Investors Scrutinizing the Regulators

Home Page


Securities Regulation In CanadA

Fox Guarding the Hen House


Thow files for bankruptcy in Washington
Lawyer expects court will reject investment executive's application


David Baines with a file from Andrew A. Duffy

Tuesday, September 13, 2005

Former Victoria investment executive Ian Thow, under RCMP investigation for possible securities fraud, has filed for bankruptcy in Washington state.

Vancouver lawyer John McLean, counsel for bankruptcy trustee Michael Cheevers, said Monday that given that "99 per cent" of Thow's creditors reside in Canada, the U.S. bankruptcy court would probably dismiss his application if an objection is filed.

In his filing last Wednesday, 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 in other district.

This 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, and then continued to live at his Saanichton waterfront mansion.



CREDIT: Darren Stone, Times Colonist

MICHAEL CHEEVERS: Missing TVs noted.

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 might 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, Thow pulled up at the Pacific Truck Crossing at Blaine, Wash., early last Thursday morning with a Ford F350 truck full of household effects.

U.S. border officials, tipped that he might try to slip across the border, called RCMP, but before an officer could get there Thow showed proof of American 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 furnishings at Thow's home and found several items missing, most notably three flat-panelled television sets.

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 a meeting of creditors convened at 10 a.m. Monday in Victoria, 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 annually.

In all cases, he failed to deliver the securities, or return their money, creditors say.

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.

CREDIT: Darren Stone, Times Colonist

Creditor Brad Goodwin and his lawyer Katherine Ducey speak during a break at a meeting of creditors of Ian Thow at the Hotel Grand Pacific on Monday.

Berkshire was represented at Monday's meeting by Vancouver lawyer Kibben Jackson, who

 told reporters the company was "outraged" at Thow's actions and has filed a claim against him for $1.5 million.

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.

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 56-foot power yacht.

"His lifestyle was obviously profligate, and he spent huge amounts of money supporting that lifestyle," Cheevers told creditors.

In a written report, 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.

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.



Ian Thow takes flight