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Thow mocks our white collar crime enforcement

July 07, 2008

 
On September 21, 2004, Ian Thow had lunch at a restaurant near the Toronto International Airport with Lou Vavaroutsos, owner of Old Mill Pontiac Buick in Toronto and East Side Chevrolet in Markham, Ontario.

It was a business lunch: Thow was in Ontario to placate Vavaroutsos and several other clients worried about their Bank of Jamaica investments.

After a spring 2004 salmon fishing weekend north of the Queen Charlotte Islands, Vavaroutsos and several friends had each given Berkshire Investment Group senior vice president Thow between $750,000 and $1 million to invest on their behalf in the Bank of Jamaica. However, Thow failed to provide transaction documents or certificates. Now, Vavaroutsos wanted his money back.

Thow did not have any share certificates because, of course, they did not exist. Thow’s lunchtime mission was to calm down the anxious and angry businessmen with empty platitudes about “brotherhood” and “trust” and to embolden them with assurances that their “investments were rocking.”

Ian Thow

no credit

Thow was simply doing whatever it took to keep his confidence scheme aloft.

In many ways, Thow’s business was not unlike that of many other entrepreneurs. From the outset, Thow considered the risk-reward paradigm. Not unlike the aspiring franchisee owner mortgaging his family home, or the frustrated middle manager considering cashing in her RRSP and launching her own business, he asked: does the reward warrant the risk?

For the aspiring franchisee, the potential loss of the family home must be considered; for the middle manager, the loss of retirement security. Thow had a few more risks to weigh against long-term financial gain and short-term prestige: eventual vilification, the personal inconvenience of unseemly flight and, oh yes, any legal bother that may arise.

Morals, integrity and honour aside, it appears Thow made the correct assessment.

On June 25, the RCMP’s Integrated Market Enforcement Team [IMET] announced that it had laid 25 fraud charges against Thow. The RCMP alleges Thow conned clients out of approximately $10 million. It took the RCMP three years to lay charges which capture less than one-third the amount people allege he actually stole.

The charges were laid on June 9. However, for whatever reason they were not announced until 16 days later. Maybe so as not to tip off Thow, who had been living in a condo north of Seattle Pike’s Place Market; or possibly police hoped to nab Thow as he returned from a Las Vegas or Caribbean holiday.

Whatever the reason, it did not work. At time of publishing, Thow was still at-large and, by most accounts, still living large.

In the event of a downturn, businesses must keep their contingency plans current and up-to-date. This may mean additional lines of credit or downsizing procedures.

In Thow’s instance, when Canadian law enforcement, market regulators and victims became bothersome, his plan was to become scarce, as he did in 2005.

As the scope of Thow’s alleged deceit became apparent, with the number of alleged victims and dollar amounts doubling and tripling, Thow simply retreated to his Central Saanich mansion. He eventually packed up his pick-up with household appliances and plasma screen televisions and left for the U.S.

Even with the enormity of the fraud allegations, Canadian law enforcement did not see it necessary to apprehend or secure Thow.

Thow would have had more face-time with a law enforcement officer had he been caught shoplifting a can of Coca Cola from 7-11.

However, Thow’s business was not petty pilfering. Thow dealt in tens of millions of dollars, helicopters, yachts and $10,000-bottles of scotch. All made possible by the Canadian criminal justice system.

Thow, like the other sharks and wolves prowling Canadian capital markets, rely on the soft touch of our country’s criminal justice system to operate. Meanwhile, investors have been offered up as prey.

So far, two Thow-related administrative actions have concluded. Last December, the B.C. Securities Commission fined the insolvent Thow $6 million and banned him from the B.C. securities market for life. The Mutual Fund Dealers Association of Canada fined Berkshire $500,000.

Meanwhile, Thow was working as a mortgage broker at Flagstar Home Lending in Seattle, as if nothing even happened in Canada, where 73 bothersome former clients and friends allege he ripped them off for more than $32 million.

Many consider Thow a cautionary tale. The BCSC, legislators and law enforcement will morosely warn against investments that appear too good to be true and remind the public to be sure to do proper due diligence.

Fine and dandy that.

However, to really knock the air out of enterprises like Thow’s, the risk-reward paradigm requires recalibration. The risk needs to be ratcheted up in the form of serious jail time.

The maximum prison sentence for fraud is 14 years and inmates get statutory release after two-thirds of their sentence. If the RCMP locates Thow, extradite him, place him on trial and convict him, the maximum time Thow could spend in prison is 9.3 years.

Frank Biller, criminally convicted and sentenced to three years in jail for his role in the $175-million Eron Mortgage Corp. fraud, did seven months before being released. Brian Slobogian – Biller’s partner in crime – served one year of a six-year prison term. Former Victoria resident Kevin Steele, who conned investors out of $7 million in a commodity trading scam, served one-sixth of a six year sentence.

A lawyer friend predicts Thow – if convicted - would spend a maximum of two years in prison.

For Thow – and other swindlers and charlatans - two years is clearly an acceptable risk. Twenty-five years makes the risk untenable.

Until white-collar crime prosecution is taken seriously and penalties that will serve as real deterrents are introduced, it will be business as usual for swindlers in B.C. BE

Lyle Jenish, chief writer / SEO / Business Development,ThinkProfits.com 250 479 7759 , lyle@thinkprofits.com

see: 

Ian Thow takes flight