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Alabama One CEO Takes the Stand.

Byline: David Morrison

John Dee Carruth, CEO of the troubled $603 million Alabama One Credit Union, testified in federal court Friday that the credit union is paying criminal lawyers to represent him, former Member Business Lending Manager Tammy Ewing and perhaps other employees, according to legal sources who were in the courtroom.

Carruth's testimony was part of what became a heated day in U.S. Bankruptcy Court for the Northern District of Alabama, as the credit union tried to convince U.S. Bankruptcy Court Judge Jennifer Hendickson to lift a stay and allow it to sell some of the property owned by Danny Ray Butler. The credit union maintained the property had been collateral for some of its many loans to Butler, according to court filings.

The court date also included some surprise witnesses, including Butler's fiance and a member who is suing the credit union over his involvement with Butler.

Butler pleaded guilty in February of 2014 to defrauding the Small Business Administration and conducting a check-kiting scheme between Alabama One and West Alabama Bank and Trust. He began serving a 36-month sentence in federal prison in Talladega, Ala., in September 2014.

Carruth testified that he thought the credit union might be paying the criminal lawyers fees for other employees as well, but that could not be sure right then, according to the sources.

Contacted by email subsequent to the hearing, Carruth said that the credit union has a policy of providing an attorney for its employees when contacted by the government seeking information or testimony. He declined to say why Ewing had not been put on administrative leave.

Carruth testified that the credit union engaged the criminal defense lawyers as representation for he and Ewing after they were subpoenaed to appear in front of a grand jury investigating Butler in October 2013, according to legal sources. The grand jury did not target either Carruth or Ewing, but she has since declined to answer questions in civil cases involving her work on some loans, because she might incriminate herself.

She cited the same reasons for staying away from the Friday hearing, the legal sources said.

The credit union has not yet said whether it is paying for the criminal representation fees for another credit union employee who also declined to take questions on the same grounds.

Carruth also testified, despite previous denials, that the credit union had continued to make loans to Butler, some with interest rates as low as 2%, even after the indictment for check kiting and fraud.

Other surprises from the day included the testimony of Jerry Griffin, one of the members who sued Alabama One after the credit union foreclosed on property it had convinced Griffin to sign over to back loans to Danny Butler.

Alabama One had called Griffin to the stand to impeach Butler's character further, according to observers, but Griffin had none of it. Griffin said he had not dealt with Butler on the loans but with Ewing, and said at one point he would trust Danny Butler with his money before he would trust Alabama One or Ewing.

When Alabama One's attorney, Mike Hall of the Birmingham firm of Burr and Forman, tried to circle back and asked Griffin, yes or no, would he trust Danny Butler with his money, Griffin responded firmly that he would, the sources reported.

Paige Howard, Butler's fiance, took the stand to reveal that Butler had informed her that he will be released in December 2015 after serving 15 months of his sentence. Howard also testified that the Carruth had paid for insurance on Butler's property that Butler could not afford himself out of what Carruth had called a special account.

Howard shared a photo with CU Times, shown above, that she said shows stacks of loans and loan related paperwork, all or almost all unfiled or unrecorded, that she's found while searching through boxes of Butler's personal papers.

Carruth denied in an email that Alabama One has any such special account.
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Publication:Credit Union Times
Geographic Code:1U6AL
Date:Apr 6, 2015
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