financial condition at the time of the state takeover.
"The conservatorship was totally unjustified based on the facts, and let me say there would have been many more Alabama credit unions with far more severe problems that would have had to undergo the same fate if he had applied the same rules," said Victor Hayslip, a partner in Burr & Forman, a Birmingham firm.
At the time of its seizure, Mutual had a three-star rating, said Hayslip. "There are credit unions with one-star ratings," but they have never met the same fate as Mutual.
Hayslip also charged that since the initial court filings, Latham or his attorneys have failed to follow court rules in providing data for claims in the Shelby County suit. "We have yet to get a single piece of correspondence" from Latham attorneys justifying the seizure, said Hayslip.
Latham argued that in the 5300 report there have been "exaggerated values and expenses out of sight."
On the conservatorship, Latham told Credit Union Times he is now the CEO and board of directors of Mutual until a new CEO and board are put in place, a process that will not be completed until early 2010. In the meantime, Mutual "has an excellent staff, and they are doing well" in operating the CU.
Mutual Savings with 40,000 members was founded in 1936 and has eight branches.
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