Thursday, June 15, 2006
In a ruling hailed by their lawyer as "a
great victory for investors," a Superior Court judge has ordered CIBC
World Markets to pay a retired Montreal couple more than $3 million,
including an unprecedented $1.5 million in punitive damages.
Haroutioun and Alice Markarian sued CIBC
after it seized $1.4 million from their accounts in 2001 to cover the
trading losses of people they didn't know.
They'd unknowingly guaranteed the accounts
by signing documents misrepresented to them by their former CIBC Wood
Gundy stockbroker, Harry Migirdic.
During the 25-day trial last year, CIBC
claimed the guarantees obtained by Migirdic were valid and the
Markarians were the agents of their own misfortune by signing them.
But Superior Court Judge Jean-Pierre
Senecal would have none of it.
In a sternly worded 150-page judgment,
Senecal said that the Markarians had clearly been victims of organized
fraud and the bank ignored "reality, facts brought to its attention and
common sense" in pretending otherwise.
He called CIBC's conduct "reprehensible"
and said it never convincingly explained the motives for the actions it
Senecal said nobody would willingly put up
all their assets at a brokerage to guarantee the accounts of people they
"You'd have to be crazy," he wrote. "They
(the Markarians) are not."
The Markarians, he said, were credible,
honest people, and the bank had no reason not to believe them when they
said they knew nothing of Migirdic's actions.
The bank's own compliance department had
itself missed numerous opportunities to detect Migirdic's misdeeds well
before 2001, Senecal wrote.
"CIBC must assume responsibility for the
fraud of which (the Markarians) were victims," he said. "It was
responsible not only indirectly, but directly."
Senecal said CIBC had "cruelly failed" in
its duty to protect its clients and control and supervise its employee.
Migirdic, because of a history of
regulatory breaches, should have been the subject of particularly close
scrutiny, but that was not the case, Senecal said.
He ordered CIBC to return the $1.4 million
seized, with interest since June 2001.
He granted the Markarians an additional $1.5 million in punitive
damages, which their lawyer Serge Letourneau said is - to his knowledge
- the largest amount levied in punitive
damages against a brokerage in Canada.
CIBC also was ordered to pay $50,000 to
each of the Markarians for moral damages, $94,560 of their legal fees
and all trial-related expert costs.
The judgment even included a clause
ordering CIBC to turn over $1.5 million to the Markarians regardless of
whether it appeals, because of their advanced ages.
Senecal said the brokerage had shown
contempt for the couple throughout the process, depriving them of their
property and causing them stress at what should have been a tranquil
time of their lives.
Its refusal to show the slightest good
faith and insistence on dragging out the proceedings were
"reprehensible" and among the reasons cited in his damage award.
In determining the amount, he said, he
took into consideration the fact CIBC had itself sued former employees
in Ontario for $10 million in punitive damages.
CIBC declined to comment on the ruling,
but the Markarians' lawyer had plenty to say.
Letourneau called the judgment a milestone
for Canadian investors because it signals to financial institutions they
could face serious financial penalties - not just reimbursement of
monies in dispute - if they're judged to have dealt unfairly with
"This helps restore the balance between
small investors and financial institutions that try to abuse their
positions of dominance," he said.
"Financial institutions have deep pockets.
With many more resources than their clients, they can try to exhaust
them. The worst that could happen was being forced to return the money.
Now, there's more at stake.
"The message is clear - don't abuse your
dominant position to crush people."