January 19, 2005
Ex-broker Harry Migirdic blew the whistle on himself for irregularities
in his client accounts at CIBC World Markets.
Testifying for a second day in the Superior Court lawsuit of two former
clients against CIBC, Migirdic said that, while on sick leave in
February 2001, he advised his superior, Tom Noonan, by e-mail that he
had about 10 problem accounts that were "killing me."
The accounts in question included two with trading deficits of almost $1
million, two more that were in the red by about $300,000, one with a
$190,000 deficit, another where he'd lost $40,000 trading options and
one that had shrunk in value from $110,000 to $5,000 in just six months.
Asked why he sent the e-mail, Migirdic said "physically and mentally, I
couldn't take the pressure any more."
He said he "felt responsible for all the losses. I should have not
created those losses. Clients should have not lost those monies."
Migirdic provided details of the accounts in two subsequent meetings
with CIBC officials. Communication ended with his dismissal in April
2001. The termination letter mentioned his "many serious violations of
securities rules and regulations."
Migirdic, 49, a former CIBC World Markets vice-president, readily
admitted that guarantees securing some of the accounts had been obtained
from people who had "no clue" what they were. Among them were Haroutioun
and Alice Markarian, the retired couple suing CIBC for $10 million in
punitive damages and the return of the $1.4 million seized from them
when CIBC exercised the guarantees.
One of the accounts the Markarians unknowingly guaranteed was in the
name of Sebuh Gazarosyan, Migirdic's uncle in Turkey.
Migirdic acknowledged yesterday that Gazarosyan was "a figurehead" and
the account actually was his own.
"So the $1 million in losses were in fact your losses?" Markarian lawyer
Serge Letourneau asked.
"You could interpret it that way," Migirdic said.
Much of yesterday's testimony centred on a trade Migirdic made on Oct.
24, 2000, buying 1,000 shares of Applied Micro Circuits Corp. for $205
U.S. a share. The $300,000 trade was initially in the account of Rita
Luthi, but exceeded the margin limit of that account, so Migirdic
transferred the shares to another account by the end of the day.
When the same problem occurred the second time, he moved 200 shares
apiece to two other accounts on Oct. 30. Though the price had dropped to
$140 U.S. by then, the initial purchase price is what the accounts were
"Is it normal practice to transfer shares six days later at a higher
price?" Letourneau wondered.
"No, it's not," replied Migirdic, who also said the practice of
"parking" shares in client accounts, while not common, "is done" in the
In the case of the AMC shares, he orchestrated yet another move,
transferring 300 shares apiece into the individual RRSP accounts of
Alice and Haroutioun Markarian on Nov. 3. By then, the stock was worth
about $147 U.S., but the cost price for the RRSPs was the same as for
the initial purchase 10 days earlier.
Letourneau asked Migirdic if that meant, in effect, the Markarians were
down 37 per cent on the investment the minute it transferred into their
RRSPs. "Yes," he replied.
Migirdic testified he needed authorization from branch manager Noonan or
his assistant to transfer a trade from one account to another, and he
obtained it each time with the AMC shares, using the explanation that
he'd mixed up accounts.
"They accepted that without question?" Letourneau asked.
"Yes," Migirdic said.
CIBC lawyers yesterday acknowledged the "error" in the RRSP transaction
and offered to buy back the Markarians' Applied Micro Circuits shares
for what they paid initially in 2000 - about $95,000 apiece - plus
interest and costs. The offer was accepted, but has no bearing on the
bulk of the suit, which concerns investments outside RRSPs.
The trial continues today.