The complicated Alabama One Credit Union saga will continue whenJohn Dee Carruth files an appeal to reverse the conservatorship andbe reinstated as the cooperative's president/CEO. That filing couldcome as early as Friday.

On Thursday, attorney Jeven Sloan told CU Times thatCarruth removed Alabama Credit Union AdministrationAdministrator Sarah Moore from a federal lawsuit in order to pavethe way to file the appeal. Under Alabama law, the fact thatCarruth had claims pending against Moore in the federal lawsuitcould have potentially served as an impediment to certain claimsand arguments Carruth could make in his appeal of theconservatorship.

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

Sloan will not be representing Carruth in that appeal, but isstill representing him in the federallawsuit against Governor Robert Bentley and other stateofficials. Dismissing Moore without cause means Carruth could addMoore to the federal lawsuit as a defendant later on.

Sloan had previously represented Alabama One in the federallawsuit, but his firm was terminated from representing thefinancial institution the day it was conserved by the ACUA. At thetime, it meant Moore was a defendant in a lawsuit initiated by acredit union while also being the administrator of itsconservatorship in what Sloan previously called a “very uniquesituation.”

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

“[She asked for] a number of documents related to the very casein which she is [was] an individual defendant,” Sloan said. “Shemade a request of us that we cannot comply with without harming theconfidentiality and attorney-client privilege that Mr. Carruthenjoys with our firm. That's an issue that's going to have to bedealt with.”

Moore's attorney, Robert P. Reynolds, did notsay what would happen to the federal lawsuit as a whole that wasjointly filed on behalf of Alabama One and Carruth, but confirmedin an email to CU Times that the “old attorneys willwithdraw from representing the credit union” and that “newattorneys will appear in due course.”

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

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

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

In an interview with CU Times, Carruth denied severalof the allegations made by the ACUA when it seized Alabama One. Hesaid the conservatorship was likely pre-planned, and that nothingthe employees did would have likely made a difference.

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

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

That day, Carruth, Chief Operating Officer Martie Patton, ChiefInformation Officer Tim Powell, Comptroller Denise Crawford andMortgage Compliance Officer Tammy Ewing were fired. The boardmembers, according to Carruth, did not receive phone calls from theACUA but rather from the remaining employees at the credit union tolet them know they were dismissed from their positions and had toreturn any credit union property.

“All these employees just like mewoke up Friday with no livelihood,” Carruth said. “It's theircareers. It's very sobering for that to happen. It's unbelievablethat a credit union of our strength, our capital, would beconserved. That a board with an average of 10 to 20 years would beremoved. That five employees would be removed. And we've just gotto know why.”

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

“We have had some losses due to a lending relationship that wehad that everyone's well aware of,” Carruth said when asked aboutthe losses. “It's been well documented. But we dealt with thoselosses and our capital still remains real close to 10% – above manyother credit unions in the state of Alabama. One of the largeimpacts in the losses we've had have been our attempts to complywith the ACUA mandate that they've given us that we've got to hireall these third parties to come in and do multiple reviews ofmultiple types of loans.”

The ACUA also said in its justification for conservatorship thatcredit union officers and employees had exhibited persistentpatterns and practices of allowing insiders to have loans onpreferential terms and conditions, falsified loan information forinsider auto loans and acceptedthings of value in exchange for making loans, among othercharges.

Carruth said there is no evidence to support thoseallegations.

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

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

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

“When she concluded that her working conditions were no longertolerable, and that her advice was being ignored, she resigned asthe compliance officer. While she declines to be interviewed todaydue to the pendency of litigation with Alabama One, she does wishto emphasize that it was Alabama One which originally filed suitagainst her, not the other way around. Ms. Baird has alwayscontended that it is more important for systemic problems atAlabama One to be identified and corrected than for the focus to beon individual facts connected with her prior employment,” thestatement continued.