By David Baines
Friday, August 05, 2005
Former Victoria investment executive Ian
Thow has submitted a list of more than 50 companies and individuals to
whom he says he owes a total of $28 million, but it is clear that this
figure significantly understates the situation.
Thow and his Vancouver lawyer, Rod Anderson -- a specialist at getting
errant brokers out of sticky situations -- submitted the list to Mike
Cheevers of Wolridge Mahon Ltd. in Vancouver, who is acting as receiver
for Thow and his companies.
Cheevers was appointed after Thow filed a notice of his intention to make
a proposal to his creditors under the Bankruptcy Act. What sort of
proposal he intends to make is not clear, but it probably won't amount to
much. He doesn't have any equity, and his future earnings potential has
been seriously compromised, to say the least.
Thow resigned from Berkshire Investment Group Inc. on May 31 after clients
filed numerous complaints about his off-book business dealings with
clients. By off book, I mean private investments that he personally
promoted and transacted with clients, rather than the mutual-funds that
are the standard fare of Berkshire.
After talking with many of his clients, I have determined that Thow
offered four types of private investments:
1. The National Commercial Bank of Jamaica: This bank is 75-per- cent
owned by Berkshire's parent company AIC Ltd. of Burlington, Ont. AIC
chairman Michael Lee-Chin, a Jamaican-born businessman, wants to use the
bank to revitalize the country's economy.
Clients claim that Thow persuaded them to buy shares of the bank through
him. All they had to do was write a cheque to him personally, or his
private holding company, and he would hold the shares in trust for them.
However, they claim that Thow never delivered their shares, and failed to
return their money.
2. Real estate loans: Thow told clients that real estate developers in
Vancouver were looking for short-term money for their projects. These
developers were purportedly willing to pay as much as 10 per cent for a
three-month loan, plus a lending fee. Again, Thow got investors to write
their cheques to him personally or to one of his private companies.
3. Berkshire seed stock: Thow told several clients that Berkshire was
going public, and they could buy seed stock before then. At least one
investor took him up on his offer, writing a cheque to his personal
holding company, A.Y.G. Investments Inc. However, Berkshire never went
public. In fact, it never intended to.
4. High-yield investments: Thow told clients he could buy them safe,
high-yield investments that were paying 10 per cent per annum. Once again,
clients wrote their cheques to him, rather than Berkshire.
All of these people were clients of Thow at one time or another. Some
stopped being clients, but maintained a relationship with him and invested
at his urging. Many borrowed against their homes to raise the required
It appears, however, that Thow did not invest the money as he had
promised. Rather, much of it was diverted to finance his extravagant
lifestyle. By his own admission, he is insolvent and investors stand to
lose millions. Some have been wiped out, including several elderly people
who have been reduced to lives of quiet desperation.
The list of creditors provided by Thow also includes financial
institutions, such as the Bank of Nova Scotia, which holds a $2.9- million
mortgage on Thow's waterfront home in Saanichton, and GE Canada Equipment
Financing, which is claiming $15 million on account of two jets and a Bell
Ranger helicopter that it financed on Thow's behalf.
There are also trade creditors, including landscapers and contractors who
did work on his waterfront home, and lawyers who provided legal services
but were not paid.
The total amount owing, according to Thow's list, is $28 million. But
several creditors told me this week that some of the individual amounts
are understated. One creditor who Thow has marked down for $300,000 told
me that Thow actually owes her $450,000.
Some creditors aren't on the list at all. One is Alex Campbell Sr.,
founder of the Thrifty Food supermarket chain. He is claiming $4 million,
of which $1.8 million is allegedly on account of an investment in the
There are also several other creditors who pre-purchased block air time on
his private jets. I have been told they paid hundreds of thousands of
dollars for the privilege of using his jets, but did not receive full, or
any, consideration. The planes have since been seized.
So it is clear that the eventual total will be much higher than $28
million. How much higher remains to be seen. Cheevers is encouraging
anybody who has a claim to contact him and "provide us with any
documentary information they have." (Thow's proposal must be filed with
the court by Aug. 22, and the first meeting of creditors must be held by
What of Berkshire's role in all this? Some investors have sued the firm,
alleging it is vicariously responsible for the losses they suffered at
Thow's hands, or that the firm was negligent in its supervision of Thow.
Leading this charge is Katherine Ducey, a low- profile but high-powered
partner with Campbell Froh May & Rice in Vancouver.
Berkshire has quickly moved to dissociate itself from what it describes as
Thow's "outside business activities." Berkshire's Vancouver lawyer, Doug
Eyford at Borden Ladner Gervais, is pouncing on any reporters or clients
who might dare suggest, or even imply, that Berkshire has some
responsibility in this matter.
I am not a legal expert, so I cannot comment on Berkshire's culpability,
if any. But I can apprise you of some of the dynamics that come into play
in the broker-client relationship, and how they might relate to this
The first is that people retain financial advisers because they don't
think they can look after themselves. They defer to a professional, and
are willing to pay professional fees for the advice. They place their
trust in the advisers, and in most cases will do anything they suggest.
Thow encouraged this trust. He repeatedly told his clients he would look
after them. In fact, he is still telling clients he will make up their
losses, even though his career is in tatters.
Secondly, brokerage firms like to drape their employees with trumped-up
titles to give clients the impression they are dealing with top-level
executives. Berkshire gave Thow the title of senior vice-president, even
though he was little more than a branch manager. His business card also
stated that he was a member of the "Berkshire Advisory Board." Thow did
little to dispel the impression that he was a bigwig, and everything to
He lived in the reflected glory of Michael Lee-Chin, continually dropping
his name and rubbing up against him whenever he was in town. He told
everybody who would listen that he was hugely wealthy. He didn't just live
an extravagant lifestyle, he flaunted it: $10,000 bottles of scotch,
Cartier watches, Hummers, jet planes -- three of them, for pete's sake.
It was clearly a lifestyle that exceeded any compensation that Berkshire
was providing. Were Berkshire's compliance people aware of this? If not,
why not? If they were, what inquiries did they make to determine the
source of his money?
Many clients have acknowledged that Thow told them these investments were
not approved by Berkshire, that they were outside investments and that
they should not tell anybody about them. He got them to write their
cheques, not to Berkshire, but to him personally or his private companies.
But this does not necessarily let Berkshire off the hook. First of all,
these transactions didn't come out of the blue. They were an extension of
a long relationship with a broker that, by all appearances, was extremely
successful, highly placed and well- regarded by his employer.
Secondly, it is highly irregular for a broker to take personal cheques
from clients for non-approved investments. If Berkshire's compliance
people knew Thow was doing this, they would have undoubtedly intervened.
So once again, it begs the question: Where were Berkshire's compliance
staff when all this was happening?
B.C. Securities Commission officials, who have launched a formal
investigation into this matter, will most certainly be asking these same
questions, if they haven't already.