CIBC wrongfully dismissed financial advisor in bad faith: Court

Bank’s sketchy discipline decisions and poor investigation of alleged misconduct led to bad faith dismissal
By Jeffrey R. Smith
|Canadian Employment Law Today|Last Updated: 04/30/2014

When employers become aware of potential breaches of policy, they have reason to be concerned and to take action. This is particularly true for employers with a high responsibility to the public and high standards of trust and professionalism for employees, such as financial institutions. However, regardless of how high those standards are, misconduct must be legitimate and proven to warrant discipline or dismissal. The difference between a good and bad investigation into misconduct can start with the approach — is it an impartial effort to determine what happened, or is it an attempt to simply prove allegations? If it’s the latter, there is a risk of painting the facts in a biased way. And pursuing a biased investigation can lead not only to wrongful dismissal, but also bad-faith damages. Even if the employer is a bank.

The Canadian Imperial Bank of Commerce (CIBC) wrongfully dismissed a financial advisor when it failed to properly investigate her misconduct and used past events for which she shouldn’t have been disciplined against her, the British Columbia Supreme Court has ruled.

Guiyun Ogden, 41, was a licensed financial advisor for CIBC in Vancouver. Ogden moved to Canada from China in 2000 and, after joining CIBC in 2004, built a portfolio of high-end clients, specializing in people who immigrated from China. She received positive performance reviews and won several awards.

In March 2008, Ogden received a warning letter for some of the loan applications she worked on. CIBC said some of the loan documents were signed in the wrong places, some didn’t properly verify income and some weren’t sent to the retail back office when they should have been. Additionally, CIBC claimed Ogden reduced the loan rates on personal lines of credit after funding. However, when it presented these examples of misconduct to Ogden, the documents themselves weren’t shown to her.

Ogden denied she was responsible for the issues with the documents, as her financial services associate incorrectly signed them. She also claimed CIBC’s instructions on income verification were always changing and weren’t clear, which CIBC’s national director of risk confirmed were “somewhat confusing.”

CIBC later determined it was branch practice to hold income records at the branch rather than send them to the retail back office — other employees had done the same as Ogden but were not disciplined.

As far as the loan rate reductions, Ogden explained she received a manager’s level override or approval for them and they only accounted for five per cent of her loans. Without such approval, she couldn’t have reduced the rate. Ogden had learned from other financial advisors this was a common practice.

Employee protested warning letter

Ogden protested the warning letter because she didn’t feel she was guilty of misconduct. She told her general manager and the associate vice-president of the business unit she was concerned about the letter and worried it could negatively impact her future as a financial advisor. The vice-president assured Ogden the letter wouldn’t impact anything in the future and she should “let it go,” so Ogden dropped her protest.

In January 2010, CIBC’s corporate security learned Ogden had been receiving clothing from a long-term client who owned a clothing factory in China for about six years. Ogden’s supervisor and the vice-president of the business unit determined Ogden had shown a “lapse of judgment” by accepting the clothing as a gift, but agreed it was a misunderstanding that didn’t violate CIBC policy or its code of conduct and there was no conflict of interest requiring discipline. However, this wasn’t passed on to the corporate security investigator, who considered the incident a breach of the code of conduct.

In August 2010, CIBC increased the interest rates on its staff loans. Ogden’s financial services associate, who was in Ogden’s portfolio, wanted to convert her staff loan to a mortgage to get a lower interest rate. Ogden was too busy to take care of it, so she told her associate to get someone else to help her. The associate came back to Ogden a few days later with the application, so Ogden reviewed the information to ensure its accuracy and submitted the application.

However, unbeknownst to Ogden, the associate had input the data herself, which was contrary to a CIBC policy prohibiting employees from processing their own personal transactions. Ogden signed the document as the lender and another employee signed it as the reviewer. Neither realized the associate had filled the application out herself.

The mortgage application was flagged as inappropriate conduct by the back office mortgage department. However, CIBC let the transaction proceed and the loan was converted to a mortgage.

On Sept. 27, Ogden received a final warning letter for failing to avoid a situation “involving an actual or apparent conflict of interest” by having the associate on her portfolio and submitting a transaction in which the associate had entered her own data. The letter indicated failure to follow procedures in the future would result in termination without notice.

