D'Alessandro sweeps clean

Barry Critchley

Wednesday, June 27, 2007

Clients of Berkshire Investment Group Inc., a unit of Michael Lee-Chin-controlled AIC Ltd., take note: There is a new kid in town, a kid that has a decidedly different view on the way things should work.

The new kid is Dominic D'Alessandro, the no-nonsense chief executive of the country's second-largest company, Manulife Financial Corp., and widely regarded as being one of the best, if not the best, financial-services executives in the land.

D'Alessandro is in this position thanks to Manulife's decision to purchase Berkshire-TWC Financial Group Inc. While the financial terms of the deal were not disclosed -- the talk is that the cost was in the $50-million-to-$60-million range -- Manulife is buying Berkshire's mutual fund and securities dealerships. (Specifically it is buying Berkshire Securities Inc., Berkshire Investment Group Inc. and Berkshire Insurance Services Inc.) Berkshire is home to more than 700 advisors in 237 branches. The advisors administer about $13-billion of client assets.

And as everyone knows, the Berkshire name and the way in which its management has dealt with some issues -- specifically a $30-million fraud case involving Ian Thow, a former senior vice-president in Berkshire's Victoria office -- are less than sterling these days. The B.C. Securities Commission is holding a hearing into Thow's activities. Thow, who is now living in the United States, has declared bankruptcy. And the trustee, Michael Cheevers, has traced more than $26-million moving from accounts of Thow's clients to Thow.

Meanwhile, Berkshire has adopted the approach that it was in the dark about what Thow -- who constantly told clients he had a close relationship with Lee-Chin -- was doing and, hence, is not responsible. However, it has made settlements with some of Thow's clients, including some who invested with Thow on the understanding that the money would be used to buy shares in National Commercial bank of Jamaica, an entity controlled by AIC.

Meanwhile, Berkshire's conduct is under investigation by the Mutual Fund Dealers Association of Canada. And Berkshire has refused to co-operate with the Ombudsman for Banking Services and Investments, a body that can insist on compensation.


Manulife has adopted a radically different approach to AIC/Berkshire's.

In March, 2005, it made good on a promise to clients of its advisors who lost money on an investment in failed Portus Alternative Asset Management. Manulife's clients were given three options for the guarantee of 100% of their principal invested.

"We hope that these options provide our clients with peace-of-mind, despite the fact that the investigation into Portus and resulting legal actions are far from complete," D'Alessandro said at the time. "Please again accept my apologies for the distress this situation has caused. The integrity of our dealings with clients and representatives is paramount to us, and I hope our actions to secure the full principal amount of your investment underscore the importance we place on protecting you and your assets," he said in a letter to clients.

Later, Manulife made some personnel changes in the division.

Meanwhile, it was business as usual at Berkshire despite the fact that its clients were one of the largest investors in financial products offered by Portus. It didn't offer to make its clients whole. (It is understood that one other financial planning firm, IQON, now part of Assante, also made its Portus clients whole.)

"This is very good news for clients affected by Thow and Portus people. This is the best-case outcome. There is no way that they [Manulife] can't make good on that," said one market participant. "It will be good for Manulife's reputation to once again step up."


Berkshire has been around for more than 20 years. It started life as AIC Investment Planning Ltd. but changed its name to Berkshire more than a decade ago. Thanks to Warren Buffett, there is a huge cachet associated with the Berkshire name; at the time, AIC was a star of the mutual fund world, was gathering assets at a great rate, and didn't want clients to associate the fund arm with the financial-planning arm, given that the latter was experiencing some negative press involving Dino P. DeLellis, one of its advisors. DeLellis, who pocketed almost $300,000 in secret commissions, was fired by AIC. He was later banned for life by the Ontario Securities Commission. More than a dozen years after clients brought an action, AIC settled.

The sale to Manulife caps a process that started more than a year back.





Ian Thow takes flight