A CIBC bank branch is shown in Old Montreal, Thursday, Feb. 26, 2009.Ryan Remiorz/The Canadian Press
Two former investment advisers are suing CIBC World Markets Inc., claiming they were wrongly dismissed after the Ontario Securities Commission accused them of involvement in a high-profile insider trading case.
Paul Azeff and Korin Bobrow have filed a claim in Quebec Superior Court seeking punitive damages from the brokerage firm, which is a division of Canadian Imperial Bank of Commerce.
Mr. Azeff, who was a former investment adviser at CIBC in Montreal, is seeking $27-million plus interest in compensation for his loss of clientele after his dismissal, while Mr. Bobrow, who was an associate adviser who worked with Mr. Azeff, is seeking $1.8-million plus interest in punitive damages for wrongful dismissal.
The case has the potential to create an important precedent for other companies seeking to discipline employees facing regulatory accusations of wrongdoing, especially when the claims have not yet been proven before a court or tribunal.
CIBC has not filed a statement of defence yet in the lawsuit, and has not yet issued a comment on the plaintiffs' most recent claim.
The OSC accused the two men of insider trading in 2010 in a case that also involves former Bay Street lawyer Mitchell Finkelstein. The OSC alleged Mr. Finkelstein learned about undisclosed takeover deals in his work as a mergers and acquisitions specialist, and passed along tips about the deals to Mr. Azeff, who was an old friend of his from university.
The OSC alleged Mr. Azeff and Mr. Bobrow traded on the information and passed along tips to their clients. The case has not yet gone to a hearing and the allegations have not been proven. Both men were suspended from their jobs the day after the OSC named them in a statement of allegations in November, 2010, and were fired the following month.
In a hearing before Quebec's Commission des relations du travail (CRT) last year, CIBC said it did not base its decision to fire the men on the insider trading allegations because it did not have "the smoking gun" to prove the OSC's case. Instead, the brokerage firm said Mr. Azeff and Mr. Bobrow were fired for breaching internal rules requiring investment advisers to document reasons for recommending trades to clients and for breaching rules that prohibit advisers from trading for their personal accounts ahead of doing trades for clients.
The bank also said the men were "untruthful" when interviewed internally about their trading.
The CRT, however, did not accept CIBC's evidence that policies were breached, saying the advisers had analyst reports and other research to justify their decisions to purchase shares. It also rejected allegations the men were untruthful in interviews.
"The employer has not proved a contravention of the policy that would justify immediate dismissal," the panel ruled in July.
The CRT said it would have upheld the dismissals "without hesitation" if CIBC had proven the men were involved in the illegal acts.
CIBC has launched an appeal of the CRT's decision and an appeal hearing is scheduled for the end of May.
In the meantime, the men have turned to the courts to seek higher payments for punitive damages and loss of business, which are above base compensation being sought from the CRT.
Mr. Azeff alleges his clients' portfolios were worth $300-million at the time of his dismissal, and about 60 per cent of his clients stayed with CIBC after he left the company. His claim values the business allegedly lost as a result of his dismissal at $27-million.
"It is clear that the defendant has been enriched as a result of its offending and abusive conduct toward the plaintiffs," the lawsuit alleges.
Mr. Azeff is also seeking punitive damages of $1.8-million, but the request is included in a separate legal filing as part of another legal action. In November, CIBC filed a lawsuit against Mr. Azeff alleging he owes about $300,000 in unpaid loans he received from the bank while an employee of the company. Mr. Azeff has filed a counter claim seeking $1.8-million in punitive damages because of his dismissal.
Janet McFarland