Andrew A. Duffy

Friday, July 13, 2007

The B.C. Securities Commission will release this fall its decision on disgraced Berkshire investment adviser Ian Thow.

A three-member panel adjourned a three-week hearing into Thow's exploits July 6 after a final submission from commission counsel Doug MacKay, who called Thow a "predator" who stole millions from unsuspecting clients. The panel's decision is set to be released Oct. 9.

The Securities Commission wants to levy Thow with an administrative penalty of $250,000 -- the maximum allowed in 2005 when the investigation started --and a lifetime ban from selling securities in B.C.

The panel heard how Thow, a senior vice-president with Berkshire, took his clients' money and used it to fuel a lavish lifestyle featuring private jets, helicopters, mansions and boats.

Thow left the country in the summer of 2005 and set up home in Seattle after filing for bankruptcy. He left behind clients and creditors who claimed he owed them in excess of $32 million.

Those former clients claim he cost them millions by convincing them to invest in a series of schemes that included buying shares in the National Commercial Bank of Jamaica, an initial public offering for Berkshire, and providing short-term loans to developers.

But none of those investments were made, and according to testimony from a forensic accountant, the money was used to pay off Thow's personal debts, furnish his lifestyle and, in some cases, pay off clients who were demanding money.

In his final oral submission to the commission panel last week, MacKay painted a picture of Thow as a predator who changed his story to suit his prey and lied to cover his tracks.

"It appears Mr. Thow was, or at least became, a predator. And over the period of at least three years, 2003, 2004 and much of 2005, the evidence of these witnesses shows that he intentionally and systematically stole millions of dollars from his clients, many of whom were elderly and were particularly vulnerable to Thow's apparent charm," he said.

"It appears as though Thow's approach was calculated to tell the clients what he expected they wanted to hear, and in this at least, he was apparently successful."

MacKay also alleged Thow breached the Securities Act and related rules by failing to deal fairly, honestly and in good faith with his clients; trading in non-mutual-fund securities for which he was not registered; and making misrepresentations in the selling of securities.

The RCMP Integrated Market Enforcement Team is continuing its investigation into Thow's activities, though there is no indication of when or if he would be charged.

The Mutual Fund Dealers Association is also investigating the role Berkshire may have played in this saga. The self-regulating body has passed the file to its enforcement counsel for consideration.

Thow is also being dragged back to a Seattle court by the trustee overseeing his bankruptcy because he did not satisfactorily answer questions about where he was living and working or what he was earning.

Thow has invoked his Fifth Amendment right under the U.S. Bill of Rights, meaning he refuses to testify under oath on the grounds that the answers could be used to convict him of a criminal offence.

Michael Cheevers, the trustee, now intends to ask the court to find Thow in contempt, which could mean a financial penalty or jail time.

The questions are part of Cheevers' search for the money former clients and creditors claim they are owed as a result of Thow's activities.

Manulife Financial Corporation announced late last month that it plans to acquire Berkshire's mutual-fund and securities dealerships in Canada. The deal is expected to close by Aug.31.

aduffy@tc.canwest.com