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Monday, October 25, 2021

Attorney General’s Attempt to Remove Trustees of Otto Bremer Trust Walks in Courtroom

When the board of the Bremer Financial Corporation decided to sell the Bremer Bank, the trustees of its philanthropic parent – ​​the Otto Bremer Trust – decided to proceed anyway.

The Minnesota Attorney General’s Office says that in August 2019, trustees Brian Lipschultz and Daniel Reardon waived key legal and financial safeguards and quickly called for the sale of 725,000 shares of Bremer Financial to 19 hedge funds controlled by 11 banks. set in motion. Until the state stepped in, the trustees took the first step toward a hostile board takeover and bank sale with the goal of making themselves millionaires.

Legal representatives of the St. Paul-based charity have argued otherwise. He says selling the shares was not only legal, but necessary to meet Internal Revenue Service standards. The trust receives 92 percent of the dividends generated by Bremer Financial — one of the largest agricultural lenders in the Midwest — and IRS rules require the charity to distribute at least 5 percent of its assets annually to beneficiaries.

Hearings began this week to consider Attorney General Keith Ellison’s request to change the foundation’s trustees, with statements before Judge Robert Ausumb on Monday. The trial-like evidence trial is expected to continue for at least another week.

Bank sale value estimated at approximately $1.9 billion

A letter of intent from a potential bank buyer estimated the sale price of Bremer Bank to be approximately $1.9 billion, or nearly double the book value of $1 billion.

Based on the higher numbers, the trust would have to double Bremer Bank’s $50 million in annual dividend payments, according to the trust’s lawyers. That would quickly eat through their liquid assets.

“It could put them in a death spiral,” said William Byrnes, a Dorsey and Whitney attorney at the trust, taking the witness’s stand Friday during the fifth day of probate testimony in Ramsey County District Court.

Bremer Bank officials have challenged how those payments should be calculated, and Attorney General Keith Ellison’s office has accused the trustees of forcing the sale of the bank and forfeiture quickly on a convenient pretext to enrich themselves. is charged. Based on allegations of self-harm, the Attorney General’s Charity Division has sought to install three new managers at the helm of one of the state’s oldest philanthropic acts.

Compliance with the Tax Act of 1969

The Ford Foundation, the Blandin Foundation, and other foundations around the country were forced to sell their corporate subsidiaries decades ago by federal tax law, and the Otto Bremer Trust stands as a major exception. On the other hand, the charity’s founding documents from 1944 indicate that it was Otto Bremer’s wish not to sell the bank, except in the event of “unforeseen circumstances”.

The trustees have openly acknowledged that the purpose of selling corporate shares to out-of-state investors was to remove the board of Bremer Financial Corporation and force the sale of the bank, but say it would boost the philanthropy’s coffers and lead to good will get huge benefits. Causes throughout the Midwest.

The Otto Bremer Trust made a record payment of $71.2 million in grants and low-interest loans last year, most of which was in Minnesota. Charitable grants and investments were also made in Wisconsin, North Dakota and Montana.

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lack of oversight

In 2014, three trustees fired executive director Randy Roth and named himself as co-CEO. Former program officers and other employees testified this week that without the executive director, human resources manager or board to respond, the trustees repeatedly crossed ethical lines. Trustees have stated that they are controlled by the courts and the Attorney General’s office.

investment fee

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