Contrary to allegations made by former Alabama One Credit Union member Danny Ray Butler, employees of the $602 million, Tuscaloosa, Ala.-based cooperative had no knowledge of his check kiting scheme that took place in 2011 and 2012, John Dee Carruth, president/CEO for Alabama One, told CU Times.
Carruth also asserted that the credit union kept a close eye on the business loans it made to Butler and the amounts of which exceeded a regulatory cap. Instead, he attributed the violation to unclear loan aggregation rules.
According to a federal lawsuit filed Monday by Alabama One and Carruth, which alleged a conspiracy orchestrated by state officials and local attorneys who pressured the credit union to settle several frivolous civil lawsuits, the credit union's loans to Butler inadvertently exceeded the regulatory cap on a percentage of MBL loans that can be made to a single member. This occurred as a result of varying opinions from regulators in regard to loan aggregation, Carruth said.
“[The loans] were being monitored, and we went over the cap because of a lack of clarity on what loans should be aggregated,” he said. “We would ask the state regulators, and they would say one thing, we would ask the federal regulators, and they would say another thing. There appeared to be opposing general counsel opinions about aggregating those loans. The credit union made the loans in good faith, and they were all underwritten by third parties.”
The NCUA and Alabama Credit Union Administration did not immediately respond to requests for comment regarding loan aggregation opinions varying between federal and state regulators.
In October 2013, a federal grand jury indicted Butler with defrauding the Small Business Administration through a loan he had taken through the $575 West Alabama Bank and Trust, and kiting checks between West Alabama and Alabama One. He pleaded guilty in February 2014 and is now serving time in prison.
A number of Alabama One members then began filing suit over losses they said they had suffered because of loans the credit union made for Butler in their names – suits the credit union has now declared part of a conspiracy against Alabama One.
Carruth maintained that all of Butler's allegations stating that Alabama One employees were aware of, and even assisted with, his check kiting activities were fabricated.
“No one in this organization was aware of any check fraud,” Carruth said. “All the claims of check kiting help are patently false.”
While Carruth has denied any wrongdoing on behalf of Alabama One, the credit union faced a cease and desist order and threats of conservatorship from the ACUA, according to the lawsuit filed Monday.
When asked if he fears conservatorship, or if he'll be facing the decision to resign, Carruth firmly asserted his track record of doing the right thing to support his credit union and its members.
“I have a board that supports me 100%, and we're just trying to operate like any other credit union,” he said. “I just show up every day, make sure my employees are in good shape and the credit union is in good shape, and try to move forward.”
Now, his biggest hope is for Alabama One to be fully compensated for the damages inflicted upon it by the parties identified in the federal lawsuit, he said.
“I've given my life to this organization, and I'm still struggling with how a regulator could suspend employees without reason,” he concluded, referring to former ACUA Administrator Larry Morgan, who called for the suspension of Carruth and three other Alabama One employees and later testified in court that he did so for no apparent reason, according to the lawsuit. “It all traces back to corruption and political pressure placed for personal gain. I never thought I would see that in the credit union industry.”
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
