Contrary to allegations made by former Alabama One Credit Union member DannyRay Butler, employees of the $602 million, Tuscaloosa,Ala.-based cooperative had no knowledge of his check kiting schemethat took place in 2011 and 2012, John Dee Carruth, president/CEOfor Alabama One, told CU Times.

Carruth also asserted that the credit union kept a close eye onthe business loans it made to Butler and the amounts of whichexceeded a regulatory cap. Instead, he attributed the violation tounclear loan aggregation rules.

According to a federal lawsuit filed Monday by Alabama One andCarruth, which alleged a conspiracy orchestrated by state officials and local attorneyswho pressured the credit union to settle several frivolous civillawsuits, the credit union's loans to Butler inadvertently exceededthe regulatory cap on a percentage of MBL loans that can be made toa single member. This occurred as a result of varying opinions fromregulators in regard to loan aggregation, Carruth said.

“[The loans] were being monitored, and we went over the capbecause of a lack of clarity on what loans should be aggregated,”he said. “We would ask the state regulators, and they would say onething, we would ask the federal regulators, and they would sayanother thing. There appeared to be opposing general counselopinions about aggregating those loans. The credit union made theloans in good faith, and they were all underwritten by thirdparties.”

The NCUA and Alabama Credit Union Administration did notimmediately respond to requests for comment regarding loanaggregation opinions varying between federal and stateregulators.

In October 2013, a federal grand jury indictedButler with defrauding the Small Business Administration through aloan he had taken through the $575 West Alabama Bank and Trust, andkiting checks between West Alabama and Alabama One. He pleadedguilty in February 2014 and is now serving time in prison.

A number of Alabama One members then began filing suit overlosses they said they had suffered because of loans the creditunion made for Butler in their names – suits the credit union hasnow declared part of a conspiracy against Alabama One.

Carruth maintained that all of Butler's allegations stating thatAlabama One employees were aware of, and even assisted with, his check kiting activities werefabricated.

“No one in this organization was aware of any check fraud,”Carruth said. “All the claims of check kiting help are patentlyfalse.”

While Carruth has denied any wrongdoing on behalf of AlabamaOne, the credit union faced a cease and desist order and threats of conservatorship from theACUA, according to the lawsuit filed Monday.

When asked if he fears conservatorship, or if he'll be facingthe decision to resign, Carruth firmly asserted his track record ofdoing the right thing to support his credit union and itsmembers.

“I have a board that supports me 100%, and we're just trying tooperate like any other credit union,” he said. “I just show upevery day, make sure my employees are in good shape and the creditunion is in good shape, and try to move forward.”

Now, his biggest hope is for Alabama One to be fully compensatedfor the damages inflicted upon it by the parties identified in thefederal lawsuit, he said.

“I've given my life to this organization, and I'm stillstruggling with how a regulator could suspend employees withoutreason,” he concluded, referring to former ACUA Administrator LarryMorgan, who called for the suspension of Carruth and three otherAlabama One employees and later testified in court that he did sofor no apparent reason, according to the lawsuit. “It all tracesback to corruption and political pressure placed for personal gain.I never thought I would see that in the credit union industry.”