That raised total unsecured claims against
Thow to $32 million, a figure that Cheevers said is bound to increase:
"There are numerous creditors out there who have not yet filed claims," he
Making the picture even dimmer for
creditors, Cheevers said the only significant asset available to satisfy
those liabilities is Thow's waterfront mansion in Saanichton, which has
only $1.5 million to $2 million in equity.
Faced with the prospect of recovering
only about six cents on the dollar -- before trustees fees, which are
expected to be substantial -- the creditors unanimously rejected Thow's
proposal, which means he is automatically assigned into bankruptcy.
However, it does not appear that Thow --
who is under RCMP investigation for possible securities fraud -- will
cooperate with his creditors. Last Wednesday, he filed for bankruptcy in
Cheevers' counsel, Vancouver lawyer John
McLean, said the U.S. filing may be an attempt to pre-empt the Canadian
action, or simply make it difficult for his Canadian creditors to
However, he said, given that "99 per
cent" of Thow's creditors reside in Canada, the U.S. bankruptcy court
would probably dismiss his bankruptcy application if an objection is
In his filing, Thow certifies that he
lives in Seattle and "has been domiciled or has had a residence, principal
place of business, or principal assets in this district" for more of the
past 180 days than any other district.
This, however, is at odds with the fact
that, until he resigned on May 31, Thow worked as senior vice-president of
Berkshire Investment Group Inc. in Victoria, then continued to live at his
It also doesn't square with an affidavit
that Thow filed in early July in response to a charge by Richmond creditor
Brad Goodwin that Thow holds both Canadian and U.S. citizenship and may
try to spirit assets out of the country.
Thow replied in his own affidavit that,
although he was born in the United States, he holds Canadian citizenship
only and has lived in Canada exclusively, except for a short stint in
Nevada many years ago.
However, early Thursday morning -- one
day after his U.S. bankruptcy filing -- Thow pulled up at the Pacific
Truck Crossing at Blaine, Wash., with a Ford F350 truck full of household
U.S. border officials, tipped that he may
try to slip across the border, called RCMP, but before an officer could
arrive, Thow showed proof of U.S. citizenship. U.S. border officials, with
no grounds to hold him, let him through.
On Friday, after hearing about Thow's
midnight move, Cheevers took another inventory of the furnishings at
Thow's waterfront home and found several items missing, most notably three
That same day, Cheevers applied to B.C.
Supreme Court to issue a warrant for Thow's arrest under the Bankruptcy
and Insolvency Act on grounds that the truck and the goods belong to
When the creditors' meeting convened at
10 a.m. Monday, Cheevers announced that just one hour earlier, the court
had approved the arrest warrant.
He said RCMP "were happy with our
decision to apply for that warrant," which will enable police to arrest
Thow if he returns to Canada. He noted, however, that it is not an
Thow has been accused by numerous
creditors of criminal fraud, and although RCMP have talked with Crown
counsel about laying charges, none have been laid to date.
Several groups of creditors have filed
lawsuits alleging that Thow induced them to buy shares of the National
Commercial Bank of Jamaica, which is 75-per-cent owned by Berkshire's
parent company, AIC Ltd., of Burlington, Ont.
Other creditors have alleged that Thow
persuaded them to buy what he purported to be seed shares of Berkshire,
which he claimed was planning to go public, or guaranteed investment
certificates that he claimed would yield 10 per cent a year.
In all cases, he failed to deliver the
securities, or return their money.
In addition to Thow, investors have also
sued Berkshire on grounds that the firm is vicariously responsible or
negligent in its supervision of Thow.
Berkshire officials deny any
responsibility. They say none of these investments were authorized by the
firm and insist they had no knowledge of what they describe as Thow's
"outside" business activities.
In some cases, investors became concerned
about their investments and pressed Thow to return their money. In several
instances, he refunded some or all of their money.
Cheevers told creditors that these
refunds may constitute a "fraudulent preference" -- a repayment that
prefers one creditor over another. He warned that he will "look very hard
at those transactions" to determine which investors will have to return
this money for the benefit of all creditors.
This has ominous implications for
creditors such as the Goodwin family of Ladner and Richmond, who at Thow's
urging invested $2.5 million in what was purported to be Jamaican bank
shares. They subsequently became concerned about the viability of the
investment and asked for their money back. Thow refunded $1.5 million,
leaving a net claim of $1 million.
"It [the preference issue] could cause a
problem," said Richmond lawyer Katherine Ducey, who represents the
Goodwins and several other creditors. "We will have to deal with that
question if and when it arises."
By all outward appearances, Thow was an
extremely successful investment executive who gave generously to the
Victoria community and lived a hugely extravagant life with three jet
planes, a helicopter and a 17-metre power yacht.
"His lifestyle was obviously profligate,
and he spent huge amounts of money supporting that lifestyle," Cheevers
In a written report to creditors,
Cheevers said he analysed 60 bank and credit card accounts and determined
that Thow received $7.15 million cash directly from creditors through five
He said that, in the 30-month period from
January 2003 to June 2005, Thow "charged $2,648,726 between his personal
MasterCard, Royal Bank Visa and Scotiagold Visa cards. . . . Included in
these figures are cash advances totalling $428,893, the majority of which
were taken either in or close to casinos."
Cheevers also said that, during the same
30-month period, Thow spent $145,313 on dining, $826,079 on trips (mainly
hotel accommodation), $100,546 on jewelry, $137,963 on clothing and
$180,487 on furniture.
"He led a lifestyle to which I am not
accustomed," Cheevers remarked.
But these expenditures, as large as they
are, do not come close to the $32 million that creditors are claiming they
"There is a shortfall between what
creditors provided and what Thow spent," creditor Brad Goodwin said after
the meeting. "It stands that there is still a substantial amount of money
Cheevers said that so far there is no
indication that Thow stashed any money in Canada or offshore, but he
conceded his examination has been restricted to the records at his
disposal. "The best way to hide assets is not to record them," he noted.
Goodwin's brother, Daryl, asked Cheevers
whether he had determined whether Thow had transferred any cash or assets
to his former wife Teresa. Cheevers replied that "very little" appears to
have gone to her.
Daryl persisted, noting that Teresa has
"half a million dollars worth of jewelry hanging off her neck. Cars, too.
That's dirty money. That came from us."
McLean, Cheevers' counsel, said he has to
research the situation and be sure of his facts before questioning her.
Cheevers said the next step is to list
the waterfront home for sale, gather in those assets which are accessible
and start legal processes to collect those assets that are not accessible.
THE THOW FACTOR:
Ian Thow charged $2.6 million on his
personal credit cards in the 30-month period from January 2003 to June
2005, according to the bankruptcy trustee. Here are some of the
- $428,893: Cash advances, in or near
- $145,313: Dining
- $826,079: Trips, hotel accommodation
- $100,546: Jewelry
- $137,963: Clothing
- $180,487: Furniture
Source: Wolrige Mahon Ltd.