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CIBC quietly closes books on Harry Migirdic affair

CREDIT: JOHN KENNEY, GAZETTE FILE PHOTO

Harry Migirdic, whose mishandling of client accounts led to losses in the millions, tries to conceal himself from a photographer at the Palais de Justice in January 2005.

 

In the wake of a scathing June judgment by a Superior Court judge, brokerage has quietly settled out of court with clients of a former vice-president

 

PAUL DELEAN

Friday, September 1, 2006

The brokerage division of the Canadian Imperial Bank of Commerce has quietly turned the page on one of the more unflattering chapters in its history.

In the wake of a scathing June judgment by Superior Court Judge Jean-Pierre Senecal, who ordered the CIBC to pay more than $3 million to a retired couple who had been misled by former Montreal broker (and CIBC Wood Gundy vice-president) Harry Migirdic, it has settled out of court with more than a half-dozen other onetime clients of Migirdic.

 

Terms of the settlements were not revealed and the law firms involved would not discuss them, but the plaintiffs had been seeking restitution for more than $3 million in losses and millions more in punitive damages.

Haroutioun and Alice Markarian, who had $1.4 million seized by the CIBC in 2001 to honour guarantees Migirdic deceived them into signing for people they didn't even know, were awarded an unprecedented $1.5 million in punitive damages by Judge Senecal, who presided over the Superior Court trial in 2005.

He said the brokerage appropriated the money illegally, treated the Markarians in an arrogant and "degrading" manner and "cruelly failed" to control and supervise its employee.

"CIBC must assume responsibility for the fraud of which (the Markarians) were victims," Judge Senecal said. "It was responsible not only indirectly, but directly."

He further chided the brokerage for bestowing on Migirdic the title vice-president based on sales, creating "a false sense of confidence" that clients were dealing with senior executives, and for dragging out the legal proceedings in an attempt to "exhaust" the plaintiffs or cause them to settle for less than their due.

"The evidence shows the defendant's attitude toward the Markarians was not an isolated gesture, but extended to other victims," Judge Senecal added.
 

“CIBC must assume responsibility for the fraud.”

JUDGE JEAN-PIERRE SENÉCAL


Since that ruling, court records show notices of out-of-court settlements in the cases of Kiganouchi Papazian and Ara Markarian, who also said they'd unknowingly signed guarantees covering the trading losses of other Migirdic clients.

Papazian, a widow who died in 2003 at the age of 78, had sought the return of $299,275 taken from her accounts in 2001 when the CIBC exercised the guarantees. Ara Markarian had $581,603 seized.

The CIBC also settled with Peter Arslanian, 76, who in his statement of claim blamed $1.2 million in investment losses on "faulty management and incompetence" by the brokerage and Migirdic (who was fired in 2001). Arslanian said his portfolio shrank by $1 million in a year. Migirdic told him he'd mortgage his house to repay him, but was fired first, Arslanian said.

The CIBC, which denied any responsibility for the losses, liquidated a further $111,158 in Aslanian's account to cover a balance it said he owed on a line of credit.

Judge Senecal noted the brokerage's compliance department somehow failed to detect 1,400 unauthorized trades in Aslanian's account.

The CIBC also has settled with Girair Chadakhtzian, whose RRSP was gradually converted from mutual funds into a high-risk portfolio that, by 2001, had almost a 90-per-cent weighting in a single stock, Intergold Ltd., which Migirdic promoted and manipulated. Chadakhtzian was claiming $320,307 for losses in his RRSP and $5 million in punitive damages.

Also settled are the claims of Kiganouchi Papazian's son Richard, who was seeking $166,266 for trading losses in his RRSP; four members of the Toukhmanian family, whose investment account dropped $386,230 under Migirdic's management; and Levon Afeyan and Ana Papazian, who lost $148,000 in their RRSPs because of unsolicited, speculative stock purchases.

CIBC spokesman Rob McLeod confirmed the settlements but would not comment further.

"The matter is closed," McLeod said.

He would not say if the CIBC had yet received, or intended to go after, the $550,870 settlement it won against Migirdic in Superior Court in 2003 over monies he owed at the time of his termination.

During the Markarian trial, Migirdic testified he had not paid the money and the CIBC had not insisted on it or seized any of his property.

The family home in Cartierville, which has a municipal evaluation of $864,000, was transferred by Migirdic to his wife, Vartiter Doghramadjian, in 1998 for "no consideration," according to documents on file at the land-registration office.

DAVE SIDAWAY THE GAZETTE

Harry Migirdic, the former broker at the heart of the CIBC trading scandal, transferred Cartierville home to his wife, Vartiter Doghramadjian, in 1998 for “no consideration.”

Brokerage failed to detect 1,400 unauthorized trades

Judge Senecal noted that Migirdic generated (and split with the brokerage) commissions that averaged more than $1 million a year from 1991 to 2000.

In its action against Migirdic, the CIBC claimed he had "caused and continues to cause considerable damages to plaintiff as a result of his wrongful and illegal behaviour toward plaintiff and its clients." At the time, it evaluated those damages at $100,000.

In retrospect, that number seems a bit low.

 
"CIBC must assume responsibility for the fraud.”
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