Jury Orders CIBC To Pay $52 Million For Money Market Firms' Losses

September 10, 2003 (PLANSPONSOR.com) - A Los Angeles Superior Court jury has ordered a subsidiary of the Canadian Imperial Bank of Commerce (CIBC) to pay $52 million to three money management firms that alleged an undisclosed conflict of interest cost them money.

Paceholder Associates Inc, Oaktree Capital Management and TCW Group Inc had accused CIBC World Markets Corp. of hiding damaging information when it sold bonds issued by now-defunct Renaissance Cosmetics.   Lawyers for the money management companies said the award would cover only part of their losses, even though the award was for the full amount due to lost interest and attorney fees, according to an Associated Press report.

The 1997 deal in question surrounded in issuing of $200 million in bonds by Renaissance Cosmetics.   However, what was not disclosed at the time of the bond sale was that proceeds from the sale were to be used to pay off CIBC’s loans to Renaissance, a conflict of interest, the plaintiffs said in their lawsuit.

Further, during the trial financial shenanigans surfaced in the form of a newsletter called Weasel Parade News that was written by Renaissance’s now-deceased chief executive.   The newsletter, which spoofed the process used by Wall Street to peddle securities, called CIBC’s pro forma financial statements “a fiction of a fiction … so that people with fictional fiduciary powers over real people’s money can spend it like water on us.”

Not surprisingly, a CIBC spokesman said the company would appeal Monday’s verdict. “We are disappointed with the jury verdict,” said Rob McCleod. “CIBC believes there are substantial questions for appeal both as to liability and the award of damages and intends to vigorously prosecute that appeal.”