TUSCALOOSA, Ala.—Alabama’s state regulator has ordered Alabama One Credit Union to replace its CEO, chief lending officer and COO, and further required the board to undergo training related to conflicts of interest, as part of a cease-and-desist order.
But the credit union is challenging the Alabama Credit Union Administrator’s authority to make the demands included in the cease-and-desist, and alleging that what’s really at work is a conspiracy among a number of parties, including a group of attorneys.
Representatives of both the state and federal regulators met with officials of Alabama One Credit Union at its headquarters here last week.
All of it comes in the wake of fraud related to a local businessman with whom the credit union had a relationship, members complaining their voices are not being heard, and more.
The Tuscaloosa News reported that two representatives of NCUA’s Atlanta office and Sarah Moore, who heads the ACUA, were in the credit union’s offices last week.
Over the weekend the Tuscaloosa News reported that an attorney for Alabama One said the credit union is completely safe and that actions being taken by the state regulator are “unwarranted.” The News quoted attorney Paul Toppins as saying in 2014 a “small group of attorneys” had lobbied the ACUA to take action against Alabama One and that the credit union had learned of “secret meetings” with regulators and others. The Tuscaloosa News further quoted Toppins as saying that after the CU won a court decision requiring those lawyers to turn over 100-plus e-mails, the lawyers appealed to the state Supreme Court as part of an effort to “delay the full exposure of their campaign to manufacture a regulatory situation at the credit union.”
A CUToday.info review of the cease-and-desist order found the following:
- That the regulator had found, and the board had consented, that the credit union had engaged in “unsafe and unsound practices and violations of law, rule or regulation, have committed fraudulent or questionable practices in the conduct of the credit union’s business and have violated conditions imposed in writing by the Administrator.
- That the credit union has been operating with a board of directors that has failed to provide adequate supervision over and direction to the management of the credit union…and has failed co comply with directives from the regulator.
- That the credit union has been operating with management that has failed to demonstrate the ability to correct problems and implement appropriate risk-management practices.
- That it has operated without proper expertise, policies and procedures over its member business loan portfolio.
- That is has granted, renewed and extended loans, mortgages or otherwise, to members disguised as straw borrowers.
The cease-and-desist order requires the board to improve oversight of the credit union, assume full responsibility for the approval of sound policies, to hold meetings no less frequently than monthly at which a list of issues must be reviewed, to keep board members demonstrating that all of those requirements are being complied with, to ensure each board member goes through training (with the specific training areas all identified), and to document that training.
The state regulator has also ordered that within 60 days the credit union find qualified management to execute all components of the cease and desist, including a new CEO, a new senior lending officer and a new COO.
The order calls on Alabama One CU to reduce its MBL concentrations and to retain a qualified appraiser with expertise to appraise undeveloped land and such buildings as present on certain properties, and that it cease offering any new business loans.
Other components of the C&D call on Alabama One’s Supervisory Committee to engage an independent third party for a comprehensive loan review, with specific mention of local businessman Danny Ray Butler; to improve its procedures around SARs and CTRs; to maintain a net worth ratio of no less than 7%; to charge-off certain losses; and make improvements in other areas of its operations.
While the cease-and-desist does not identify specific individuals, it makes clear the regulator is concerned about conflicts of interest on the board. The order requires that the board submit to the state regulator written policies “designed to bring to the attention of each member of the board conflicts of interest that may exist in approving loans or other transactions…”
The credit union has been ordered to provide every member with a copy of the cease-and-desist.
The $600-million Alabama One has been embroiled in controversy surrounding business Danny Ray Butler, who is currently in federal prison following conviction of charges related to fraudulent loans and check kiting. Documents filed as part of Butler’s bankruptcy filing in 2012 indicated that at that time he owed Alabama One $25 million, although the Tuscaloosa News has reported that that debt has since been reduced.
Alabama One is in the process of foreclosing on two Butler properties on which it holds mortgages, including a 108-acre estate.
The Tuscaloosa News quoted Paige Howard, Butler’s fiancée, who has power of attorney for Butler, as saying, “The real story of how Danny Butler ended up in a federal penitentiary has not yet been told. While there’s no doubt he made some poor choices, there’s also no doubt that a lot of people took actions, made decisions and advised Danny Butler about what to do and how to do it. When all the facts come out, I predict there will be a lot of surprises and a lot of surprised people.”