October 18, 2007
Madhavi Acharya-Tom Yew
British Columbia Securities Commission panel has
found that a former Berkshire Investment Group
Inc. mutual fund salesperson bilked clients out
of at least $6 million, spending their money on
his lavish lifestyle, including boats, cars and
even personal aircraft.
The panel found that Ian Gregory Thow committed fraud, made misrepresentations, traded in securities without being registered, and failed to deal fairly, honestly and in good faith when he took money from clients from January 2003 to May 2005.
"This case represents one of the most callous and audacious frauds this province has seen," the panel said in its decision, released yesterday. "Thow preyed on his clients 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."
During weeks of hearings this summer, the disciplinary panel heard testimony on how Thow talked clients into what he described as low-risk investments, having already won their trust with high-profile charity work and by flaunting a personal connection to his former employer, Michael Lee-Chin, wealthy founder of mutual fund company AIC Ltd. and Berkshire, its fund-selling division.
Thow did not appear at the B.C. hearing, nor was he represented by counsel.
Thow, who also operated a handful of numbered companies, has declared bankruptcy and what's left of his assets are being administered by a receiver. In early September, Thow left Canada, and Canadian authorities believe he is living in Seattle.
The commission heard from 26 victims who together lost about $6 million, though the initial allegations claimed Thow misappropriated $30 million from hundreds of clients.
"His greatest level of accountability was to his mutual fund clients and we focused specifically on that area," said Lang Evans, director of enforcement at the B.C. Securities Commission.
The Mutual Fund Dealers Association of Canada, or MFDA, has reached a tentative settlement with Berkshire Investment Group on allegations that the company failed to properly supervise Thow and investigate his activities. The agreement has not been approved and no details have been released. A hearing is slated in Vancouver Oct. 22.
"Given the pending MFDA settlement hearing and outstanding civil proceedings, we do not feel it is appropriate at this time to comment on Thow-related matters," an AIC spokesperson said yesterday.
Vancouver's Integrated Market Enforcement Team, the stock-market-crime arm of the Royal Canadian Mounted Police, is close to completing its criminal investigation into the case, said Evans. Officials could not be reached yesterday.
Thow donated his time to Victoria police projects and once pledged $500,000 to the Greater Victoria Hospitals Foundation, though it is unclear whether he ever paid.
One former client told the panel "We thought he was a paragon of virtue. ... He was running Crime Stoppers and he was always donating to these various charities, and he just seemed, like, you know, the man of the hour."
Thow also invited clients to presentations and dinners involving Lee-Chin, touting them as "an opportunity to meet a billionaire."
Thow told clients he owned his assets outright, from his waterfront home, his three Cessnas and cars - two Mercedes, a Cadillac Escalade, a Corvette and a Porsche Boxster - to his 56-foot Sea Ray yacht.
"For many clients, though, it was simply the personal touches that made the difference. Two sisters who were his clients liked the way he would drop in for tea. He told them, 'I love you ladies. You are my favourite ladies.' It was, the witness said, 'always kiss, kiss, hug, hug.'"
Thow persuaded 15 clients to invest in short-term loans that he said would be used to fund developers involved in new construction. He promised rates of return from 32 per cent to 192 per cent, and encouraged clients to invest cash on hand, but also to liquidate their mutual fund portfolios and mortgage their homes. The panel found no evidence that the loans existed.
He persuaded another 10 to buy shares in a Jamaican bank, another phantom investment.
A forensic accountant testified Thow used client funds to "eliminate overdrafts" in his personal, family and corporate accounts and pay off credit cards and loans.
The panel will hear arguments on sanctions in November. Securities commission prosecutors intend to ask for the maximum penalties a lifetime ban from trading securities and a $250,000 fine.
"What this fellow really deserves is only available through the criminal system," Evans said.
In the meantime, the B.C. Securities Commission's panel will help protect the public, he added.
"This will be a permanent, public blot on his record, a red neon flag to anyone he deals with in the future that they should never trust him."