The $418 million Southeast Financial Credit Union has filed a suit against CUNA Mutual Insurance Society, CUNA Brokerage Services Inc. and one of its former representatives for alleged claims of misrepresentations regarding deferred compensation plans and variable annuities.
According to the Sept. 4 complaint, Southeast Financial contracted with former CUNA Mutual representative Daniel Balogh to develop a supplemental deferred compensation for the credit union's CEO, John Simmonds. The CU said it was not interested in strategies that would cause loss of deposits or principal. Balogh proposed a deferred compensation plan following 457(f) rules recommending that Southeast Financial make a $1.3 million deposit towards the plan. The amount would be used to fund the plan's accrual account and life insurance plan. The CU would receive the amount back at the end of a seven-year agreement.
Southeast Financial said the nearly $1.3 million was not used as a deposit but to purchase a variable annuity and a variable life insurance plan, according to the complaint. The CU said the "deposit" invested in products that exposed the principal to market forces.
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Balogh also developed another 457(f) plan requesting a $4.5 million deposit to offset losses from the first plan. Southeast said he used the amount to buy a fixed annuity that could not deliver on a lump sum payout for Simmonds by an agreed-upon date. Southeast is seeking to recoup it losses.
"We would hope that CUNA Mutual reach out to us and try to make this right," said Elizabeth Ferguson, the attorney representing Southeast Financial. "Besides Mr. Simmonds, there are other defendants that will be added to the suit later."
CUNA Mutual spokesman Rick Uhlmann the company is currently reviewing the suit and could not provide a comment.
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