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CIBC not diligent
Lawyer: Raised clients' risk profile, court told. Bank 'should have rid itself of Migirdic's services well before it did'

 

PAUL DELEAN

 

May 25, 2005

If CIBC Wood Gundy had been diligent in supervising Harry Migirdic, a stockbroker with a history of rule infractions, it would have detected anomalies in his clients' accounts well before he admitted to them just prior to being terminated in April 2001, a lawyer for two ex-clients said yesterday.

 

Serge Letourneau was making his final arguments in Superior Court on behalf of Haroutioun Markarian, 71, and his wife, Alice, 67, a retired couple suing the CIBC for $10 million in punitive damages and the return of $1.4 million seized from them in 2001 under guarantees Migirdic had them sign covering the accounts of people they didn't know.

Letourneau said that, between 1980 and 2001, Migirdic had been threatened with being fired at least four times by superiors at Wood Gundy and Merrill Lynch Canada (which merged with Wood Gundy). It's unusual in business to give anyone that many warnings, he said.

The CIBC "should have rid itself of Mr. Migirdic's services well before it did," Letourneau said. "It willingly blinded itself in its supervisory work."

When Migirdic's misdeeds eventually came to light, the brokerage tried to shift the entire responsibility to the Markarians, whose only real mistake was to trust their CIBC broker, Letourneau said.

"If Mr. Markarian had the misfortune of being duped by Mr. Migirdic, he's not alone," the lawyer noted, rattling off a list of names that included CIBC Wood Gundy's branch manager, Tom Noonan, and several members of the CIBC compliance department who failed to follow up on questions raised about Mirgirdic's accounts and trades over the years.

Letourneau said the Markarians were never actually contacted by any CIBC official other than Migirdic before his firing, though their risk profile (updated periodically by Migirdic) gradually evolved from low-risk to speculative, the exact opposite of what's appropriate for people their age.

Their investment priority had been preserving their capital, yet it ended up being taken from them, "which is nonsensical," Letourneau said.

He noted that the CIBC also never informed Migirdic's clients of his "chronic" rule breaches and fines and never even stripped him of the vice-president title that supposedly required a good compliance record.

The fact he was one of the top producers in the Montreal branch, generating $11.5 million in commissions between 1990 and 2001, might explain why he kept the title, Letourneau said.

Closing arguments in the case, now in its fifth month, continue today.

pdelean@thegazette.canwest.com

 

"CIBC must assume responsibility for the fraud.
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