Wednesday, February 9, 2005
The manager of CIBC Wood Gundy's downtown branch acknowledged yesterday
that clients of former broker and vice-president Harry Migirdic had been
victimized by his "significant web of deceit" and said the brokerage
could have done a better job dealing with the matter.
"We recognize today a lot of things could
and should have been done differently," Tom Noonan testified in Superior
Court. "A lot of policies and procedures have changed as a result of
this. Could we have done a better job? One hundred per cent. And we
Retired machine-shop owner Haroutioun Markarian, 71, and his wife Alice,
67, are suing CIBC World Markets (parent company of CIBC Wood Gundy) for
$10 million in punitive damages, plus the return of $1.4 million seized
from their accounts by the CIBC in 2001 to cover the trading losses of
Migirdic clients they didn't know. They contend Migirdic, dismissed by
the CIBC in April 2001, used fraudulent means to get them to guarantee
the others' accounts.
In his second day on the stand, Noonan agreed the Markarians had been
misled by Migirdic, a veteran broker they trusted to manage their money,
but said the brokerage also was a victim.
"Had we known this was happening, our actions would have been 100 per
cent different," he said. "We would not have accepted this. We're
serious business people. We act in good faith, but we rely on the
honesty of the employee."
When the employee deceives, "we're all victimized," he said.
Migirdic admitted in an e-mail to Noonan in February 2001 that the
Markarians knew nothing about the guarantees. Noonan said he believed
Migirdic, and he also believed Haroutioun Markarian when he told him the
same thing after being called in for a meeting at the CIBC office.
But the brokerage still invoked the guarantees to seize $1.4 million
from the Markarians a few months later.
In earlier testimony, it was revealed that Migirdic's large personal
holding in a speculative stock called Intergold so troubled the CIBC's
compliance department that it specifically directed him in 1999 to stop
buying the stock for clients.
But Migirdic, who had 100,000 Intergold shares of his own, ignored that
edict, making at least three subsequent trades that eluded the scrutiny
of CIBC executives charged with reviewing the roughly 2,000 transactions
each day at the downtown branch.
The three trades were purchases for the Markarians' RRSP accounts in May
2000 and January and February 2001.
Noonan was asked by their lawyer, Serge Letourneau, if the trades
violated the 1999 restriction. Noonan said they did.
Questioned about why he had failed to detect the trade in May 2000,
Noonan said the actual checking would have been done by one of his
assistants. While the monitoring can be done electronically now, at the
time it was a completely manual process, he said.
Through a lawyer, the Markarians requested in the spring of 2001 that
the Intergold trades be cancelled. The CIBC agreed to annul the trade
from February 2001, made while the Markarians were away on vacation, but
not the other two, saying there was no justification for it.
"Was that also your state of mind?" Letourneau asked Noonan.
"Yes," Noonan said.
He said the Markarians could have called earlier to complain about the
trades, though he admitted clients were not notified by the CIBC about
Migirdic's Intergold restriction, calling it "an internal matter."
The trial continues next week.