Andrew A. Duffy

Thursday, June 07, 2007

VANCOUVER -- The money disgraced investment adviser Ian Thow accepted from some clients went to pay down his personal Visa bills, eliminate overdrafts from his personal accounts and pay off loans, a forensic accountant testified yesterday.

It went to car dealerships, into his pocket as cash and was used to pay other clients.

It seemed to go everywhere but toward purchasing the investments his clients had been promised, veteran forensic accountant James Blatchford told the B.C. Securities Commission hearings into Thow's conduct.

As has been the case throughout the hearing, the former vice-president of Berkshire Investment Group was neither present nor provided defence counsel to act on his behalf.

Thow has been living in Seattle since 2005 after fleeing Victoria and his high-profile bankruptcy that left 73 former clients and unsecured creditors claiming he owed them in excess of $32 million.

The former clients claim he cost them millions by having them put money into in a series of investment schemes, though it's becoming clear Thow used that money to fuel his own lavish lifestyle.

During two hours of testimony, Blatchford, a certified management accountant and forensic accountant with Grant Thornton LLP, dealt with Thow getting money from his clients and how he would quickly disperse the funds into other accounts he controlled and then into a variety of expenditures such as Visa bills and overdrafts.

"It's just like being kicked in the guts, like someone sucker-punched you," said former Thow client Brad Goodwin, one of the few former clients who showed up for the fourth day of hearings.

"Just to see [the money] spent like that makes me sick, sick that a human being can do that.

"And what really blew me away is that [all of Thow's accounts] were in overdraft, he was constantly in overdraft, this guy wasn't flush from day one."

Blatchford took the three-member commission panel through sections of the 1,500-page report he prepared on Thow's accounts.

He showed them how at one point Thow took a cheque for $300,000 from one of his clients, Darrell Goodwin, and transferred the funds to his other accounts.

The immediate expenditures included $100,000 to Vancouver Island Jet to reduce a deficit, $28,900 to one of his personal accounts to reduce the balance of a loan, another $29,000 to eliminate a deficit in another account, $22,577 to Three-Point Motors for his 2003 Mercedes 500SL, and he took $15,000 in cash.

In another series of charts, he showed money coming in from a number of former clients and being used to pay down his Visa bills, and outstanding balances owed to Tom Harris Chev-Olds, among others.

"He deposited the proceeds received from investor/clients to personal, family or corporate bank accounts that he controlled or managed, and then made transfers to other personal, family or corporate accounts," said Blatchford, reading his report's observations to the hearing. "In many cases, the number and value of the cheques were more consistent with personal, family or corporate [transactions] than the purchase of shares in [the National Commercial Bank of Jamaica] or property-development mortgages."

There was no mention anywhere of money being transferred to Berkshire Investment Group or being used to buy into any of the investment schemes Thow had convinced his clients to take part in.

"None of it ever came through Berkshire," said Julie Clarke, senior counsel for the investment firm. "And certainly that's been our difficulty in terms of investigating this. Nothing came through and we're depending on people coming forward."

In summing up his findings, Blatchford said Thow "purposely used the proceeds he received from investor clients in an effort to support personal, family and corporate financial obligations."

He pointed out that in many cases the funds deposited into Thow's account and quickly dispersed, were often circulated back to that original account, and were sometimes depleted "by making payments to other investor clients."

In total, Blatchford said, he looked at about $6 million of the money given to Thow by his former clients. He said he was able to trace 99 per cent of it.

The hearing has adjourned until June 14 and 15, when commission counsel Doug MacKay intends to put more client witnesses on the stand.

MacKay's written argument is to be submitted to the panel by June 29, but he couldn't say how long it would take for the panel to render its decision.

The BCSC is seeking the maximum penalty enforceable, a lifetime ban from selling securities in B.C. and a $250,000 administrative penalty, the maximum allowed when the infractions took place.

aduffy@tc.canwest.com