Barry Critchley

Wednesday, February 28, 2007

This is the tale of one couple's battle to regain money lost when they invested with Ian Thow, a former senior vice-president in the Victoria office of Berkshire Securities, who almost two years back skipped the country, leaving $32-million in losses. It's not a happy tale. It has dragged on and reflects badly on some participants in the world of mutual funds, the companies that employ them and the regulators that oversee them. The couple is Kirk Wong and Krista Kleven, who gave Thow $133,000 to invest in preferred shares of National Commercial Bank Jamaica.

History

The two gave money to Thow personally between December, 2002, and February, 2005. Thow was a senior vice-president at Berkshire and Berkshire was part of the AIC Group. And AIC, controlled by Michael Lee-Chin, has just bought the bank in Jamaica. In June, 2005, Thow left the country and has not been heard from since. He is scheduled to appear before the B.C. Securities Commission this summer.

Wong said Thow told him and his wife "that he was going to get the shares through Edward Gayle & Co. Ltd. [a Jamaican brokerage now owned by Lee-Chin.]" Wong and his wife completed the necessary forms and faxed them back to Berkshire's Victoria office. At the same time -- the summer of 2002 -- they opened another Berkshire account and deposited $15,000.

When they opened the account, Wong asked for "confirmation." In turn, Thow signed a letter on Berkshire letterhead saying the following: "Welcome to the Berkshire Investment Group Inc. We would like to thank you for the trust that you have shown us by investing with Berkshire. With the opportunities available, we assure you have made the right decision." The letter noted Thow had received the $15,000 and added, "we have enclosed your copies of the documentation we completed to open your new accounts."

Prior to making that investment, Thow told Wong he "owned 2% of each of Berkshire and of AIC." Thow said AIC "was purchasing the bank [in Jamaica] and he could get us into some preferred shares," at attractive rates.

"The preferred price was 30? Jamaican," said Wong, who also met Lee-Chin when he came to the Vancouver. "We went to 'Meet the Billionaire' in 2003 and that's when he [Lee-Chin] promoted the bank in Jamaica," he said.

"The meeting was a big event for Thow," said Wong, who noted that at regular intervals Thow would advise him and his wife of the worth of their investment. "It was all on his personal computer and also on the files at his office. "But we did not get share certificates."
 

Dealings with Berkshire

In March, 2006, Wong and Kleven wrote a three-page letter to the compliance department at Berkshire's head office in Burlington. That letter sets out the details of their investment with Thow and Berkshire. In that letter, written at the request of a senior Berkshire staffer, the two state the value of their investment is $5- million but add, "we cannot get our money back. Thow told us that Michael Lee-Chin had personally approved the purchase of these Jamaican bank shares for certain friends and Berkshire clients of Ian Thow," it said.

Nine months later, the couple received a reply, but not from Berkshire. Instead, the letter was sent by Torys, Berkshire's counsel.

That letter told them to shove off. "Though we are sympathetic to the impact the alleged transaction has had on you, you knew that you were not dealing with Berkshire with respect to the alleged transaction but rather with Ian Thow personally. Berkshire is respectfully declining any compensation to you. In so doing, Berkshire fully encourages you to cooperate and assist the police authorities, British Columbia Securities Commission and the Mutual Fund Dealers Association with respect of their investigations concerning Ian Thow."

The couple disagree: At all times, they say, Thow represented himself as a Berkshire representative.

The letter hoped that the foregoing "concludes the matter ... any further communications from you in respect of your claim, they are to be directed to me [not Berkshire] in writing. I ask that Mr. Wong immediately cease and desist his harassment of Berkshire."

It is worth noting that Berkshire has "conducted mediations with 17 complainants," a number of whom have been reimbursed for giving cash to Thow that was in turn invested in mortgages. Wong, who has wonderful research skills, says he has found evidence of a Berkshire client receiving compensation for an investment in the Jamaican bank.

A few weeks back, the couple wrote to Berkshire requesting a copy of its policies and procedures regarding client complaints. "They sent a legal letter and refused to give me a copy," said Wong, who argues Berkshire is trying to force the couple into expensive and time-consuming litigation.

Julie Clarke, Berkshire's general counsel, could not be reached for comment.


Dealings with MFDA

Last August, the two met with a Toronto staffer of the MFDA. Since then, no contact. "We don't know what's going on. But they are letting Berkshire send us letters saying 'they are not responsible for Thow.' " But Wong, who has become an expert on the workings on the MFDA, argues one of the rules stipulates Berkshire "shall be liable to all third parties, including clients for the acts and omissions of employees relating to the member's business."

Shaun Devlin, MFDA's vice-president, said, "we are conducting a thorough investigation, and that takes time."
 

Summary

The couple say the MFDA "has all the power to take care of the situation and to stop Berkshire."

They add that "these types of stories happen way too often and it doesn't seem that the regulatory bodies can give the public any answers. Everything is confidential, they can't comment and can't keep us updated. It's very frustrating for investors. Nobody seems to want to do their job," said Kleven, who was forced to add an extra $189,000 to their mortgage to "get us out of this mess."

bcritchley@nationalpostl.com