By Donald V. Watkins
©Copyrighted and Published (via Facebook) on September 25, 2015
David Byrne – Governor Bentley’s Consigliere
On August 14, 2009, federal and state regulators took control of Colonial BancGroup, a regional banking powerhouse based in Montgomery. The seizure of Colonial Bank's 346 branches and $26 billion in assets made it the sixth-biggest bank failure in U.S. history, the worst of 2009, and the third largest during the credit crisis that plunged the financial markets into turmoil in 2008. Colonial’s collapse cost the Federal Deposit Insurance Corporation $2.8 billion. Colonial’s shareholders lost billions of dollars in stock value. Thousands of bank employees lost their jobs.
Although the public focused on the failed leadership of Bobby Lowder, Colonial’s founder and CEO, it was David B. Byrne, Jr., who was in charge of the bank’s legal affairs and regulatory compliance when Colonial failed. Byrne was Colonial’s executive vice president, general counsel, and corporate secretary. Byrne is the same man who would later emerge as Governor Robert Bentley’s chief legal advisor and consigliere.
After Colonial collapsed, Byrne was retained for a while by BB&T, the North Carolina-based bank that bought Colonial’s assets. He was eventually pushed out of BB&T and was looking for work.
Lowder, Byrne and other top Colonial executives worried about an investigation by the FBI and the Office of the Special Inspector General for the Troubled Asset Relief Program into Colonial's “warehouse” mortgage lending business. Colonial had applied for $550 million in TARP funds during the financial crisis of 2008, but the bank was never cleared to receive a bailout.
On August 3, 2009, just eleven days before regulators shut down Colonial, law enforcement agents raided the bank's offices in Orlando, where the warehouse lending was managed. David Byrne was the man who signed off on the legal review of Colonial’s regulatory filings with the U.S Securities and Exchange Commission. He also reviewed Colonial’s highly suspect TARP funding application before it was submitted to the U.S. Treasury Department. Byrne worried that, as Colonial’s executive vice president and general counsel, he could face civil or even criminal charges if fraud was found in the bank's TARP application or customary business operations.
Federal prosecutors found a $3 billion fraud scheme operating during Byrne’s watch at Colonial. Senior vice president Catherine Kissick was charged, convicted, and sentenced to eight years in prison for her role in the fraud. Byrne escaped criminal prosecution. However, Byrne was deemed to be “unemployable” because the $3 billion fraud scheme operated right underneath his nose at Colonial and it was larger than the $2.7 billion accounting fraud discovered in 2003 at HealthSouth.
In 2012, Bentley rescued Byrne from the ranks of the unemployed by hiring him to replace R. Cooper Shattuck as his chief legal advisor. This action came after Byrne’s wife, Alice Ann Byrne, brokered a deal with Bentley to advance and protect the interests of Rebekah and Jonathan Mason as state employees in exchange for a job for David. Alice, who has served as the general counsel of the State Personnel Department since 2000, practically ran the Department from her lawyer’s position. The governor agreed to this deal.
After David joined Bentley’s staff, he and Alice took care of the governor’s wishes with respect to his favorite state employees. They arranged for former trooper Wendell Ray Lewis to receive a total of $799,285 in base pay and overtime as a member of Bentley’s executive security detail, as well as a highly questionable promotion from sergeant to lieutenant in 2014. They aided Bentley in directing $393,538 in total compensation to Jonathan, as the director of Serve Alabama. They also helped Jonathan increase Serve Alabama’s small staff to thirteen state employees.
David advised Jonathan on Serve Alabama’s distribution of $20 million in grants and program benefits to religious and service organizations across the state. These payments included substantial financial contributions each year to the First Baptist Church of Montgomery Foundation, where David Byrne serves as a board member.
David also cleared the way for Rebekah to operate her private public relations firm, RCM Communications, Inc., while working full-time as Bentley’s communications director. Undeterred by state ethics laws, Rebekah conducted RCM business from the governor’s office and used state resources to further her private business interests.
On August 26, 2015, David Byrne, along with Bentley and others, were accused in a federal court lawsuit of forcing Alabama One Credit Union, a Tuscaloosa-based financial institution with $598 million in assets, into settling hotly disputed legal claims for millions of dollars to benefit one of Byrne’s former law partners and close personal friends, attorney Justin D. "Jay" Smyth, III. Bentley and Byrne, who are named defendants in the lawsuit, pressured a state regulatory agency into facilitating the delivery of monetary benefits to Smyth and his clients. This was an unprecedented abuse of executive powers by Bentley and Byrne. Their actions pushed Alabama One into conservatorship under state control.
This was the second time in six years that David Byrne has been a central figure in the demise of a regulated financial institution. First, it was the 2009 collapse of Colonial Bank. Next, it was the conservatorship of Alabama One. Each time, the collateral damage to innocent parties was catastrophic.
