Thow issue crystallizes for Lee-Chin
Case is affecting his plans for Berkshire

Barry Critchley

Friday, June 01, 2007


This is quite the week for Michael Lee-Chin, the controlling shareholder of AIC Ltd.

Tomorrow the Michael Lee- Chin Crystal -- which forms part of the new expansion program at the Royal Ontario Museum, one of Toronto's major cultural attractions -- will be officially unveiled.

The ROM is undergoing a major transformation. About $200-million is being spent, and Lee-Chin is understood to have kicked in $30-million, enough to get his name on the crystal.

Meanwhile, the B.C. Securities Commission is holding a hearing in Vancouver into the activities of one of his former star producers, Ian Thow, who until May, 2005, was the branch manager and senior vice-president for Berkshire Investment Group, a mutual fund dealer controlled by AIC. Thow worked for Berkshire for almost seven years.

According to the so-called notice of hearing, Thow misappropriated "up to" $30-million. He represented to clients he was able to invest in shares of National Commercial Bank of Jamaica (controlled by AIC), a Berkshire initial public offering and high-yielding mortgages. "Thow's representations were all false," said the notice.

To put the $30-million into perspective, it happens to be equal to what Lee-Chin invested in the ROM crystal and, according to Sean Devlin, enforcement boss at the Mutual Fund Dealers Association of Canada, the regulatory body that oversees Berkshire, it represents the largest loss in the MFDA's history. Thow left Canada two years ago.

Yesterday was day three of the hearings. In fairly graphic detail, Thow's victims have come forward and explained how Thow, who has not attended the hearing and is not represented, moved their savings to his pocket from theirs.

The stories were very, very sad. Maybe Lee-Chin should be in attendance to hear first hand about the activities of the rogue mutual fund salesman who constantly reminded clients of his access and friendship to the founder of AIC.

Indeed, Thow was the key organizer for "meet the billionaire" when Lee-Chin visited Vancouver in 2003.

And while Lee-Chin personally is not suffering, the activities of Thow have affected his plans for Berkshire.

A couple of months ago, National Bank Financial was retained to find a buyer for Berkshire.

A number of candidates were contacted but no deal has emerged. The reason: Would-be buyers are wary of committing until they know the outcome of the regulatory hearings.

"It's gone quiet," said one executive at a firm that was contacted. "And it's all because of the guy out west."

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While Lee-Chin is not at Vancouver, some Berkshire executives, including Julie Clarke, general counsel, have turned up. But they aren't saying much, even though they have been given ample opportunity to do so by some of the clients who have lost a pile of cash by being associated with Thow.

The clients want to know the criteria by which Berkshire "conducted mediations with 17 complainants" and not with the others who have also lost money. Berkshire has been less than clear.

In the past, Clarke said the settlements were "largely" with clients who provided cash to Thow to invest in mortgages.

But Kirk Wong and Krista Kleven, who have lost a pile of their savings, have unearthed information that Berkshire has also settled with clients who invested in shares of the Jamaican bank. "We asked what the criteria were and she [Clarke] said nothing," Kleven said.

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Indeed, Berkshire seems to have a policy of saying little and engaging in delay. For instance: - In a recent report in the Vancouver Sun, David Baines said the following.

One of the lawsuits (against Thow) has been launched by Nanaimo businessman George Thomson, who is claiming $686,000 on account of an investment in the Jamaican bank.

The voluminous court file shows that Berkshire's lawyers have balked at answering questions and providing information.

Earlier this year, Judge Richard Goepel chastised the firm for its stonewalling tactics: "Berkshire's failure to comply with the rules of court and various court orders made during the course of this application is not acceptable," he remarked. - Delays in dealing with the Ombudsman for Banking Services and Investments.

At Berkshire's urging, Wong and Kleven approached the OBSI, an independent body that investigates complaints from individuals and small businesses about products and services provided by bank financial groups.

Wong said Berkshire was required to pass on information about their situation by May 24. That date has passed and the information has not been passed over.

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Meanwhile, the MFDA, which has a number of its staff at the BCSC hearing, is still beavering away on its investigation into Berkshire. Devlin said the investigation is in its "final stage" and, in time, it will make a determination as to what, if any action, it will take.

Devlin said the MFDA has talked to "all the necessary people and gathered the necessary documentary evidence." But the MFDA did not interview Thow.

There will be much attention given over to what the MFDA decides.

In short, the world will not accept that Berkshire did not know about Thow's activities. "If you want to act as a self-regulatory organization, then you have to be prepared to look out for those who are affected," said one observer, who has no personal stake in the Thow/Berkshire matter.

bcritchley@nationalpost.com

see: 

Ian Thow takes flight