The Vancouver division of the Integrated
Market Enforcement Team (IMET), the RCMP national body charged with
investigating capital markets fraud and market-related crimes, had
requested that U.S. Customs alert Canadian authorities if Thow attempted
to cross the border. However, RCMP agents arrived after Thow had passed
through the Pacific border crossing. Without formal charges in Canada,
U.S. border authorities were unable to prevent Thow's entry into the U.S.
Thow was supposed to have appeared at a
creditors' meeting held Sept. 12 at the Hotel Grand Pacific. It was
attended by approximately 60 creditors, representatives and lawyers who
unanimously rejected Thow's August 22 proposal to creditors, forcing the
rogue mutual fund salesman into bankruptcy.
According to a creditors report prepared
by Vancouver-based bankruptcy trustee Michael Cheevers of Wolrige Mahon
Ltd., Thow's expenses appeared profligate and cash flow and financial
management practices peculiar.
Banking records obtained by Cheevers over
a 30-month period between Jan. 1, 2003 and June 30, 2005 show Thow
incurring personal expenses of $1,390,388. They included: $145,313 in
dining expenses; $826,079 in travel; $100,546 in jewelry; $137,963 in
clothing; $180,487 in home furnishings.
Between Jan. 1, 2003 and June 30, 2005,
Thow took $7,150,195 from his five companies. This included: $169,200 from
639662 BC Ltd.; $3,502,582 from 657594 BC Ltd.; $304,000 from 679071 BC
Ltd.; $2,220,909 from A.Y.G. Investments Inc.; and $953,504 from Van Isle
Jet. Many creditors claim they wrote personal cheques to Thow and to these
companies understanding they were to cover investments in the National
Commercial Bank of Jamaica and a number of high-yield investments. Claims
filed to Sept. 2 indicate $15,892,958 was advanced to Thow and his coterie
of companies. It appears much of the money went to subsidize Thow's
extravagant lifestyle that included the purchase of two jet airplanes, a
helicopter, a yacht, an ocean-front mansion and a fleet of vehicles.
According to Cheevers, Thow relied on
approximately 60 accounts at Canada's major banks and with credit card
companies to move, shuffle and hide money. According to Cheevers, Thow, on
his regular jaunts into the U.S., made a habit of withdrawing and carrying
exactly $10,000 in cash - the declaration limit - and over the same
30-month period, he rang up $428,893 worth of cash advances on assorted
credit cards in or around U.S. casinos.
Concerned about the unusual activity in
the accounts over the years, some banks became "uncomfortable" dealing
with Thow and asked him to take his business elsewhere. According to
Cheevers, in the midst of one of several account transfers, in a single
day Thow made eight-separate $99,999 deposits at a Bank of Nova Scotia
Asked whether funds remain unaccounted
for, Cheevers said as of Sept. 12, none had yet been discovered. He also
said Thow has no money in the National Commercial Bank of Jamaica.
Relative to the size of the massive debt,
Cheevers estimates Thow's personal assets are a miniscule $7,574,500.
According to Cheevers's report, Thow's
mortgaged house at 8338 West Saanich Rd. is estimated to be worth $7
million; a 10-per-cent interest in a house at 2057 Neil St. worth $5,000;
furniture and personal effects, $75,000; vehicles $465,000; and proceeds
from the sale of a Harley Davidson, $29,500.
Some angry creditors challenged
Cheevers's calculation, suggesting Thow has hidden or failed to declare
numerous pieces of expensive art and an extensive collection of wine they
had personally seen in the wine cellar at 8338 West Saanich Rd.
Creditor Brad Goodwin said that since the
story broke in May, Thow has been actively hiding assets and endeavoring
to evade creditors and law enforcement. Goodwin, who along with his family
and family-owned company claim losses of $1.35 million, said Thow's border
jump came as little surprise and that he had heard rumours similar to
those provided the Business Examiner.
At least two months earlier, the Business
Examiner had been told by sources that Thow was planning a sudden
departure. Calls by the Business Examiner to counsel representing Thow
creditors as late as Sept. 6 indicated Thow was still free to move with
impunity. One anxious lawyer even offered to act as a liaison, requesting
that the Business Examiner reveal sources to IMET Insp. Mike Ryan, in an
effort to secure a court-ordered seizure of Thow's Canadian passport.
"Vancouver IMET, which had advance
intelligence of Thow's possible departure, liaised with Saanich PD and the
Crown counsel's office, in a bid to restrict Thow's departure from
Canada," wrote Staff Sgt. Tim Alder of Vancouver IMET in a Sept. 9
advisory. "Attempts to locate Thow at his and his parent's residences were
unsuccessful and border points were notified. A determination was made
that Crown required a detailed brief of IMET charges prior to an arrest,
which was premature at this stage of the investigation."
