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Thow creditors reject settlement
Former Island investment executive assigned into bankruptcy

David Baines

Tuesday, September 13, 2005

The plight of former Victoria investment executive Ian Thow's creditors went from bad to worse Monday when they met to consider his proposal to settle his debts and avoid bankruptcy. Not only did Thow not show up at the meeting at the Hotel Grand Pacific in Victoria, neither did the unidentified donor who Thow claimed would provide $5 million cash to sweeten his proposal.

Instead, bankruptcy trustee Michael Cheevers delivered some bitter news to the 60 creditors and representatives in attendance: over the weekend, another unsecured creditor, Thrifty Food supermarket chain founder Alex Campbell Sr., had filed a claim for more than $12 million.

 

 

CREDIT: Darren Stone, Victoria Times Colonist

Creditor Brad Goodwin and his lawyer Katherine Ducey take a break during Monday's meeting of creditors. It was Goodwin who claimed Thow had dual citizenship and might remove assets from Canada.

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 said.

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 Washington state.

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 intervene.

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 filed.

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 waterfront mansion.

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 effects.

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 flat-paneled televisions.

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 creditors.

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 extraditable offence.

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 told creditors.

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 private companies.

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 advanced Thow.

"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 out there."

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.

dbaines@png.canwest.com

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 significant charges:

- $428,893: Cash advances, in or near casinos

- $145,313: Dining

- $826,079: Trips, hotel accommodation

- $100,546: Jewelry

- $137,963: Clothing

- $180,487: Furniture

Source: Wolrige Mahon Ltd.

 

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Ian Thow takes flight