A Ramsey County District Court judge has allowed a legal case to move forward involving the contested sale of controlling interests in Bremer Bank, one of the Midwest’s largest farm lenders, while signaling that key questions have already been settled in favor of the philanthropic trustees who engineered the stock sale.
The judicial order, which calls for mediation in advance of an evidentiary hearing, neither approves nor denies the long-contested stock sale. Instead, it reaffirms that the case will not “relitigate” allegations of trustee misconduct.
In October 2019 the three trustees of the Otto Bremer Trust — one of the state’s oldest philanthropies — sold more than 725,000 “Class B” shares in Bremer Bank, the charity’s largest asset, to 19 East Coast hedge funds, positioning the bank board for takeover and the bank itself for a possible sale.
Bank officials and bank employees responded by filing suit against the three trustees, and individual hedge funds then filed legal action of their own against the bank when the stock sale was frozen.
The result was at least six separate lawsuits and the legal involvement of the Minnesota Attorney General’s office, which regulates charities and accused the trustees of self-dealing.
In April 2022, Judge Robert Awsumb removed Brian Lipschultz as a trustee of Otto Bremer Trust, noting his conduct — including berating the charity’s grantees and running a side business using the philanthropy’s resources — constituted a serious breach of trust.
Lipschultz appealed, but the Minnesota Court of Appeals and the Minnesota Supreme Court later affirmed his removal.
Awsumb, however, did not give merit to the claim that the three trustees engineered the stock sale to increase their own investment advisory fees. Nor did he take issue with the trustees’ compensation, which he said was within a cap created by the philanthropy’s founding documents. He left the question of the actual stock sale unresolved for consideration at a later date. The Minnesota Attorney General’s office did not appeal Awsumb’s ruling.
Judge Mark Ireland this week ordered the bank board and trustees to schedule mediation in advance of an evidentiary hearing in the case, which he said will not focus on whether the trustees “breached their fiduciary (duties) or abused their discretion” in the October 2019 stock sale.
Calling those issues settled, Ireland said “the court expressly concluded that the trustees’ compensation was reasonable,” though “neither the attorney general’s petition nor the trial order are conclusive and binding on all issues.”
As a result, the trustees’ legal motion for a quick judicial decision, or summary judgment, to immediately approve the October 2019 stock sale “is not appropriate at this time,” Ireland wrote.
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