Investors Scrutinizing the Regulators

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Fox Guarding the Hen House


CIBC adviser red-flagged, trial told
Manager reprimanded him for sloppiness
Couple suing bank over savings they say they lost through account schemes set up by broker Migirdic



Thursday, February 3, 2005

CIBC World Markets summoned an investment adviser now at the centre of a multimillion-dollar lawsuit against the brokerage to its Toronto headquarters to grill him over his sloppy record-keeping four years before it finally gave him the axe.

The CIBC compliance manager who did the grilling, Guenther Kleberg, told a Quebec Superior Court yesterday he wanted to "throw the book" at the adviser, Harry Migirdic, because Migirdic repeatedly violated company policy through various trade practices and took too much time to update client records.

Four months after that 1997 meeting, Migirdic's assistant blew the whistle on an irregularity involving the signature of a Migirdic client. In 2001, Migirdic was dismissed.

The trial, which started in mid-January, pits retired machine shop owner Haroutioun Markarian and his wife, Alice, against the CIBC World Markets.

The retired couple say they lost a large part of their savings through account schemes set up by Migirdic, their former adviser. They're seeking from the CIBC $10 million in punitive damages, $1.4 million taken from their accounts because of allegedly fraudulent guarantees, $226,935 in transaction losses, plus legal costs.

The couple's lawyer argues CIBC officials knew of Migirdic's 20- year record of "chronic delinquency," failed in its duty to safeguard clients, and kept Migirdic on only because he generated millions of dollars in commissions. In 2000 alone, Migirdic generated $1.5 million in gross commissions, the court heard.

The CIBC argues the transactions that led to the couple's financial loss were legitimate and signed by the Markarians. It is the first of several such lawsuits to come to court.

Despite numerous warnings by CIBC compliance officials about Migirdic's practices, Kleberg testified he did not see an improvement in Migirdic's record-keeping. So he summoned him from Montreal to Toronto.

"I wanted to be strong and for Harry to listen and do something about it," Kleberg, now retired, said. "I wanted Harry to believe this is a serious situation."

Four months later, after being tipped off by Migirdic's assistant, CIBC officials determined Migirdic broke proper procedures in allowing a third party to sign a document for one of his clients.

Kleberg asked Migirdic's superior for his opinion about the signature violation given that Migirdic had received an in-person reprimand in Toronto only several weeks before, the court heard.

The superior, Tom Noonan, answered that he did not believe Migirdic would intentionally commit fraud. Noonan recommended fining Migirdic $20,000. He was eventually fined $30,000.

"What do you think of Noonan's (comment) that the only thing FCs (financial consultants) understand is money?" presiding Judge Jean- Pierre Senecal asked Kleberg.

"There is an element of truth to this," Kleberg answered.

The trial continues today.


"CIBC must assume responsibility for the fraud.
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