NASHVILLE, Tenn. – A suit filed Friday in federal court here charges CUNA Mutual’s CUNA Brokerage Services unit misrepresented the nature of a multi-million dollar retirement plan a credit union purchased for its long-time CEO.
Southeast Financial CU claims that a former executive benefits specialist for CUNA Brokerage, Daniel Balogh, who has since been sued by CUNA Mutual, sold the so-called 457(f) retirement plan for the credit union’s CEO, John Simmonds by representing that the funds were returnable "deposits," when in fact they were invested in market-based annuities that will fall short of the promised returns, leaving the credit union with a deficit to fund the plan. The plan is similar to one that has been sold to dozens of credit unions to fund their CEO’s retirement benefits.
In its suit, Southeast Financial alleges that Balogh, used the funds invested by the credit union to buy a variable annuity and a variable universal life insurance plan, both sold by CUNA Mutual, in Simmonds’ name. "Contrary to Mr. Balogh’s and CUNA’s representations and assurances, neither the Members Variable Annuity II or Variable Universal Life II Plan were safe or conservative investments," states the credit union’s suit. "Rather, both were almost entirely comprised of risky and volatile publicly traded equity and debt investments."
"But for the market collapse, Mr. Balogh and CUNA might have gotten away with misrepresenting their proposal as safe and suitable. As the markets fell, however, it became apparent that Southeast Financial’s principal was not safe and that the returns that Mr. Balogh promised were as illusory as his claimed expertise in deferred compensation," states the suit.
The Southeast Financial plan was supposed to start paying Simmonds monthly benefits of $6,194 on May 11, 2012, the CEO’s 65th birthday, but is currently almost $1 million short of funding, according to the suit.
Balogh left CUNA Mutual to work for Southwest Business Corp. in November 2007 and is being sued by CUNA Mutual for allegedly violating a two-year non-compete clause.
Lawyers for Balogh and CUNA Mutual could not be reached over the Labor Day weekend.
