Former advisor ian Thow, accused of embezzling millions from clients of Berkshire Investment Group Inc., has fled to the U.S. state of Washington just days before a meeting with creditors who claim they are owed more than $30 million in unsecured debt. He is now considered a fugitive from Canadian justice.

Thow, 43, was a senior vice president of Berkshire in Victoria and a member of Berkshire’s advisory board until he resigned in June. He ostensibly left for personal reasons but, in ensuing weeks, four groups of former clients filed lawsuits claiming he had duped them out of millions of dollars using bogus investment schemes.

One scheme involved investing in what Thow purported to be shares of National Commercial Bank of Jamaica, which is 75% owned by Berkshire’s sister company, AIC Ltd. of Burlington, Ont.

The lawsuits allege that Thow instructed his clients to make out their cheques to him personally or to one of his private companies, and promised to hold the shares “in trust” for them. Investors claim, however, that he failed to deliver the shares or return some or all of their money. The B.C. Securities Commission and the RCMP’s integrated market enforcement team in Vancouver are undertaking formal investigations.

The lawsuits also name Berkshire, on grounds that the firm is vicariously responsible for Thow’s activities or was negligent in its supervision of Thow, who lived a hugely extravagant lifestyle during his stint at the mutual fund dealer from 1998 to his departure.

Berkshire has denied any responsibility. It has taken out advertisements in several newspapers, including The Vancouver Sun, National Post and The Globe and Mail, noting that Thow was not authorized to sell anything but mutual funds or insurance products. Berkshire says it was unaware of what it described as Thow’s “outside business activities.”

But Thow’s alleged victims, some of them elderly and now financially devastated, wonder why his conspicuous consumption did not raise alarms at the company. “How could Berkshire’s compliance people not know something was going on?” asks Brad Goodwin of Richmond, B.C., who, with his extended family, is claiming $1.1 million in losses.

Thow owned or co-owned three jets, including a $12-million Citation X jet with gold-plated seat-belt buckles and a cruising speed of Mach 0.92. He also owned a $5-million waterfront mansion in Saanichton, just north of Victoria, complete with a $1.5-million Sea Ray 560 Bridge Sedan yacht and a pad for his US$500,000 Bell 206 JetRanger helicopter.

He also spent lavishly on himself and friends. Thow acquired an armful of Rolex, Breitling and Cartier watches, and bought his former wife a six-carat ring that a former client described as “big as a jawbreaker candy.” Thow took his friends on fishing trips to the exclusive West Coast Fishing Club on Langara Island, B.C., gave each $600 fishing reels and made a public display of tipping the staff $10,000.

He took groups of friends and clients on junkets to the luxurious Bellagio Hotel in Las Vegas, at which he once bought a bottle of 100-year-old McCallum’s Scotch, poured a small glass for himself, took a sip, denounced it as “shit” and threw the rest over his shoulder. He also took some clients on his Citation X to an opulent seaside villa on Montego Bay so they could visit the Jamaican bank.

Thow attributed his ability to finance such a lavish lifestyle to his lucrative personal investments, including the Jamaican bank.

He frequently invoked the name of Berkshire/AIC chairman Michael Lee-Chin, a Jamaican native who views the bank as a way to revive that country’s flagging economy. Thow also introduced clients to Lee-Chin when he appeared at speaking events in Victoria, and claimed they had a tight relationship. “He said when Mike zigs, he zigs, and when Mike zags, he zags,” says Derek Stimson of Coaldale, Alta., who claims he lost US$200,000 in the bank scheme.

Thow also nurtured a reputation as a philanthropist and was a regular fixture at Victoria fund-raising events. He announced a $500,000 donation to the Greater Victoria Hospitals Foundation in memory of his late mother, and claimed he had garnered $1.1 million in pledges to set up a fund at Royal Roads University in the name of client Alex Campbell Sr., founder of the Thrifty Foods supermarket chain on Vancouver Island.

@page_break@Thow also served as chairman and president of Victoria CrimeStoppers and said he would raise $2 million to establish the Greater Victoria Police Foundation, an affiliation that generated favourable publicity in the Victoria Times Colonist and bolstered his credibility.

However, Victoria police chief Paul Battershill has since advised that the police foundation has not received a cent. A trustee of the hospital foundation similarly says that it has not received any money, and a Royal Roads spokesman said the university has confirmed just $141,000 in pledges, of which only $77,000 have been collected to date.

