Investors Scrutinizing the Regulators

Home Page

InvestorVoice.CA


Securities Regulation In CanadA


Fox Guarding the Hen House

   

The strange dealings of Phillip and Ian Thow

 

By David Baines

 

Wednesday, July 13, 2005
 

There are many decent stockbrokers out there, but there are also some indecent ones who have cast their clients into lives of quiet, and no-so-quiet, desperation.

One of those indecent brokers is Phillip Thow, who sorely abused his position as regional manager of Investors Group in Vancouver during the mid-1990s. His victims are still trying to recover from the havoc that he wreaked upon them.

"I trusted him like a brother," one of those victims, Barry Samuels of North Vancouver, said in a court affidavit. "It turned out to be the mistake of a lifetime."

If the name "Thow" rings a bell, that's because Phillip Thow's brother is Ian Thow, who has made headlines in recent weeks.

Ian Thow, while working as senior vice-president of Berkshire Investment Group Inc. in Victoria, lived an extravagant lifestyle with three jet airplanes, a 17-metre Sea Ray yacht and a $4.6- million waterfront home.

On May 31, he resigned from Berkshire. Since then, four groups of clients have filed lawsuits claiming he induced them to invest millions of dollars in the National Commercial Bank of Jamaica.

In some cases, they claim, Thow persuaded them to mortgage their homes to finance the share purchases. They also claim that, if he ever bought any shares, he didn't deliver them or return the money.

Thow has denied the allegations. Berkshire -- which has been named a co-defendant -- claims it knew nothing about Thow's share dealings and denies any responsibility.

Ian Thow's career appears to have many parallels with that of his brother, Phillip. In 1987, both were working as mutual fund salesmen at Investors Group, Ian in Victoria and Phillip in Vancouver. Both were effective salesman and quickly promoted to regional managers. But under this rosy exterior, there were some strange dealings.

In April 1994, Phillip Thow asked Barry Samuels, who was then a colleague at Investors, to lend him $40,000 to help clear up some debts. Samuels agreed "because of our friendship and my confidence and faith in [Phillip's] ability to continue to earn a substantial income," according to court documents.

In ensuing months, Phillip asked to borrow more money, first to buy a condo for his in-laws, then to buy a house for him and his family. Samuels obliged. By October 1994, Samuels had remortgaged his home and loaned him a total of $250,100.

But Phillip didn't buy a house. When Samuels questioned him, he said he had instead invested the money in heritage properties that were being refurbished and resold.

Little did Samuels know, but Phillip was counselling some of his clients to do the same thing. Two of those clients, Lorraine and Forrest Johnson, borrowed $200,000 against their home and loaned the proceeds to Phillip, ostensibly for him to invest in heritage properties.

Lorraine Johnson told court that Phillip and his wife "lived well beyond their means, but it was all on other people's money. And how I found out is they said, 'Let's go on a holiday together to Los Angeles.'"

She said that when they arrived in Los Angeles, Phillip said, "'Let's rent a limo,' and we are thinking, 'Phil, we can't afford this. We have a young child.'"

They drove around Los Angeles and then Phillip's wife said: "Oh, I feel like red shoes." Johnson said Phillip double-parked the limo on Rodeo Drive "while she whips in and buys red shoes."

She said that, after buying the shoes, Phillip said, "'I know, let's go to Vegas.' We said, 'Oh, we can't afford that, we can't afford the airfare for that.' [And he says], 'Don't worry about it. I'll hire a limo and I'll pay for it.'"

She said they drove to Las Vegas, checked into Caesar's Palace and went to the casino, where Phillip won $26,000.

"I thought, $26,000, he could pay me back, but he didn't. He got his room comped, he got every meal comped and we paid for the meals every second day and some of those meals were, like, $800 per meal."

Little did the Johnsons know, but Phillip had also persuaded another client, Carol Brett, to borrow $250,000 against her home and lend him $175,000 of the proceeds, ostensibly to invest in heritage homes in Seattle.

Samuels, meanwhile, noticed that Phillip was living an extravagant lifestyle. He was paying $2,500 a month to rent a fancy home, he bought designer clothes and he gave his wife expensive jewelry and clothes.

But Samuels assumed that Phillip, who had been promoted to regional manager, was financing these items from his income. "At no time did it occur to me that Thow was enjoying his lavish lifestyle with borrowed money," he said in a court affidavit.

In July 1995, a senior official at Investors Group called Samuels and other staff members together and conveyed some grave news: the firm had discovered that Phillip owed more than $1 million to various creditors, including Samuels and two other clients.

Samuels learned that Phillip had never bought any heritage properties. Rather he had frittered the money away, mainly at the casinos in Las Vegas where, by his own admission, he once lost $100,000 in a single sitting.

Phillip was drummed out of the firm, and in August 1996, he filed for bankruptcy, declaring $82,500 in assets against $1.14 million in liabilities. Then he moved to Washington state, where he racked up more debts and once again declared bankruptcy.

He applied last fall for an absolute discharge in Canada, but both Samuels and the Johnsons objected. He got only a conditional discharge, subject to repaying $75,000 US to Samuels and $50,000 to the Johnsons.

So far, Johnson has recovered only about $30,000 of the $250,100 he loaned him. Whether Ian Thow's clients meet a similar fate remains to be seen.

dbaines@png.canwest.com