Following years of regulatory inspections, allegations of fraudand lawsuits, John Dee Carruth, president/CEO of the $598 million,Tuscaloosa, Ala.-based Alabama One Credit Union, said he has proofof a state government conspiracy against him, several of hiscolleagues and his financial institution.

Carruth shared dozens of emails, depositions and other documentswith CU Times, which he said is evidence that attorneyJustice D. “Jay” Smyth, III conspired with his political friends toforce Alabama One to settle lawsuits for millions of dollars.

Smyth has denied these allegations, and drama could ensue in alengthy court battle.

Email exchanges discussed or took place between Smyth's friendand former law partner David Byrne, who is now the chief legaladvisor for the governor of Alabama; Alabama Governor RobertBentley; aides for both of them; State Sen. Gerald Allen(R-Tuscaloosa); Alabama Credit Union Administration AdministratorSarah Moore; an FBI agent; a retired judge and several others.

CU Times detailed a few of these emails in a previous article after Carruth and hisattorneys provided documentation stating that the Alabama SupremeCourt denied Smyth's request to keep them from being used in thelawsuit.

Carruth said he feels the emails prove that Smyth used hisconnections with Bentley, others in his office and ACUA regulatorsto settle his lawsuits.

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 ACUAAdministrator Larry D. Morgan and Doug Key, president/CEO of the$140 million Mutual Savings in Hoover, Ala., who served as atemporary CEO for Alabama One in 2014.

Alabama One alleged in the suit it received letters ofcommendation from the ACUA and NCUA in April of 2013, as well as apositive Examination Report dated Dec. 31, 2013. Morgansuspended Carruth and three other Alabama One employees inFebruary 2014, but reversed the order in March and abruptly resigned. He wasreplaced by Moore, who issued a cease and desist order April 2 requiring Carruth and otherexecutives to resign. Alabama One fought the order in court.

Download a PDF of theACUA's cease and desist order.

The NCUA said that per agency practice, it could not comment onmatters relating to supervision.

A number of Alabama One members began filing suit after former memberDanny Ray Butler's arrest over losses they said they hadsuffered because of loans the credit union made for Butler in theirnames – suits the credit union has now declared are part of analleged conspiracy against Alabama One. According to the complaint,Smyth represented five of those lawsuits against Alabama One, etall. The complaint alleged that a suit filed by Jerry and BrendaGriffin, and Sammy and Tommie Colburn, were settled with no moniesbeing paid by Alabama One to the plaintiffs.

However, CUTimes previously reported, court documents revealed thatthe Griffin suit resulted in significant cost to the creditunion.

According to the settlement agreement, the credit union modifiedthe Griffins' loans and loan terms, renewed or extended loanagreements, made additional loans at advantageous interest rates,canceled debts, released and sold property and improvements,canceled injunctions and refunded bonds, and released claimsagainst the couple.

The complaint filed by Alabama One also alleged member WallyPrice voluntarily dismissed his lawsuit before a motion to dismisscould be decided by the court, but refiled it 14 months later. Arepresentative for Alabama One said it was also dismissed onlimitation grounds.

The complaint said Alabama One and its co-defendants received asummary 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, aswell as another email pertaining to Moore.

“The first two months [of 2014] were smooth months,” Carruthsaid. “Everything was signed off by the regulators.”

What Carruth didn't know at the time was that emails betweenSmyth and state officials continued, he said, plus a new player hadbeen thrown into the email chain mix: Carrie McCollum, a statedeputy legal advisor.

Smyth said Alabama One's lawyers “… have now moved into a newdimension of bad faith …” as they began to prepare subpoenas tofight the lawsuits. In emails dated during December 2013, Smythaccused Alabama One's lawyers of serving notices of intent to servesubpoenas on certain non-parties, such as law firms representinghis clients, which Smyth said in the email were protected by bothattorney work product and client attorney privilege.

On Jan. 22, 2014, Smyth wrote to Bryne's assistant Pam Chesnuttand copied ACUA General Counsel Mark Williams, stating, “Not tryingto push on the Alabama One petition, but I forgot to tell you thatCircuit Clerk Tiffany McCord will only be in the office until noontoday … if you'll let me know something from David (Byrne) on hisapproval of the drafts, I will call Mark Williams to advise him ofthe status.”

Smyth even reached out to regulators at the NCUA stating he was“concerned about the pace,” and that his clients were “suffering aslow death as a result of the Alabama One/Danny Ray Butler fraudscheme.”

According to an email from Smyth to Allen dated Jan. 24, 2014,he met in the “Lt. Gov's conference room with David Byrne, MarkWilliams, Larry Morgan and 'troubled credit union' investigatorsfrom both the (ACUA) and the NCUA.” Smyth then said he wanted tospeak to Allen to give up an update prior to the “Saturdaybreakfast.”