Devastated and upset, Ogden asked her general manager why she received the warning letter, and she was told it was because she should have known her associate input her own data. Ogden argued she couldn’t have known without the associate telling her — and the associate later testified she didn’t realize the move counted as a transaction. She also pointed out that the associate was in her portfolio because CIBC had directed her to include the associate a few years earlier. Ogden was also concerned that, as a final warning, there was reference to the 2008 loan rate incident — which the vice-president had told her would not affect her future.

When Ogden challenged the letter, it was revised to say future misconduct “could” result in termination instead of “will.” Ogden still disagreed with the warning letter, but she had found out she was pregnant and didn’t want to pursue it.

Snap judgment to help client in middle of the night

Early in the morning of Sept. 9, 2010, Ogden received a phone call from a client who needed to wire $100,000 from China to her account or she would lose a deal on a new home in Vancouver. She needed two accounts to transfer $50,000 each — Chinese regulations prevented transfers of more than $50,000 out of China — so she asked Ogden if she could transfer the money to two of Ogden’s accounts. This practice was common in China, where bankers and clients had close relationships.

Ogden thought quickly about it and didn’t think there was any problem, so she agreed and moved the funds to the client’s Canadian account the next day.

In October, the transaction came to light in a review of transactions. A further investigation was launched and the corporate security investigator interviewed Ogden on March 15, 2011. The investigator took the position it was a very serious issue and Ogden felt intimidated. The investigator discussed the transaction and the code of conduct, but didn’t inquire as to the circumstances of the incident that pushed Ogden to make the decision.

The investigator reported to a management panel, which felt it was important for CIBC to control Ogden’s exit rather than let her resign — the panel was aware of Ogden’s unhappiness with the discipline letters and wanted to keep her substantial portfolio. Ogden’s employment was terminated for cause, finding she had breached the higher level of trust expected of bank employees.

No opportunity to improve

The court noted Ogden was entitled to time and opportunity to improve her performance after a final warning is issued. However, the decision to terminate came because of the wire transfer, which happened before the final warning was given following the mortgage incident. There was no misconduct between the final warning and the termination, said the court.

Additionally, the court found the prior incidents on Ogden’s record — the loan rate incident, clothing gift incident and mortgage incident — all had reasonable explanations and either did not occur or did not justify discipline. As a result, only the wire transfer incident could form a basis for just cause, said the court.

The court also found the conflict of interest provision in CIBC’s code of conduct was vague and open to confusion, and the only training employees received was an annual online course. Because there was no clear rule, Ogden was forced to use her judgment for the wire transfer — in circumstances in the middle of the night, with a panicked client and no one to consult for advice. That judgment led Ogden to honestly conclude there was no problem with the transaction, said the court. In addition, Ogden received no benefit from the transaction and CIBC acknowledged there was no actual conflict of interest — which was the focus of CIBC’s policy.

The court noted CIBC had the information about the wire transfer in October 2010, but Ogden was allowed to continue in her job until her termination in March 2011. This meant CIBC didn’t have any serious concerns about trusting her to deal with high-level clients in her position.

The court also found CIBC applied its policies inconsistently, as there were “numerous breaches of clear and unambiguous rules” by CIBC employees and management — such as the associate’s input of her own data on her application — which went undisciplined.

The court found the wire transfer incident did not constitute serious misconduct — or misconduct at all — that constituted just cause. Additionally, it’s treatment of Ogden in pursuing discipline in the previous incidents as well as the unfair investigation of the wire transfer was a breach of its duty of good faith, particularly since such a dismissal was likely to prevent Ogden from finding another job in the financial services industry.

“The consequences in this case were so devastating to Ms. Ogden — and CIBC knew they would be — that the bank had a higher level of responsibility to get it right before making a decision that would have such a severe financial, professional, and emotional impact to Ms. Ogden,” said the court. “Failing to ensure the (management) panel had complete and accurate information, and forging ahead with a termination despite having a heightened responsibility to get it right, was cavalier, reckless and negligent.”

The court found CIBC was liable for breach of contract, unjust dismissal, and compensatory damages for bad faith, along with aggravated and special damages. The amount of damages were to be determined at a later trial.

For more information see:

Ogden v. Canadian Imperial Bank of Commerce, 2014 CarswellBC 447 (B.C. S.C.).