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Class action suit filed against CU over investments
MIAMI (7/7/09)--Attorneys for a Florida woman have filed a class action lawsuit against a Boca Raton-based credit union and four individuals that alleges they lost millions of dollars by investing in a now-defunct company that the suit terms was "a bucket shop rife with fraud." The case--filed on behalf of Boca Raton resident and former IBM employee Claudia Schorrig against IBM Southeast Employees' FCU--"highlights the problem with respected financial institutions referring their clients to other firms without doing the necessary due diligence or closing their eyes to obvious red flags," according to the plaintiff's counsel. The complaint expressly states that it is not accusing the credit union of fraud or of knowing about the alleged fraud. The complaint was filed June 30 in the U.S. District Court for the Southern District of Florida, West Palm Beach division by three Florida law firms--Dimond Kaplan & Rothstein of Coconut Grove; Blum & Silver of Coral Springs; and Sallah & Cox LLC of Boca Raton. In addition to the credit union, defendants include Lary B. McCants, president/CEO of the credit union; and three financial services representatives of Wellstone--Christi Seay, Jay Jones and Barbara Leschander. The complaint alleges that the credit union "negligently solicited and referred" its members to Wellstone Securities LLP, a now-defunct broker-dealer. Wellstone Securities recommended and sold bonds issued by Cornerstone Ministries Investments Inc. to credit union members. Cornerstone is now in bankruptcy, having collapsed under a fraud scheme. Members who purchased the securities lost millions of dollars, said the complaint. The suit alleges that upon the credit union's recommendation, Schorrig paid $60,000 for two bonds issued by Cornerstone through Wellstone and "with the active solicitation of the credit union and at least one of the individual defendants." Schorrig lost that money when the company folded. According to the court records, the complaint maintains that had the credit union performed due diligence it would have found that Cornerstone lied in an SEC registration statement that it was approved for listing on the Chicago Stock Exchange and that several state regulators had brought action against Cornerstone for misrepresenting its stock. The credit union's law firm maintains that the complaint is misdirected and full of inaccuracies, such as the representation of the Wellstone employees as credit union employees. The credit union and its CEO is denying the allegations and intend to vigorously defend themselves in court. The lawsuit, it said, stems from a growing tide of legal actions by victims of fraud, bad judgment, or the economy who look for the nearest deep pockets to blame.


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