The former CEO claimed in his lawsuit that the ACUA's decision to conserve the credit union on Aug. 27, 2015 was "unreasonable, arbitrary and motivated by ill will," and was not supported by any substantial evidence. (Click on image to enlarge the Alabama One Timeline.)

The lawsuit asked the court to return the cooperative to the possession and control of Alabama One's board of directors, and reinstate the board and all other employees who were terminated upon its conservatorship. Carruth's appeal also requested court-determined monetary damages "as a result of the ongoing harm and losses sustained by the credit union during the period of the 2013 suspensions through the present as a result of the ACUA's control and conduct."

In response to Carruth's lawsuit, Robert P. Reynolds, Alabama's deputy attorney general, wrote in court papers that the ACUA will prove that a myriad of violations were committed with the most irrefutable of evidence: Alabama One's own documents.

Carruth's appeal was consolidated with an appeal from Tim Powell, who was chief information officer at Alabama One.

"Petitioners (Carruth and Powell) must overcome that damning reality of their own documents, which overwhelmingly demonstrate that the action undertaken by (the) ACUA was neither arbitrary (n)or capricious under Ala. Code, and was in fact taken to preserve the best interest of Alabama One's members and prevent further mismanagement and dissipation of member funds by the Petitioners," Reynolds wrote.

In addition to Alabama One's $12.6 million in losses as of June 30, 2015, credit union members decreased their deposits by $18.8 million from April 1, 2015 to July 31, 2015, or more than $1 million per week during those four months, according to Reynolds.

"Contrary to Carruth's assertions, Alabama One was not strong at the time of conservatorship," Reynolds wrote. "Carruth's insistence that Alabama One was strong only demonstrates his failure to appreciate the actual condition of his own credit union."

In a prepared statement, Carruth said the ACUA filing exemplifies a desperate attempt by the state to justify its illegal and improper seizure of Alabama One and the removal of the management team and board that led the credit union through its most prosperous years. 

"To argue that a credit union with more than $50 million in reserves and a capital ratio of nearly 10% is not a safe and sound financial institution will simply not hold up under close review," Carruth said. "The ACUA has spent over $1 million in taxpayer money pursuing its private agenda against Alabama One. The ACUA refuses to acknowledge that a significant portion of the losses incurred by the credit union this year are the direct result of pointless expenditures and actions mandated by the ACUA, itself, who disregarded its own previous reviews."

He also argued that these were unnecessary and redundant directives that required Alabama One to spend millions of dollars on new reviews so that the ACUA could try to reach a specific conclusion despite its inability to do so previously. 

"As we are now learning, the full story about what has been happening in Montgomery has yet to be told," Carruth said.

Since the storm of controversies surrounding Alabama One began two years ago, there have been numerous lawsuits filed by members, employees, state regulators and others claiming fraud, a hostile workplace environment, compliance and state law violations, conspiracy, breaches of fiduciary duties and the waste of corporate assets.

Moreover, in April, the ACUA and the NCUA filed a cease and desist order to force the troubled credit union to replace its CEO, COO and chief lending officer.

In June, Alabama One filed a federal lawsuit against Alabama public officials – including Sen. Gerald H. Allen (R-Ala.), Gov. Robert Bentley's chief legal advisor David Byrne and local attorneys – alleging conspiracy and abuse of power from Gov. Bentley's office.

Carruth alleged the defendants attempted to coerce tens of millions of dollars in legal settlements out of the credit union despite state and federal regulators deeming it a safe and sound institution.

The credit union stated in the suit that the public officials' abuse of power began in November 2013 and stemmed from their desire to benefit their political and personal friend, attorney Justice D. "Jay" Smyth, III, whom Alabama One states put pressure on the credit union to settle five frivolous lawsuits filed by Smyth and others affiliated with him.

Legal challenges for the cooperative, which was the eighth largest in Alabama by asset size, began after a federal grand jury indicted a long-time member, Danny Ray Butler, in October 2013.

In its 51-count indictment, the jury charged Butler with defrauding the Small Business Administration through a loan he had taken through West Alabama Bank and Trust, and kiting checks between West Alabama and Alabama One.

Butler pleaded guilty in February 2014 and went to federal prison in Talladega, Ala., in September 2014.