Investors Scrutinizing the Regulators

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Retiree, CIBC in court battle
Broker accused of sapping accounts



Tuesday, January 11, 2005


Retired machine-shop owner Haroutioun Markarian finally got to see the stranger whose investment account he unwittingly guaranteed to the tune of $356,824 in 2001.

Rita Luthi, a resident of the northern Quebec community of Senneterre, was the first witness in Superior Court yesterday in the multimillion-dollar court action pitting Markarian and his wife, Alice, against CIBC World Markets, former employer of their former broker, Harry Migirdic.

In the first of a few such lawsuits to get to trial, they're seeking from the CIBC $10 million in punitive damages, $1.4 million taken from their accounts under "fraudulent" guarantees, $226,935 in transaction losses, plus legal costs, after losing a large part of their savings in a scenario they claim was orchestrated by Migirdic.

In his opening statement yesterday, their lawyer, Serge Letourneau, said company officials knew of Migirdic's 20-year record of "chronic delinquency," and failed in their duty to safeguard clients.

"They kept him employed for one reason - he was one of its most performing producers, generating more than $1 million in commissions," Letourneau said.

CIBC World Markets' lawyer Bernard Amyot, while admitting he had no evidence of a motive for the Markarians' guarantee of Luthi's account, argued in his opening statement that the guarantees were legitimate and signed by the plaintiffs, and the company was within its rights in exercising them.

While the couple's experience was "regrettable," Markarian is a prudent businessperson who "understands the consequences of a signature," Amyot said.

If people can avoid contractual commitments because they claim they didn't read or understand what they signed, the implications for the economic and judicial system are profound, Amyot maintained.

Luthi, 51, who runs a small meat shop with her husband, also is a former client of CIBC World Markets and Migirdic, who was assigned as her investment representative in the early '90s when her first broker left.

She testified yesterday she had no idea her account was being guaranteed by the Markarians, people she didn't know.

Luthi said she didn't even know she was losing money in her trading account. She had indicated to Migirdic she did not want risky investments.

Capital preservation "was primordial for me," Luthi said.

"I had no reason to believe he lied to me," she said. "He reassured me. Because of his position (company vice-president), I was not suspicious."

In her weekly conversations with Migirdic, he indicated her account was worth something in the range of $145,000 to $165,000, she said. "According to him, everything was going well."

Only when she spoke to someone else at the CIBC, after Migirdic went on sick leave in 2001, did she learn otherwise. "They said I should call Toronto," Luthi said. The call confirmed the account was empty, and she owed an additional $356,824.

The person she spoke with asked if she knew the Markarians. Luthi said she didn't.

"I never asked for a loan (guarantee)," Luthi said. "I didn't know what was going on."

A lawyer she consulted is the one who explained the Markarians had been guaranteeing her account, she said.

The case resumes today.


"CIBC must assume responsibility for the fraud.
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