Investors Scrutinizing the Regulators

Home Page

InvestorVoice.CA


Securities Regulation In CanadA


Fox Guarding the Hen House

   

CIBC Wood Gundy blames client
'We had duly signed guarantees,' court told.
Couple seeking $10 million in punitive damages and return of almost $1.5 million

 

PAUL DELEAN


Wednesday, February 16, 2005

The head of CIBC Wood Gundy maintained yesterday that retired businessman Haroutioun Markarian was the author of his own misfortune when he affixed his signature to a guarantee of other people's accounts at the urging of his then-broker at CIBC, Harry Migirdic.
 

"We felt, as we had the duly signed guarantees, (that) Mr. Markarian had not given us the tools required to properly supervise our employee (Migirdic)," Tom Monahan testified in Superior Court, where Markarian, 71, and his wife Alice, 67, are seeking $10 million in punitive damages from the CIBC and the return of almost $1.5 million seized from them by the brokerage in 2001 when it exercised the guarantees to cover losses in the trading accounts of Migirdic clients they didn't know.

Monahan's contention that Markarian was a sophisticated, knowledgeable businessman and therefore not "vulnerable" prompted an intervention from Judge Jean-Pierre Senecal, who noted that CIBC Wood Gundy also had many sophisticated, knowledgeable employees.

"Why is it a big problem for him (Markarian) to have been deceived (by Migirdic) and not for you?," Judge Senecal wondered. "Why should he be responsible for everything, because he's a sophisticated businessman, but not Wood Gundy, with many more sophisticated employees?"

Monahan said that, instead of signing the guarantee agreements, Markarian should have alerted CIBC management. "If he hadn't signed those documents, we would not be here today."

Judge Senecal noted that the CIBC's own compliance department had repeatedly raised questions - "very good questions" - about Migirdic's accounts.

Monahan said Migirdic always had "reasonable, rational explanations" for the issues raised.

"I'm not so sure the answers were as good as you said, because the compliance department came back with the same questions many months later," Judge Senecal observed.

Earlier yesterday, the judge urged Monahan to be more forthcoming in answering questions from the plaintiffs' lawyer, Serge Letourneau, qualifying his testimony to that point as "reticent."

Court was told Monday that CIBC Wood Gundy had offered the Markarians $1.5 million to settle the case before it came to trial last month. Yesterday, Monahan said the brokerage had upped the offer to $1.5 million plus interest and costs, but with no provision for punitive damages. "We have consistently not felt we should be subject to punitive damages," he said.

Asked what prompted the CIBC to offer $1.2 million more than in August, when it proposed to the Markarians a $250,000 settlement, Monahan said no new information had emerged, other than the trial date.

"It's always preferable to avoid trials if you can," he said.

Letourneau asked if offers had been made to two other former clients of Migirdic who have initiated legal action against the brokerage. The answer was no.

The trial continues.

pdelean@thegazette.canwest.com

 

"CIBC must assume responsibility for the fraud.
For more information

(click on picture)