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Fox Guarding the Hen House

   

Like a thief in the night

 

Sep 19 2005

IAN THOW: The RCMP continues building a criminal case against the former officer of Berkshire Investment Group. Ian Thow fled Canada, crossing the U.S. border at Blaine, Wash. at 1:30 a.m., Thursday September 8, four days before creditors voted him into bankruptcy. Driving a Ford F350 and followed by another pickup, Thow was loaded with household items and brandishing a U.S. birth certificate. Thow crossed the border ahead of pursuing RCMP.

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 banking machine.

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 country.

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 asset pool.

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 squirreled away.

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 remain.

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 Revenue Agency.

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 next step."

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

ljenish@businessexaminer.net