Monday, October 22, 2007

VANCOUVER -- For the first time in its history, the Mutual Fund Dealers Association of Canada has rejected a settlement agreement with one of its members.

The agreement between the MFDA and Berkshire Investment Group Inc. was presented Monday to a confidential panel hearing in relation to allegations that Berkshire failed to properly supervise Ian Thow, a former Victoria-based Berkshire financial adviser who bilked victims -- many disabled and elderly -- of an estimated $32-million.

But the three-person MFDA panel, which was convened to examine the settlement, unanimously rejected it after nearly four hours of meeting in a Vancouver boardroom.

The MFDA can now pursue another settlement agreement with Berkshire or bring a formal notice of hearing.

Berkshire said in a news release that it was "disappointed" with the decision, but will continue to work with the MFDA.

The details of the rejected settlement agreement are confidential, but Shaun Devlin, the MFDA's vice-president of enforcement, said the panel can deny an agreement based on disagreement with what it includes regarding facts, rules that have been broken and penalties awarded.

Brad Goodwin, a Vancouver area man who, along with his brother and father were defrauded of over $1-million by Mr. Thow, called the rejection "shocking."

But, he said, if the panel was "unhappy with the fine that's great. Bring it up higher and put it to them."

The maximum penalty the MFDA can assess is expulsion from its ranks and a $5-million fine, although that fine cannot be used as compensation for victims.

The rejection comes as a blow to victims like Mr. Goodwin, who are engaged in civil actions against Berkshire and Mr. Thow, and had hoped to use any admissions contained in the settlement agreement as fodder for their own legal suits.

"It's going to make it harder, a lot harder," said Mr. Goodwin, who together with his family are suing for $1.2-million. "It's nice to have a regulatory body make a decision so that you have something to fall back on, the rules that were broken. But it doesn't look like we're going to get that."

Mr. Thow served helped establish the Victoria office of Berkshire Investment Group Inc. in 1998, 10 years after beginning work as a mutual fund salesman with Investors Group in the B.C. capital.

According to those he scammed, around 2003 he began selling non-existent shares in a short-term construction loan scheme (which itself never existed) and in National Commercial Bank Jamaica Ltd., a bank which existed and whose largest shareholder was Michael Lee-Chin, the billionaire owner of AIC Ltd., and, at the time, Berkshire.

Mr. Thow used the money he stole to fund a lavish lifestyle that included two business jets, a 56-foot yacht, a mansion, his own helicopter and a small fleet of sports cars.

In 2005, as his clients began to ask questions about the lack of documentation for the investments they had made, abruptly quit Berkshire and fled the country in the middle of the night for Washington state, where he now lives in the Seattle area.

Last Wednesday, a B.C. Securities Commission panel declared him a fraudster who failed to deal fairly, honestly and in good faith with his clients, traded in securities without being registered to do so and made untrue statements of material facts about the securities he offered.

The commission found that of 26 of Mr. Thow's clients it questioned, they had invested $8.7-million and lost $6-million.

The Commission is expected to seek the maximum penalties against Mr. Thow, which include a $250,000 fine and a lifetime ban from selling securities in the province.

But given that Mr. Thow now lives in the U.S., even the commission itself admits it will be difficult to recoup any money from the man.