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Quebec case a painful win for investors
Judge criticizes CIBC for failing to protect clients

Jonathan Chevreau


Thursday, November 2, 2007

Personal Finance Documents for a landmark legal case hailed a year ago as a “great victory” for investors but publicized mostly in the Quebec media are now available in English. Securities industry watchdog Robert Kyle has just added court-approved translations of French court rulings to his Web site at

Go to “Cases” and “Investor Cases in provincial courts,” then “Markarian vs. CIBC World Markets Inc.”

The Markarians were a retired Canadian couple of Armenian descent defrauded of $1-million in the 1990s by fellow Armenian financial advisor Harry Migirdic.

In June, 2006, Montreal Superior Court Judge Jean Pierre Senécal awarded more than $3-million, including $1.5-million in punitive damages, to Haroutioun and Alice Markarian. As Kyle explains, the couple unwittingly guaranteed the trading losses of people they didn’t know at the behest of Migirdic, then a broker with CIBC Wood Gundy.

The brokerage invoked the guarantees to seize $1.4-million from the Markarians in 2001, leaving almost nothing in their accounts — even though Migirdic admitted to CIBC prior to his 2001 termination that the Markarians were the subject of his fraud and that they were totally unaware.

Judge Senécal called CIBC’s conduct “reprehensible,” saying it “cruelly failed” in its duty to protect its clients and supervise its employee. In August, 2006, the bank settled out of court with at least six other former clients of Migirdic. Terms were not disclosed and CIBC spokesman Rob McLeod declared “the matter is closed.”

Closed and forgotten, if indeed investors in English Canada even knew of the case in the first place. Few outside Quebec are, because until now the court decision and related documents were available only in French. The only prominent English-language coverage of the case was by Montreal Gazette reporter Paul Delean.

In reading judge Senécal’s decision, I was struck by how Migirdic was able to exploit the trust his clients had in him for more than five years. Some of this stemmed from the impressive “vice-president and director” title conferred on him soon after the Markarians became clients.

Year after year, when Haroutioun questioned the annual disclosure of the mysterious “guarantee,” Migirdic dismissed the query with a simple statement it was “a mistake” he’d soon fix.

One thinks of the Peanuts cartoon strip, where the hapless Charlie Brown forever takes another run at the football Lucy always yanks away.

The case raises broader questions about compliance procedures at the big brokerages and their oversight by self-regulated organizations. Reviewing Migirdic’s “numerous faults over the years,” judge Senécal says many were repeated. “It is incredible that, despite their size, none of the faults were discovered by the Compliance Department or anyone else at CIBC.”

The other troublesome aspect is why the IDA or Quebec Securities Commission took no action against CIBC or those behind the fraud. Judge Senécal notes that in February, 2001, Migirdic admitted his fraud to CIBC Wood Gundy president Tom Monahan.

Kyle says Monahan was also on the IDA’s board of directors from June, 2003, to June, 2005, and chair of the IDA’s Retail Sales Committee. Two years later, in April, 2004, the IDA found Migirdic guilty of 24 counts, including forgery, 11 of them related to the Markarian case, and prohibited him from membership. It also fined him $305,000. (He never paid).

However, judge Senécal added, “no criminal charges were ever laid against him. Moreover, there was never any complaint or sanction against CIBC.” Judge Senécal said CIBC persisted in refusing the acceptance of fraud contrary to the facts and all common sense, seizing the Markarian’s assets and forcing a five-year court proceeding.

At one point a CIBC compliance officer suggested it should absorb the Markarians’ losses but this was never implemented. Judge Senécal concluded “CIBC thus became the accomplice in Migirdic’s fraud and did everything in its power to benefit from it directly.”

Kyle’s site poses the question whether the IDA and QSC felt their supervisory roles were exercised properly. When he raised this at last week’s Investor Forum in Toronto he says he was told in private the IDA is now investigating the case.

Chevreau blogs at www.


"CIBC must assume responsibility for the fraud.”
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