By David Baines
Wednesday, August 24, 2005
A mystery benefactor has offered $5 million to unsecured creditors of
former Victoria investment executive Ian Thow.
The offer is the central clause in a proposal that Thow has made to his
creditors to avoid bankruptcy. The proposal states that, if creditors
accept his proposal, Thow "shall cause a third party to pay the trustee
for the general benefit of unsecured creditors the sum of five million
Bankruptcy trustee Mike Cheevers said in an interview Tuesday that he
doesn't know who the third party is.
He said Thow's lawyer, David Gagnon, has assured him the donor is not
related to Thow's former employer, Berkshire Investment Group Inc.
He said Gagnon promised to divulge the donor's identity so he can confirm
he or she is arm's-length to Thow, and the money is not part of some
secret stash that actually belongs to Thow.
He also said the money must be in the bank by Sept. 12 when creditors will
meet in Victoria to consider the proposal.
"How could I recommend [the proposal] otherwise?" he said.
Cheevers said Gagnon has told him that he must keep the donor's identity a
secret. Not even creditors can know.
"Mr. Gagnon discussed that the trustee can know [the donor's identity] in
order to make appropriate inquiries, but it's not to be public
information," Cheevers said.
Gagnon declined to say why the mystery donor wishes to remain anonymous.
"Benefactors have their terms," he said in an interview.
He confirmed the donor's identity will be revealed to the trustee and his
counsel so they can do their due diligence.
"The key is to assure creditors that this is fresh third-party money that
they cannot get any way other than by saying 'yes' to the proposal," he
Richmond lawyer Katherine Ducey, who represents some of Thow's creditors,
raised questions about the proposal.
"If Thow is really destitute then the proposal is one that should be
considered. However, one wonders where the money is coming from," she
Cheevers said he fully expects the donation, and its origin, to be the
main issue at the creditors' meeting on Sept. 12.
Without the $5-million infusion, he said, unsecured creditors would get
less than 15 cents on the dollar. With it, they would get about 50 cents.
He stressed this is a rough calculation, before trustee fees, which he
said will be substantial considering the complexity of the case.
Thow, 43, was formerly senior vice-president of Berkshire in Victoria. He
lived a hugely extravagant life with three jets, a $900,000 US helicopter
and a waterfront home valued at $7 million.
He went on junkets to Las Vegas, where he ordered a $10,000 bottle of
scotch, and to the luxurious West Coast Fishing Lodge, where he handed out
a $10,000 tip.
On May 31, he suddenly resigned from Berkshire. In ensuing days and weeks,
five groups of investors filed lawsuits in B.C. Supreme Court alleging he
had induced them to buy shares of the National Commercial Bank of Jamaica,
but failed to deliver their shares or return their money.
The Jamaican bank is 75-per-cent owned by Berkshire's parent, AIC Ltd. of
Burlington, Ont., but Berkshire denies it knew or approved of these
investments. It also denies any responsibility for what it characterizes
as Thow's "outside business activities."
Earlier this month, Thow filed a notice of his intention to make a
proposal under the Bankruptcy Act. In that proposal, which he filed Monday
with Cheevers, Thow declared $42.9 million in liabilities against $7.6
million in assets.
Of his total liabilities, $3.7 million are classified as secured debts.
Cheevers said these creditors will recover virtually all their money.
Unsecured debts are reported at $39.2 million, but Cheevers said that
figure may be overstated and actual unsecured debts against Thow
personally may total only $13 million.
He said Thow's assets consist mainly of his waterfront home, in which
there is about $2 million equity.
He said this $2 million is available to satisfy the roughly $13 million in
unsecured debt. This represents a return of about 15 cents on the dollar
before trustee fees.
If creditors accept the $5 million donation, he said, there would be $7
million in assets to satisfy the $13 million in unsecured debt, a return
of about 50 cents on the dollar.
The proposal envisions that Thow would retain all his clothing, watches
and jewelry, computers and all household goods and chattels at his
waterfront home in Central Saanich.
Ducey said she may object to this. "We understand he has thousands, if not
hundreds of thousands of dollars worth of watches, so that is an area we
would would have to question."
She also said she may question Thow's proposed retention of household
goods. "We understand there's some valuable pieces of art there," she