Nearly three years after members filed a class action suit against IBM Southeast Employees Federal Credit Union for the sale of fraudulent investments, a judge has approved a settlement.
According to a court omnibus order signed Feb. 24, both parties have agreed to settle for $8.8 million, which represents 85% of the total damages sustained by the members. Of the settlement amount, the members will receive an immediate cash payment in the amount of $950,000.
As of the balance, the defendants have assigned the members all of their insurance coverage claims that might enable them to recover from the credit union's insurance carrier, CUNA Mutual Group's CUMIS Insurance Society, the order read.
The insurance carrier has agreed to aid the members in the pursuit of those claims, according to the court order provided to Credit Union Times by Robert Linkin, one of the attorneys with Dimond, Kaplan & Rothstein, the Florida firm representing the members.
Filed in 2009, the complaint said the $843 million credit union in Boca Raton, Fla., and its representatives negligently solicited and referred its members to Wellstone Securities LLP, a now-defunct broker-dealer. Wellstone recommended and sold bonds issued by Cornerstone Ministries Investments Inc. to the members, according to the complaint. Cornerstone later filed for bankruptcy and members who purchased the securities lost millions of dollars.
The complaint said more than 100 members in Florida and Georgia purchased $10.5 million of the securities.
In the Feb 24 order, the court said the case was complex, had taken more than two years to work out and was further complicated by the notion that there is virtually no case law discussing the gatekeeping duty of a federally chartered credit union, the plaintiffs said.
However, the NCUA has pronouncements and advisory letters that provide guidance on working with third party service providers and broker-dealers, the order noted.
In agreeing to the settlement, the court said expenses to move the case further would have been enormous.
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