Investors Scrutinizing the Regulators

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Fox Guarding the Hen House


CIBC broker never told couple about guarantee
Compliance officers hoodwinked
Migirdic lied to supervisors
ex- VP says brokerage didn't check what he told them



Tuesday, January 18, 2005


On the day in 2001 when he learned he was on the hook for almost $1.4 million in trading losses in the accounts of two complete strangers, retired machine-shop owner Haroutioun Markarian froze in a chair at the CIBC World Markets office in downtown Montreal, and had to be helped from the room.

"I felt physically ill. I was stressed, panicked. I felt I'd lost our security," Markarian, 71, testified in Superior Court yesterday, the second day of the trial into his multi-million-dollar lawsuit against CIBC World Markets.

Markarian and his wife, Alice, were clients of former CIBC World Markets broker Harry Migirdic, as was Rita Luthi, a woman they didn't know. Unbeknown to the Markarians, or Luthi, they also had been made the guarantors of her trading account and that of Migirdic's uncle, Sebuh Gazarosyan.

Luthi, first witness in the case, testified she was under the impression her investments were doing well under Migirdic's management and thought her account was worth between $145,000 and $165,000.

Only when Migirdic went on sick leave in 2001 did she learn the account was empty, and she owed $356,824.

That money was extracted a few months later from the Markarians by CIBC, which exercised their guarantee on her account.

But CIBC later repaid Luthi $115,000, court was told.

The 2002 settlement followed a letter from Luthi's lawyer that originally demanded $224,000 from CIBC, an amount she said had been determined by an accountant who went over her records.

Asked why she had settled for less, Luthi said "I wanted to be done with it. My lawyer said it could take years to go to court."

CIBC lawyers had asked that the terms of the agreement be kept confidential, but Judge Jean-Pierre Senecal denied that request, saying the deal has direct bearing on the matter before the court.

Invited to further explain the rationale of the deal, CIBC lawyer Bernard Amyot said the indemnity was paid to "buy peace," with "no admission of responsibility."

Markarian, a Migirdic client since the mid-1980s, described himself as an unsophisticated investor and said he made it clear to Migirdic he wanted only low-risk investments. The actual choices were left to him.

"I wanted security," Markarian said. "I didn't want to risk retirement money."

He said he never looked closely at any of the documents sent to him and readily signed whatever and whenever Migirdic asked.

"I didn't read them. I had faith in him," Markarian said. "I felt fortunate to be served by a company vice-president."

Usually, Migirdic dropped by the house to have him sign forms. It would have been "like an insult" to read them with him waiting, Markarian said.

He testified he was never aware he'd signed guarantees for the accounts of Luthi and Sebuh Gazarosyan, Migirdic's uncle in Turkey. "Why would I risk the family fortune for people I don't know?"

Before his fateful meeting at the CIBC office in 2001, no one from the firm had ever called him to double-check, Markarian said.

The trading deficit in the Gazarosyan account totalled more than $950,000 when CIBC exercised the guarantee in 2001.

"When the account went from $1 million to a few bucks, that was another shock," said Markarian, who had attempted in vain to get the funds transferred to another institution. "It's not easy seeing an account emptied."

Asked by lawyer Serge Letourneau if it had changed his life, Markarian said, "Surely, it's had an impact ... We had established a certain standard of living. It was cut in half."

The trial continues today.


"CIBC must assume responsibility for the fraud.
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