Late last month, St. Paul-based philanthropic holding company Otto Bremer Trust (OBT) floated a plan to sell its banking business Bremer Financial Corp. On Tuesday, Bremer board members filed a suit in Ramsey County District Court objecting to the trust’s plans.
The bank’s suit aims to “protect its employees, shareholders and customers, and other local stakeholders” from a “hostile takeover attempt,” according to a press release from Bremer Financial.
The lawsuit accuses the trustees with misusing confidential information, disloyalty and self-dealing, and shareholder oppression.
“In filing this lawsuit, the Board is [ensuring] that any transfer of Bremer Financial shares is valid and consistent with OBT’s and Bremer Financial’s organizational documents, which reflect Otto Bremer’s vision to harness the power of banking to drive economic growth and to support our communities,” said Ronald James, Bremer Financial board chairman in a news release.
The complaint was filed by seven of the 10 total Bremer Financial board members against the remaining three board members: Brian Lipschultz, Daniel Reardon, and Charlotte Johnson—all three of whom are also trustees of OBT.
The trustees believe that selling Bremer Financial would allow for more growth of both the bank and OBT.
To begin the divesting process, the trustees already sold about 37 percent of shares to 19 investors, according to the court filing. Meanwhile, Lipschultz, Reardon, and Johnson brought a sale proposal before the Bremer board. The six other board members present voted against the proposal.
In the new complaint, the seven contending board members claim a sale “has nothing to do with protecting the Trust or serving its beneficiaries,” but rather is a “disloyal scheme … designed to enhance the Trustees’ personal wealth and public profile.”
The plaintiffs say the sale would be the latest move in a years-long power grab that began when Lipschultz became trustee in 2012. In 2014, then OBT executive director Randi Ilyse Roth wrote in an email to colleagues and friends that her OBT position was being eliminated because the foundation’s three trustees had become co-CEOs in a restructuring, reported MPR at the time.
Not long after this leadership shakeup, Washington, D.C.-based philanthropy watchdog group National Committee for Responsive Philanthropy called on Minnesota Attorney General Lori Swanson to investigate OBT.
The committee called for the investigation over concerns that checks and balances had been removed from the trust’s structure, and that trustees were making too much money. In 2013, Lipschultz, Johnson, and Reardon were paid a combined sum of more than $1.2 million. That total marked an increase of nearly 10 times from the salary 10 years prior, MPR reported. The trust responded to those allegations by calling them “baseless assertions and innuendo” and “false and unfounded,” according to a Pioneer Press report.
Now, the plaintiffs have stirred up those allegations once more. They also argue that the trustees are violating written policy through their efforts to move the sale forward.
According to the court filing, OBT is supposed to hold the controlling shares of Bremer Financial in perpetuity unless “unforeseen circumstances” arise. There are no valid possible reasons for a sale that would qualify as such circumstances, the plaintiffs say. They note that Bremer Financial has “served as a highly successful financial engine for OBT,” paying more than $750 million in dividends to OBT in the last 30 years alone.
In addition, the plaintiffs say the Trust already violated by meeting with a potential buyer for in the spring.
The trustees deny all allegations against them.
“The allegations in the lawsuit are false and without merit,” they said in an email. “We’re confident the courts will quickly see this tactic for what it is: an ill-founded attempt by conflicted management and directors to deprive all shareholders of the value of their stock and to deny employees and communities of any legitimate exploration of their opportunities.”
Said president and CEO Jeanne Crain: “We are extremely disappointed that OBT’s reckless unilateral actions have undermined a partnership that has delivered for the people of Minnesota, North Dakota and Wisconsin for more than 75 years.”
Crain said Bremer will continue its financial services and operations amid the suit.