Although Tuscaloosa-based Alabama One Credit Union has been released from state control, the embattled financial institution still faces lawsuits in the wake of the ongoing issues surrounding former board members and the organization's former president.
A new complaint against the credit union's insurance company, Cumis Insurance Society, alleges that the actions causing the conservatorship in the first place resulted in losses of a significant amount of the credit union's assets.
The issues with the credit union mostly involve loans to Danny Ray Butler, a businessman engaged in, among other things, the sale of used cars through his company, Butler Wholesale Inc. As well, Alabama One's management was accused of issuing "straw loans" to borrowers for the benefit of other member-owners, who otherwise would not have been permitted to receive financing, as well as management's participation in a check-kiting scheme that admittedly caused Alabama One to lose more than $1.25 million.
"The complaint alleges that a group of officers literally cost the credit union millions of dollars through dishonest acts and conflicts of interests," said Andy Campbell, partner with Birmingham law firm Campbell Guin. "We intend to recover those losses from the insurance company that insured the client against those wrongful acts."
The complaint states, "Cumis has an obligation to diligently investigate the facts, fairly evaluate the claim, and act promptly and reasonably," and that "Alabama One is legally entitled to recover under the bond for the losses it suffered."
The complaint further states, "Cumis has breached its covenant of good faith by, among other things, (1) refusing to cover the losses; (2) demanding that Alabama One violate applicable statutes by producing protected regulatory information; and (3) failing to act promptly and reasonably to investigate the claim."
Alabama One is requesting a trial by jury.