On Jan. 25, 2014, Smyth emailed Allen, Lewis and a client tothank Allen for his “genuine interest in seeing the State ofAlabama take the kind of meaningful corrective action at AlabamaOne that the Governor has now TWICE said he wants to see.” He thensuggested McCollum be included in more meetings since Byrne wasscheduled for surgery and McCollum “could be very helpful in makingthe meeting productive since she was a participant in the(four)-hour meeting (they) had at the Capitol (the previousday.)”

Carruth said he now believes Smyth was stepping up his effortsto avoid a court battle because he had been hoping to kick thecredit union while it was down and expected a settlement.

Over the next several months, according to documents provided byCarruth, Smyth's emails increased in urgency and frequency,detailing the financial plight of his clients and warning stateofficials of the seriousness of the issue.

On Jan. 22, 2014, in an email from Smyth to Bryne, Chesnutt andWilliams, Williams was told which documents needed Morgan'ssignature and advised to take them to the circuit clerk. Smyth thentold Byrne that Williams is “fine with this approach for theprotection of former BCA Compliance Officer Lori Baird.Nevertheless, he wants you to look over the draft petition andproposed Order to make sure that you approve.”

CU Times reached out to Smyth on the emails andallegations of intense lobbying for the purpose of replacingAlabama One executives with friendlier allies. Smyth was out oftown at the time of the request, but agreed to answer two or threequestions via email.

“Alabama One Credit Union is a member-owned financialcooperative regulated by the Alabama Credit Union Administration,”he wrote. “The clients we represent are members of this creditunion. As such, they have a right to expect the ACUA to properlyinvestigate and correct any known or suspected improper or illegalconduct which is either caused or allowed by the credit unionmanagement. Our clients urged the ACUA to investigate theircomplaints and, if the agency found Alabama One to have engaged inconduct that violated financial regulations or state law, to takeprompt remedial action in connection with such findings. Membershave an absolute right to make such requests to regulators.”

Smyth's email included the following quote from President DwightEisenhower: “Without God, there could be no American form ofgovernment. Recognition of the Supreme Being is the first – themost basic – expression of Americanism.”

According to his 2014 emails, Smyth also wanted to assist theFBI with providing information for criminal proceedings related toButler. In an email to the U.S. Attorney's Office dated Feb. 12,2014, Smyth invited staff and FBI agents to attend and monitordepositions related to the lawsuits against Alabama One, stating,“The information obtained through the depositions should be usefulto you in comparison with statements of fact, which have alreadybeen obtained in regard to the Danny Butler criminalprosecution.”

That was the same month Butler pleaded guilty to the chargesfiled against him.

That same day, Smyth asked Chesnutt in an email for a statusupdate from the governor and Byrne so that he could “make plans onhow we (and the State) will be proceeding.” He said it wasimportant because of “recent negative developments at Alabama Onewhich are being evaluated by the U.S. Attorney's Office in(Birmingham).”

CU Times was not able to confirm that Alabama One wasin fact being evaluated by the U.S. Attorney's Office at thattime.

The following day, Smyth thanked Chesnutt for her help in anemail and said, “now that everyone (perhaps with the exception ofLarry 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 Districtof Alabama Assistant U.S. Attorney George Martin, and believed thatCarruth 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 notcomment on the details of any criminal investigation, unless it waspublic record, and also did not state whether anyone at Alabama Onewas being or had been investigated. While it is the policy of theJustice Department to neither confirm nor deny the existence of acriminal investigation to protect the rights of witnesses andpotential subjects, as well as to protect the integrity of theinvestigation, the representative said the only incident that couldbe found that the FBI and local field office pursued was the caseagainst Butler. One of the charges he pleaded guilty to wasdefrauding Alabama One.

On Feb. 19, 2014, Smyth emailed multiple state officials, askingthem to review the correspondence from the lawyers Alabama One hadhired 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 stateofficials rather than file a motion with the judge in the case.

On Feb. 22, 2014, Smyth emailed NCUA Problem Case Officer KimBrown and copied several state officials, as well as the FBI agentand retired judge. In that email, he apologized to Brown foremailing her while she was on vacation, but said he had become veryalarmed by recent developments, stating, “We understand that thegovernor and his lawyers conferred with ACUA Director Larry Morganon Thursday about the gravity of these problems. While we very muchappreciate the actions by the Alabama officials, we are gravelyconcerned about the pace of urgently needed remedial actions.” Hethen said his clients “may eventually decide to go and tell theirstories to the news media …”

“We think that you and the NCUA can make a difference here, andthat it's imperative for Larry Morgan to realize that his action(or his inaction) is receiving scrutiny from a whole range ofdifferent people,” he said.

Less than a week later, Morgan and state troopers arrived atAlabama One.

Stay tuned to cutimes.com for more details on Alabama stateofficials' alleged conspiracy against Alabama One, includingSmyth's side of the story.