Columnist Scrutinizes CU Legal Tactics

Just because a business has the words "credit union" in its name does not necessarily mean it is looking out for your best interest.

A January 16 column by Gretchen Morgensen, a columnist for the New York Times, highlights this point.

The column focuses on a questionable brokerage recommendation of an employee of State Employees Credit Union (S.E.C.U.) located in Raleigh (NC) -- the second largest credit union in the country -- and the credit unions's use of the legal process to thwart arbitration adding significant cost to the investor seeking relief.

At the heart of the issue is whether the investment recommended by the S.E.C.U. employee to an octogenarian widow, who died 3 years later, was suitable. The widow invested $1 million in a real estate investment, which ultimately lost $700,000.

In 2009, an arbitration claim was filed against S.E.C.U. seeking to recover losses as well as $2.6 million in damages for alleged claims of senior citizen financial abuse and for legal fees.

Notes taken by an S.E.C.U. employee in 2005 stated that the widow “confuses easily.” But in response to the complaint, State Employees CU stated that the widow was a sophisticated real estate investor.

However in June 2010, the credit union, using legal tactics outside of the Finra arbitration process, brought a counterclaim in Superior Court in San Diego.

Arthur S. Leider, president of Investors Arbitration Specialists in San Diego, who represents the trust set up by the widow, contends that the credit union lawsuit was a form of harassment meant to impose additional cost to the investor seeking relief.