Wednesday, May 30, 2007

BY DAVID BAINES
COLUMNIST

IAN SMITH/ VANCOUVER SUN British Columbia Securities Commission investigator Keven Stuart ( left), is questioned by prosecutor Doug MacKay at hearing for broker Ian Thow.

A retired Vancouver Island couple who were financially devastated by rogue Victoria broker Ian Thow described Tuesday how they were lulled into a false sense of confidence by Thow’s good standing in the community.

Gloria Boudreau of Sidney told a B. C. Securities Commission hearing panel that in March 2004 she and her husband invested $ 349,000 — including $ 200,000 borrowed against their home — in a mortgage investment scheme recommended by Thow. “ We never saw a penny of it,” she said. Asked by commission lawyer Doug MacKay how the loss has affected them, she said they previously had a very comfortable lifestyle, a lovely home, no debt and money in the bank. “ We lost that. It was really difficult.” “ It has had a tremendous impact on our well- being,” added her husband Gerry. “ He just ruined a lot of things for us. He’s stolen our son’s inheritance, that’s one thing.”

Asked why they invested with Thow, Gerry Boudreau said they initially bought mutual funds at Thow’s suggestion and lost a lot of money. Thow told them they could make it up by investing in a first mortgage loan to a Vancouver development company that would pay a high rate of return.

“He had us in a very vulnerable time in our lives. ... He knew exactly what he was doing,” he said.

Boudreau said that, at the time, he trusted Thow: “ For one thing, he was a senior vice- president of Berkshire [ Securities]. He was a member of their advisory board. He was well- known in the community.”

Gloria Boudreau said Thow had “ quite a reputation around Victoria.” She said he was involved with the CrimeStoppers program; he was a “ big wheel” in Rotary; and he gave money to hospitals and various other charities.

“He seemed to be highly thought of in the community,” she said.

None of the investments were approved by Berkshire. In June 2005, after the firm realized what he was doing and confronted him, Thow quit Berkshire, went into bankruptcy and fled to Seattle. RCMP are investigating the matter and are expected to lay charges.

Securities commission enforcement staff allege that Thow duped investors out of up to $ 30 million in a variety of bogus investment schemes, including the mortgage scheme and non- existent preferred shares of the National Commercial Bank of Jamaica, and a fictitious initial public offering of Berkshire shares.

The hearing before a panel headed by commission vice-chair Brent Aitken started Tuesday, but neither Thow nor his lawyer showed up. At MacKay’s urging, the panel decided to proceed without him.

In his opening remarks, MacKay said that, due to time and cost constraints, he did not intend to trace all $ 30 million that Thow is alleged to have diverted from investors. Rather he would trace just $ 5.5 million, which he argued is more than sufficient to warrant a lifetime expulsion from the market and a $ 100,000 fine, the maximum penalties under the Securities Act at the time of the infractions.

MacKay noted that the Mutual Fund Dealers Association is investigating Berkshire’s conduct in the affair. Among the 25 people in attendance was Berkshire’s general counsel, Julie Clarke.

“ We are certainly interested in what happens and getting as much information out of the process as we can,” she said in an interview. “ This is certainly something that no company wants to go through.”

The hearing continues today with more testimony from victims. It is being held at the commission’s offices on the 12th floor of 701 West Georgia.

dbaines@png.canwest.com