Investors Scrutinizing the Regulators

Home Page


Securities Regulation In CanadA

Fox Guarding the Hen House


Thow ‘preyed on clients,’ panel declares
Securities Commission probe says investment adviser orchestrated multimillion-dollar fraud

Andrew A. Duffy

Thursday, October 18, 2007

Calling it one of the most callous and audacious frauds in the province's history, the B.C. Securities Commission has found former Victoria investment adviser Ian Thow perpetrated a multimillion-dollar fraud when he took money his clients gave him to invest and instead spent it on a luxurious lifestyle.

A three-member commission panel found that Thow, then a senior vice-president with Berkshire Investment Group, "preyed on his clients [between January 2003 and May 2005] by offering them non-existent securities and instead using the funds to support his lavish lifestyle.

"He took their money and betrayed their trust. He has left a trail of financial devastation and heartbreak."

Ian Thow has left Victoria and is believed to be living in Seattle.

The decision came as no surprise to Thow's victims. While pleased with the harsh words levelled by the commission, they are looking ahead to what they hope will be criminal charges.

"It's a step in the right direction ... this might be the start of the snowball rolling down the hill," said Brad Goodwin, whose family lost $1.4 million.

Goodwin isn't ready to celebrate, yet, however. "He will probably never ever pay the fine and no one will ever get anything out of it as there is no restitution order available," he said.

The next step is for the securities commission to hand down sanctions, expected before the end of November. The maximum is a $250,000 administrative penalty - the most allowed in 2005 when the investigation started - and a lifetime ban on selling securities in B.C.


Ian Thow, left, with former clients Brad Goodwin and Daryl Goodwin in Mr. Thow's jet during a trip to Jamaica. Mr. Thow owed his clients $32 million before filing for bankruptcy in 2005.

Before Nov. 2, the securities commission's executive director will deliver a submission to Thow and the secretary to the commission. Thow must submit his response to the submissions by Nov. 16.

Thow did not make a submission at his disciplinary hearing in July. Lang Evans, director of enforcement for the B.C. Securities Commission, said he does not expect to hear from Thow.

"I think if there was any question about his character, it's confirmed by his flight from the jurisdiction. I can only describe that as cowardly," Evans said.

Calls to Thow's cellphone were not returned Wednesday.

Although the commission is seeking the maximum fine, Evans said he wished the amount was higher, noting legislation has since been changed to accommodate fines of $1 million per offence. "But most importantly, his actions call out for a criminal response," he added.

The RCMP's integrated market enforcement team has reportedly finished its investigation and passed the file to Crown counsel to consider laying charges.

Criminal charges would allow authorities to seek Thow's extradition from the U.S. to face charges in a Canadian court, something his victims are anxious to see.

"This [ruling] helps, but we'd like to see him come back to Canada and pay for this with time [in jail]," said former Thow client Doug McColl. In the meantime, he said, "We just have to live with it and move on ... thumb our noses at him."
Ron Black echoed the sentiments, saying the time it's taken to get to this point has been frustrating. "They found out he was a big thug, so what are they going to do about it?" he said. "Why has it taken two years to find out something we knew within three months? Why does it take so long to lay criminal charges?"

The B.C. Securities Commission's decision came after the panel heard heartwrenching and emotional testimony during a three-week hearing this summer.

A stream of Thow's former clients recounted how they had been befriended by the investment adviser, convinced to hand over their money and, in some cases, were left with nothing.

Bruce Stotesbury/Times Colonist

Ron Black: "Why does it take so long to lay criminal charges?"

Thow, who left the country in the summer of 2005 and set up a home in Seattle after filing for bankruptcy, left behind clients and creditors who claimed he owed them in excess of $32 million.

During the hearing, the securities commission traced Thow's use of $6 million of those funds, finding he used that money to fuel a lifestyle featuring private jets, helicopters, mansions and boats.

The panel found Thow convinced his former clients to invest in a series of schemes that included buying shares in the National Commercial Bank of Jamaica, an initial public offering for Berkshire, and providing short-term loans to developers.

The investments were never made and the money went to Thow.

The panel said Thow's disregard of rules requiring him to deal with his clients fairly, honestly and in good faith "was as blatant a contravention of these rules as one could imagine," and that Thow dealt "unfairly, dishonestly, and in bad faith with his clients."

Berkshire refused to comment on the panel's findings. General counsel Julie Clarke said the company continues to review the panel's findings, but "given the pending [Mutual Fund Dealers Association] settlement hearing and outstanding civil proceedings, we do not feel it is appropriate at this time to comment on Thow-related matters."

The Mutual Fund Dealers Association hearing comes after a two-year investigation into Berkshire's role in the Thow affair.


Ian Thow takes flight