Creditors who have not yet filed lawsuits have stepped forward with their own tales.
One former client says Thow induced him to buy what Thow purported to be seed stock in Berkshire, on the false premise that the firm was about to go public. Others say they were persuaded to invest in short-term loans to real estate developers who would supposedly return 10% in three months, plus a 10% lender’s fee. Still others claim that Thow got them to invest in GICs that would yield 10% a year.

In many cases, Thow persuaded clients to mortgage their homes to finance the investments. The advice was consistent with Berkshire’s “five laws of wealth creation,” of which the third law is to “use other people’s money.” Although it is clear that Berkshire intended the strategy to be used only for authorized mutual fund investments, Thow adopted it as his mantra to promote the sale of both authorized and allegedly unauthorized investments. The result is that many former clients say they have not only lost their savings, but find themselves buried under mountains of mortgage debt.

Besieged by bad publicity and angry creditors, Thow made a proposal in July under the Bankruptcy and Insolvency Act. He filed a statement of affairs showing he had about $1.5 million of unencumbered assets against roughly $13 million in unsecured debt, for a potential return of 15¢ on the dollar. However, he said that if creditors supported the proposal, a mystery donor would chip in another $5 million, raising the total return to more than 50%.

Alas, when creditors gathered on Sept. 12 at the Hotel Grand Pacific in Victoria to consider the proposal, bankruptcy trustee Michael Cheevers of Wolrige Mahon Ltd.
had nothing but bad news.

First, Thow had not shown up.

Days earlier, Thow had crossed the U.S. border at Blaine., Wash., at 1 a.m. with a Ford 350 truck loaded with household goods, followed by another truck similarly loaded with furnishings. U.S. border officials, alerted earlier that Thow might flee the jurisdiction, summoned Vancouver RCMP. But, before they arrived, Thow offered proof of U.S. citizenship and, in the absence of a warrant for his arrest, border officials were obliged to let Thow cross.

Cheevers also told creditors that not only had the mystery donor not materialized but that an additional claim for $12 million had been filed. It was from former client Campbell, who said he had invested in the Jamaican bank and other Thow-inspired schemes. The claim, and others, raised Thow’s unsecured debt to $32 million against only $1.5 million in equity in his home.

Cheevers also provided creditors with more evidence of Thow’s profligate spending.
After reviewing 60 bank and credit card accounts, Cheevers has determined that Thow had received $7.2 million cash from creditors. During the 30 months from January 2003 to June 2005, he had charged $2,648,726 on his credit cards, including cash advances totalling $428,893 — “The majority of which were taken either in or close to casinos.”
Cheevers says Thow also spent $145,313 on dining, $826,079 on trips (mainly hotel accommodation), $100,546 on jewellery, $137,963 on clothing and $180,487 on furniture. “He lived a lifestyle to which I am not accustomed,” Cheevers dryly remarked.

With the new prospect of recovering only about 6¢ on the dollar before trustee fees, creditors voted against Thow’s proposal, which had the effect of automatically assigning him into bankruptcy. Cheevers also advised creditors he had obtained a warrant for Thow’s arrest under the bankruptcy act on grounds that the Ford 350 and household goods that he had taken across the border belong to creditors. Thow cannot be extradited for the alleged offence, but can be arrested if he returns to Canada.

It appears, however, that Thow has no immediate plans to return. Concurrent with his flight south, Thow filed for bankruptcy in the U.S., claiming his permanent residence as Seattle. Cheevers had hoped to thwart that application during a U.S. Bankruptcy Court hearing on Oct. 28.

Meanwhile, on Oct. 13, reporters tracked Thow to Seattle, where, he claims, he is “living on buttons” and is able to get by because family and close friends have stuck by him. “It’s funny, when things are going well and you’re riding high, how many friends you have,” he said. “But the people who really matter to me are the ones who are by my side right now.”

One such person is Thow’s new 23-year-old wife. Goodwin says the couple flew to Las Vegas in late September and attended a gala charity event at the MGM Grand Hotel. The event featured tennis star Andre Agassi and singer Barbra Streisand, plus an all-star lineup of performers, including Celine Dion and Robin Williams. Despite his purported impecunious state, Thow still manages to sample the good life. IE