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Thomas Y. Kim v. CUSO Financial Services - 2/16/2006

Award Amount- $539,000.00

Case Summary: On February 16, 2006, a three-person NASD arbitration panel sitting in Denver, Colorado awarded Thomas Kim, a financial advisor for CUSO Financial Services, a San Diego-based broker-dealer that services credit unions nationwide, $539,000 as compensatory damages for his claims of defamation and breach of contract, among others. Mr. Kim was represented by Liddle & Robinson, LLP. From 1998 through July 2003, Mr. Kim, a Korean-born immigrant, worked as a financial advisor affiliated with the Bellco Credit Union in Denver, Colorado, becoming the credit union's largest producer. In July 2003, CUSO and Bellco terminated Mr. Kim's employment and accused him of making "unauthorized trades" in over 200 clients' accounts. After five days of hearings, the panel rejected CUSO's defense that it owed Mr. Kim nothing because of his allegedly unauthorized trading activity. In January 2001, CUSO replaced FNIC as the broker-dealer servicing Bellco. At this time, CUSO heavily recruited Mr. Kim, the highest producing broker in FNIC's nationwide operation. Mr. Kim agreed to join CUSO - and bring with him his 1,000 clients and their assets - in exchange for a guaranteed 50 percent payout and a unique provision in his contract that allowed him to take his clients after five years of service to CUSO. Mr. Kim believed that this five-year release would ensure him and his family financial stability well into the future. CUSO and Bellco, frustrated that Mr. Kim negotiated such a high commission payout (the highest in CUSO's nationwide operation), tried to lower Mr. Kim's commission payout. Mr. Kim resisted, insisting that CUSO and Bellco live up to the terms of the contract. In July 2003, CUSO and Bellco accused Mr. Kim of making "unauthorized trades" in more than 200 clients' accounts. While the "investigation" was pending, CUSO and Bellco again tried to make Mr. Kim agree to a lower commission payout. Despite his weakened negotiating posture with these bogus charges pending, Mr. Kim still refused to agree to the new terms, claiming he was innocent of the charges. On July 29, 2003, CUSO and Bellco terminated Mr. Kim's employment. Adding insult to injury, despite conducting an audit of Mr. Kim that found that he operated within all applicable rules and regulations, CUSO indicated to the NASD on his Form U-5 that it had a pending investigation against Mr. Kim, which spawned an NASD investigation. CUSO also sent Mr. Kim a series of letters threatening him with legal action if he contacted any of his clients. Accordingly, Mr. Kim was unable to get a comparable job and, to this day, has never been able to reclaim his 1,000 clients. At the February 2006 hearing, CUSO failed to present any credible evidence of Mr. Kim's "unauthorized trades" but for an unsubstantiated allegation that he admitted it. Mr. Kim denied this allegation. Further, CUSO's internal documents (produced in the arbitration process) supported Mr. Kim's position that he never made this admission. Moreover, CUSO sent out so-called "happy letters" to approximately 500 of Mr. Kim's clients inviting them to call CUSO's compliance personnel if they had any complaints. According to a letter CUSO sent to the NASD in September 2003, not one client called in response to the 500 happy letters. According to this same letter to the NASD, not one client actually complained to CUSO that Mr. Kim made an "unauthorized trade." Notwithstanding the evidence, CUSO told the NASD that Mr. Kim admitted to making - and in fact did make - "unauthorized trades" in over 200 clients' accounts, and the NASD adopted CUSO's "finding," issuing Mr. Kim a "Letter of Caution" in mid-2004. The panel, by its award, obviously disagreed with the NASD's finding. In addition, after Mr. Kim filed his Statement of Claim with the NASD, CUSO tried to further smear Mr. Kim's reputation. In early 2004, a former client of Mr. Kim's submitted a complaint that Mr. Kim sold her an "unsuitable" variable annuity in 2000. At this time, CUSO "dismissed" the complaint. Weeks after Mr. Kim filed the arbitration Statement of Claim, CUSO re-opened its "investigation" into this woman's complaint. After the Statement of Claim had been filed, CUSO changed the nature of the woman's complaint to "unauthorized trades" (so it bolstered CUSO's claims that Mr. Kim engaged in unauthorized trading) and settled her $14,500 claim for $28,000. Because CUSO re-opened the investigation and settled the case for $28,000, the incident was reported on Mr. Kim's Form U-5, and, as a result, his employer at the time terminated his employment.

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