The most intriguing part of this whole story was that Saban tried to renew Smith's scholarship even after he wanted expressed his interest in transferring. I don't beleive Smith is telling the entire objective truth, however I do think that Saban was thirsty to keep him at Alabama due to his need in the secondary.
IMO here is how this went down:
-Mo Smith was tired of being overlooked and likely had to do with Tony Brown getting chance after chance at UA. By all accounts, Smith was a kid that did things right and never had off field problems, yet found himself a spot or two away from having a consistent role until the end of last year. When TB was allowed to practice all Spring and likely took a lot of legit reps, that probably but Smith on tilt.
-Mo Smith didn't do his homework and thought if Chris Black was allowed to go to an SEC school, he would be to. Not understanding the intricacies of the situation, he had made plans in his head that Saban was not going to allow.
-Now Saban is trying to clear up a situation that he created by the lack of consistency and/or organization with the Black situation. Had Black found any other school outside of the league, this statement would not be necessary. Whether you want to blame it on timing, assistants, administration, etc., bottom line is that if the papers were not addressed and processed in time, the buck stops on his desk. If those reports are true he dropped the ball, whether he meant to or not.
-Smith's parents got involved and are willing to make this a media circus to bring negative attention to Saban after what they feel was unfair treatment of their son (before the transfer situation). They have now accomplished their goal of dragging UA/Saban through the mud, which may or may not be deserved IMO.