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Mutual Fund Dealers Association rejects proposed agreement with Berkshire Investment Group
Closed-door hearings fail to settle dispute over disgraced financial advisor Ian Thow


David Baines

Monday, October 22, 2007

A proposed settlement between Berkshire Investment Group and the Mutual Fund Dealers Association over Berkshire's alleged failure to properly supervise former employee Ian Thow has been rejected by an association panel.

After deliberating in private for more than three hours, panel chairman Stephen Gill announced that he and his two fellow members had rejected the proposed settlement.

No details of the proposed agreement were released, and no reasons were given for its rejection.

Shaun Devlin, the MFDA's vice-president of enforcement, told reporters this is the first time an MFDA hearing panel has rejected a settlement proposal since it started taking disciplinary action against errant members in December 2004.

He said the association can now try to negotiate another settlement, or issue formal allegations against Berkshire and proceed to a formal hearing on the matter.

"It has been one of the [MFDA's] highest priority cases, and continues to be," he said.

Thow worked as a senior vice-president in Berkshire's Victoria office and was a member of Berkshire's advisory board.

He persuaded dozens of clients to invest up to $30 million in a variety of non-existent investment schemes, including shares of a Jamaican bank and real estate mortgage loans to Vancouver developers.

The investments were not approved by Berkshire and did not show up on client statements. Instead of investing the money as promised, Thow used the funds to support his extravagant lifestyle.

When his scheme was discovered in May 2005, Thow resigned from Berkshire and later fled to Seattle where he has been living ever since.

Asked how the public should view Monday's decision, Devlin replied: "They should view it as the process working."

He conceded, however, that Berkshire clients who have filed lawsuits against the firm for allegedly failing to properly supervise Thow, and were hoping for some substantive admissions to advance their cases, "may have a different view."

One of Thow's victims, Brad Goodwin of Richmond, expressed disappointment with the rejection. "We were hoping for a decision," he said.

Goodwin, his brother Darryl and father Don invested $2.5 million in Thow's bogus investment schemes. They recovered $1.5 million and are suing Berkshire for the balance on grounds the firm failed to properly supervise Thow. Their trial is scheduled to start in January.

Goodwin said the MFDA's failure to secure any formal admissions from Berkshire "will make the litigation a lot harder."

Another former Berkshire client, George Thomson, lost $686,000 in Thow's hands and is similarly suing Berkshire. That trial is scheduled to start in December. One of his lawyers was personally monitoring the MFDA proceeding on Tuesday, but was not available for comment.

The B.C. Securities Commission has also held a hearing into Thow's conduct and branded his scheme "one of the most callous and audacious frauds this province has ever seen." It left the issue of Berkshire's culpability to the MFDA.

Meanwhile, Vancouver RCMP have recommended criminal charges, which are expected to be laid shortly.

dbaines@png.canwest.com

see: 

 

Ian Thow takes flight