TUSCALOOSA, Ala. — A legal battle involving Alabama One Credit Union, headquartered here, and the Alabama Credit Union Administration escalated Friday, as the credit union filed a petition in state court to void the regulator's recent actions.

Alabama One CU, represented by its attorneys, on Friday filed a petition in the Circuit Court of Tuscaloosa County. The document, obtained by Credit Union Journal, alleges Sarah Moore, administrator of the Alabama Credit Union Administration, did not post the necessary bond to become administrator, nor did she take and file a constitutional oath — both of which are required by Alabama state law.

Because Moore did not follow the proscribed steps after she was appointed to take over as administrator of the ACUA for former administrator Larry Morgan on April 15, 2014, Alabama One CU asserts Moore has "vacated her office" and "all actions taken after vacating her office are void."

The petition is a counter move to an order to cease and desist that had been filed against the credit union by Moore and the ACUA on April 2. According to Paul Toppins, one of the attorneys for Alabama One CU, the credit union had appealed the cease and desist order, but the ACUA posted the order on its website earlier Friday.

The ACUA alleges in its cease and desist order that Alabama One CU's officers, directors, committee members or employees, "have engaged in unsafe or unsound practices and violations of law, rule or regulations, have committed fraudulent or questionable practices in the conduct of the credit union's business, and have violated conditions duly imposed in writing by the Administrator."

Moore and the ACUA declined to comment.

CU ‘Disappointed'

Toppins forwarded to Credit Union Journal a statement prepared by the CU, which says:

"Alabama One Credit Union is disappointed that the Alabama Credit Union Administration (ACUA) has chosen to release information about a disputed action between the ACUA and the credit union. Alabama One's financial condition is excellent and the deposits and accounts of the members are completely safe. The order entered by the ACUA is unwarranted and the publication of an order that has been disputed seems designed deliberately to hurt the credit union. Among other things, the ACUA took issue with the credit union following an order from a federal court. Alabama One has appealed the entry of this order. Alabama One expects its position to be vindicated."

Toppins told the Journal the credit union is disappointed "for a lot of reasons," starting with the fact the ACUA chose to publish it.

"We do not fully understand why it would be published as the order is on appeal," he said. "Publishing something before it becomes final is a little punitive. There also are aspects of the credit union's relationship with regulators that raise concerns this is retaliatory in nature." 

Ongoing Issues

The roots of the disagreement between Alabama One CU and the Alabama Credit Union Administration date back to the check-kiting case of local businessman Danny Ray Butler. As reported in CU Journal in October 2013, Butler's scheme cost the credit union $1.3 million.

According to Toppins, in February 2014 Larry Morgan, then administrator of the ACUA, arrived at Alabama One CU's headquarters with armed state troopers to suspend four credit union employees.

"The employees were not told what they did to warrant being suspended," Toppins said. "The state administrator then appointed a temporary CEO — who was the CEO of a competing credit union. A judge later concluded the administrator's actions violated state law, and the administrator reinstated the employees."

The administrator, Larry Morgan, retired the next business day, Toppins continued. When Moore took over as administrator, Toppins said, "She set about trying to prove that what happened was correct. That has continued, and we fear this cease and desist is just more of the process."

Toppins further alleged that former business associates of Danny Ray Butler have been "lobbying" the ACUA to take actions against Alabama One CU. He said these people had sued Alabama One CU alleging the credit union participated in Butler's schemes, but the credit union has been able to get itself dismissed from many of those lawsuits.

"The frightening thing is, back in February, the day before the suspensions, one of the lawyers for plaintiffs said, 'We know more than you do, and if you do not pay us today, then tomorrow something bad is going to happen to your credit union by the state.' It turned out the lawyers did know something."

Toppins said attorneys for Alabama One CU have since learned the lawyers for those suing the credit union conducted an "intense lobbying campaign," making allegations against the credit union in hopes a change in the credit union's administration would help their case.

"We have an order from a judge stating the e-mails between the lawyers and the Alabama Credit Union Administration should be released, but the attorneys are appealing that decision."

A statement by Alabama One CU regarding these allegations reads as follows:

"In 2014, a small group of attorneys heavily lobbied the ACUA and other government officials to convince them to take regulatory action against the credit union. Alabama One has discovered that these lawyers held secret meetings in Montgomery with regulators and other officials in furtherance of their plan. These attorneys were representing parties who had sued the credit union, but were losing their cases in the courts.

For that reason, they instead sought to win by forcing a change of management at Alabama One. The credit union has been seeking to uncover the content of communications between the plaintiffs' attorneys and the officials. The State took this action against Alabama One only after the credit union obtained an order from a court directing the lawyers to turn over 100 email communications they had sent in an effort to avoid the judicial process. The plaintiffs' lawyers have appealed that order to the Alabama Supreme Court in an attempt to further delay the full exposure of their campaign to manufacture a regulatory situation at the credit union."

Subscribe Now

Authoritative analysis and perspective for every segment of the credit union industry

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.