Creditors who spoke to the Business
Examiner after voting to force Thow into bankruptcy believe the August 22
proposal Thow filed with the Vancouver Office of the Superintendent of
Bankruptcy was simply a ruse, to gain more time, allowing him to flee the
The proposal offered to pay $12.5 million
to 111 creditors (102 unsecured, nine secured) to resolve claims in excess
of $42.9 million. However, key to the proposal was the inclusion of a
mystery benefactor Thow claimed was ready to inject $5 million into the
However, the $5 million never
materialized. Thow's lawyers quit the case. And up until heading south,
Thow worked to prevent bankruptcy trustee Cheevers from entering his
Central Saanich home to generate an inventory of his possessions. At the
end of August, and only after obtaining a court order, was Cheevers able
to access Thow's residence. Cheevers was also granted access to Thow's
personal computers. According to Cheevers, hard drives are being scoured
to trace communications and to determine whether funds have been
While most creditors' anger is currently
directed at Thow and his former employer Berkshire Investment Group, this
may refocus on members of their own ranks. Now acting as a trustee under
bankruptcy instead as a trustee under proposal, Cheevers says one of his
primary goals will be to determine whether any creditors received
preferential treatment from Thow before he filed his Aug. 22 proposal.
Cheevers says he knows of some individuals who will be asked to return
funds. This money will then be dispersed among all creditors.
Cheevers said it is "difficult to say"
how far back he will go to determine whether "fraudulent preference" was
extended individual creditors. Ideally it would be for the period Thow was
insolvent, however he admitted insolvency would be difficult to prove and
suggested a five-year window.
The grim news overwhelmed some of the
creditors, many of them elderly and unsure of the long, complicated
process now underway. An elderly gentleman told the Business Examiner that
even with Thow's flight south, he held out hope that the $5 million from
the mystery benefactor would materialize and that Berkshire Investment
Group would make a statement. Instead, creditors learned that during the
weekend of Sept. 10-11, Thrifty Foods founder Alex A. Campbell joined the
ranks of unsecured creditors, filing a claim for $12 million.
Challenged to provide an estimate on how
much unsecured creditors should expect to recover, a reticent Cheevers
said "possibly six cents on the dollar."
Considering the width and breadth of the
case, Cheevers said trustee costs will be "significant." He told creditors
to carefully consider how hard they want to pursue Thow and possible
assets, as costs can quickly escalate and may consume whatever assets
Five inspectors were appointed by
gathered creditors to examine and give direction to Cheever's
administration of Thow's estate. They include Brad Goodwin of Richmond;
Gary Sartorio of Calgary; Peter Lloyd, representative by proxy for Alex A.
Campbell; Steve Racicot of Victoria; and an agent of Canada Customs
Creditors were also informed that an hour
before the Sept. 12 meeting convened the B.C. Supreme Court had issued a
warrant for Thow's arrest. Cheevers had applied to the court for the
warrant under the Bankruptcy and Insolvency Act on Sept. 9 on grounds that
the household items and pickup truck belong to companies in receivership
and could not be taken out of the country. According to trustee lawyer
John McLean, the offence is not extraditable.
Creditors were also told that Thow had
retained Seattle lawyer Larry Feinstein and filed for banruptcy in
Washington State. The first meeting of creditors, at which time Daniel E.
Forsch will be appointed interim trustee, will be held Oct. 10 in Seattle.
According to McLean, since almost every one of Thow's creditors live in
Canada, the U.S. bankruptcy court will likely dismiss the application if
an objection is filed.
Meanwhile, Thow has made downtown Seattle
home and has rented a condominium in an upscale building over looking
Myrtle Edwards Park and the Puget Sound. According to his U.S. bankruptcy
declaration, he pays approximately $1,700 a month in rent.
While creditors attempt to recover
assets, IMET, with the help of Victoria City Police, continue interviewing
complainants and investigating Thow.
"We are going to march ahead with our
investigation and try to get something into Crown as soon as we can to see
if we have enough for charge approval," said IMET Staff Sgt. Alder. "If we
get that [charges] and we do not get our hands on him [Thow] then we are
going to be seeking warrants for his arrest and then we will move to the
However, creditors hoping for extradition
of Thow back to Canadian soil best not hold their breaths. According to
Alder, the earliest IMET will approach Crown is early-spring 2006.
"We are pleased how it [the
investigation] is coming along. There is a lot of documents and accounting
that we are trying to grind through," Alder said. "[We] have to try to lay
this out so the judge can understand it as well. [We need] to make it
really readable as to what happened."
Now across the border, and still in
possession of a Canada passport, Alder does admit that Thow enjoys a
definite advantage and is relatively free to go where he wishes. Alder
says that if charges are eventually brought against Thow, it would be
possible to investigate Thow's movements between countries if he does
choose to fly out off a U.S. airport.
As previously reported, Thow and
Berkshire Investment Group are named in several lawsuits. Plaintiffs
allege that Thow sold them investments in the National Commercial Bank of
Jamaica which is controlled by Michael Lee-Chin, president of Canada's AIC
Limited. Lee-Chin is also founder of the Berkshire Group and its three
subsidiaries: Berkshire Investment Group, Berkshire Securities and
Berkshire Insurance Services. Berkshire has vigorously denied involvement,
insisting that Thow acted on his own.
Thow's British Columbia Securities
Commission (BCSC) registration as a company officer with Berkshire was
terminated on June 1.
By Lyle Jenish
Business Examiner editor