|Thow hangs over MFDA, Berkshire
By David Baines
One of the key questions in the case of Berkshire Investment Group
Inc.’s supervision of rogue broker Ian Thow is: how did Berkshire
reconcile Thow’s extravagant lifestyle with his relatively modest income
as a branch manager? Much to the chagrin of his victims, that question
In December, a Mutual Fund Dealers Association of Canada hearing
panel ratified a settlement agreement in which Berkshire admitted it did
not act diligently enough when it received two earlier complaints about
Thow. That supervisory lapse gave Thow additional time to flog his bogus
investment schemes, resulting in millions of dollars of additional
losses for his victims. For these transgressions, Berkshire has agreed
to pay a $500,00 fine and $50,000 in costs.
As has been well reported, Thow used his ill-gotten gains to finance a
life of conspicuous consumption. He bought several jet planes and a
waterfront home outside Victoria.
Thow incurred huge personal expenses, according to bankruptcy trustee
Michael Cheevers of Vancouver. In the 30-month period from January 2003
to his resignation from Berkshire in June 2005, Thow charged about $2.7
million on his personal credit cards.
“Included in these figures are cash advances totalling $428,893, the
majority of which were taken either in or close to casinos,” Cheevers
has noted. During the same period, Thow spent $145,313 on dining,
$826,079 on trips (mainly hotels), $100,546 on jewellery, $137,963 on
clothing and $180,487 on furniture.
“How could Berkshire’s compliance people not know that something was
going on?” wonders former client Brad Goodwin, whose family lost $1
million at Thow’s hands.
This was the elephant in the MFDA hearing room that everybody seemed to
ignore. On Thow’s advice, many of his clients had liquidated their
mutual fund accounts at Berkshire, incurring huge deferred service
charges in the process. This large-scale liquidation of client accounts
should have rung loud alarms at Berkshire.
Then those clients put their money into Thow’s investment schemes — or
so they thought. In fact, Thow was taking the money and spending it on
It was a profligate spending pattern that was abundantly obvious to
everybody who came within his orbit, and this also should have rung
alarms at Berkshire. Where was all this money coming from? The question,
however, wasn’t raised by enforcement staff at the hearing or in the
settlement agreement. It was as if it didn’t even exist.
In a later interview, MFDA enforcement director Shaun Devlin insisted
that his staff reviewed the matter and found no supervisory breaches. He
says Berkshire was aware that Thow had an outside business interest —
selling block air time on his airplanes — and Berkshire had approved it
as a “dual occupation.” Devlin also said this outside business had been
reported to the B.C. Securities Commission, which had also approved it.
This begs the question: as part of its due-diligence process, did
Berkshire review financial statements to make sure the plane business
was generating the kind of profits required to support such an expensive
At that point, things get fuzzy. Instead of answering the question,
Devlin gave more vague assurances that Berkshire did not commit any
It’s difficult to imagine that Berkshire made any serious inquiries.
Otherwise, Thow would have been immediately exposed. But the point is,
the public will never know for sure because this issue has not been
publicly addressed. IE