Investors Scrutinizing the Regulators

Home Page


Securities Regulation In CanadA

Fox Guarding the Hen House


Mystery surrounds Thow payback plan


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 dollars."

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 said.

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 said.

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 said.



Ian Thow takes flight