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Fox Guarding the Hen House

   

CIBC wanted to settle, court told
Offered to refund Markarians amount seized. But brokerage balked at paying punitive damages to two clients of former broker Harry Migirdic

 

PAUL DELEAN


Tuesday, February 15, 2005

CIBC Wood Gundy was prepared to return to a retired Montreal couple the almost $1.5 million it seized from them four years ago, but wouldn't budge on punitive damages, the head of CIBC Wood Gundy told a broker at the firm last month.
 

Their conversation was mentioned yesterday at the Superior Court case of Haroutioun Markarian, 71, and his wife Alice, 67, who are suing the CIBC for $10 million in punitive damages as well as the return of the more than $1.4 million seized from their accounts to pay for trading losses rung up in other accounts of their then- broker at CIBC, Harry Migirdic. The Markarians claim they unknowingly guaranteed the accounts, at the instigation of Migirdic, a 20-year employee dismissed by the CIBC in 2001.

Yesterday's witness, CIBC Wood Gundy head Tom Monahan, 46, admitted discussing the trial last month with Allan Fenerdgian, a broker who has since left the firm.

Monahan told him the firm had offered the Markarians $1.5 million before the trial began in January, but "on punitive damages, that was the only part I was not willing to discuss."

Monahan also confirmed CIBC Wood Gundy had offered the Markarians $250,000 to settle last August. Under questioning from the plaintiffs' lawyer Serge Letourneau, Monahan admitted knowing in the spring of 2001 that Haroutioun Markarian and Migirdic both told CIBC investigators the couple had no knowledge of the guarantees.

"I did not know what to believe," he said. "It was completely contrary to what I had been led to believe for a period of years."

The brokerage still decided to exercise the guarantees a few months later.

Asked if Migirdic's admission about the guarantees figured in the decision to dismiss him in April 2001, Monahan said it had.

"But it was not sufficient to void the guarantees?" Letourneau asked.

"That's right," Monahan said.

He said it was the view of the CIBC's internal and external experts that the brokerage had "a reasonable basis" to proceed as it did, given that it had a series of written confirmations of the guarantee signed by Markarian.

When Letourneau asked if the brokerage had given any consideration to the consequences of its actions on Markarian and his health, Monahan said: "Absolutely." Such actions should be taken "only if you felt you had very much justifiable reasons to do so," he said.

Monahan said he now believes the Markarians did not know the people whose accounts they were guaranteeing, but added, "I still believe those guarantees, today, were duly acknowledged and duly signed by a knowledgeable business person." People presented with a document have an obligation to understand it before signing, he said.

Also yesterday, court was told that, of about 600 investment advisers employed by CIBC Wood Gundy, almost half had the "vice- president" title held by Migirdic. Monahan said the title involved no added responsibilities. It simply meant the broker generated a certain level of revenue.

But he agreed it probably helped them attract clients.

The trial continues today.

pdelean@thegazette.canwest.com

"CIBC must assume responsibility for the fraud.
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