Montreal Gazette, Canada
Jan 18 2005
CIBC broker never told couple about guarantee
Compliance officers hoodwinked; Migirdic lied to supervisors; ex-VP
says brokerage didn’t check what he told them
PAUL DELEAN
The Gazette
CREDIT: JOHN KENNEY, THE GAZETTE
Harry Migirdic tries to conceal himself from a photographer yesterday
at the Montreal courthouse. He told his Superior Court trial he did
not know how he was able to avoid detection so long with his
deceptive practices while he worked at CIBC World Markets.
Former CIBC World Markets broker and vice-president Harry Migirdic
never informed a retired Montreal couple their investments were
guaranteeing the trading accounts of two people they didn’t know, one
of them his uncle in Istanbul, Turkey.
But whenever CIBC’s compliance department questioned him about the
accounts, Migirdic insisted that Haroutioun Markarian, 71, and his
wife, Alice, 67, knew all about the guarantees and were comfortable
with them. He only fessed up to CIBC officials in 2001, just before
being terminated.
Migirdic was asked yesterday by the Markarians’ lawyer, Serge
Letourneau, how he managed to avoid detection despite repeated
inquiries from the compliance department over the years.
“I don’t know,” replied Migirdic, 49, a key witness in the Superior
Court trial in which the Markarians are seeking $10 million in
punitive damages from CIBC, plus the return of $1.4 million seized
from them by the brokerage when the guarantees were exercised in
2001.
Although the couple had never met Migirdic clients Rita Luthi and
Sebuh Gazarosyan, the beneficiaries of the guarantees, the broker
told his supervisors at CIBC that Luthi was a business partner of
Markarian and Gazarosyan was a shareholder in his company.
Migirdic said that, to his knowledge, the CIBC never attempted to
contact Gazarosyan directly, though the trading account had been in
the red for years and previously was guaranteed by other clients.
The former broker admitted yesterday to changing the risk tolerance
on the Markarians’ know-your-client forms without their knowledge or
consent, misleading them about why they were getting statements
bearing Gazarosyan’s name (he blamed it on a mix-up in the Toronto
office), and falsely telling CIBC the Markarians had specifically
asked not to receive monthly statements of trading activity in the
Luthi account.
Asked by Letourneau why Markarian routinely signed whatever he handed
him, without verifying the contents, Migirdic said “he trusted me …
I guess because I’ve done good for him in past years.”
In the course of yesterday’s proceedings, it emerged that Migirdic –
now unemployed – had run afoul of CIBC’s trading practices in the
mid-1990s, when he was found guilty of discretionary trading in an
account that ran up losses of $250,000. CIBC repaid the client but
each month kept a portion of Migirdic’s commissions as repayment, he
testified.
Asked by Letourneau if CIBC had ever asked him to pay back any of the
almost $1 million in accumulated losses in the Gazarosyan account,
and for which the Markarians were ultimately held responsible,
Migirdic said no.
In other testimony yesterday, Alice Markarian said the couple’s trust
in Migirdic was such that when he asked them to sign something, they
did it. “I trusted my husband, who trusted Harry Migirdic.”
Like them, Migirdic was an active member of Montreal’s Armenian
community, from which he drew about half his 400 clients.
Migirdic even came to the house and helped organize their financial
papers, she said. “I saw him tearing stuff up sometimes.”
She said the CIBC seizure had a profound effect on her husband, who
had only $300 to his name when he immigrated with her from Egypt in
1962 and built a prosperous machine-shop business here.
“He didn’t want to go to Armenian functions. He didn’t want to face
people who wanted to talk about (what happened). He felt humiliated
personally.”
Son Arek, 37, also testified his father took it hard. “He was a
respected man, a founding member of the Armenian community, one of
the builders. It was a tremendous blow to his ego, his self-esteem
…. Losing half what you worked your life for, in one afternoon, at
his age – it changed him. It aged him.”
The trial continues today.