Minnesota Attorney General Keith Ellison's office is seeking the removal of three trustees of Otto Bremer Trust amid a battle over the bank it controls.
Following a months-long investigation, Ellison filed two petitions and a memorandum of law in Ramsey County Probate Court this week to remove trustees Brian Lipschultz, Daniel Reardon and Charlotte Johnson and replace them with interim trustees.
"I do not take this action lightly," Attorney General Ellison said in a news release. “But as the chief law officer of the state and supervisor of charitable trusts in Minnesota, I have the duty to make sure charitable assets are used properly and for the benefit of the public, not the private aims and personal enrichment of the trustees. Because the trustees’ misconduct is particularly serious, it requires particularly serious action by my office.”
In the court documents, Ellison accuses the trustees of attempting to sell Bremer Bank, hiking up their own compensation, paying themselves redundant and unnecessary fees, excessive spending and issuing grants to charities to which they were personally affiliated, among other things.
“Otto Bremer directed that the trust in his name not be used for ‘any purpose’ other than charitable. The trustees’ actions have abused his trust and Minnesotans’ trust,” Ellison said in the release.
According to the petition, the trustees attempted to sell the trust's shares of Bremer Financial Corporation in October 2019 to out-of-state hedge funds, knowing it would lead to a hostile takeover of the bank. Ellison says the attempt to engineer the sale of the bank enriched them "significantly" and "drained the trust of millions of dollars meant for charitable purposes."
To prevent the hostile takeover, Bremer Financial Corp. sued Otto Bremer Trust in November, leading to other legal actions. Ellison has asked the court to stay the lawsuits between the trustees and Bremer Financial Corp. until his petition is decided.
In response to the petitions, the trustees said they'll fight this "misguided effort," noting the "accusations are unfounded in law or fact and reflect government overreach at its worst."
They accuse Ellison of supporting their efforts to find a buyer for Bremer Bank initially, but then say he allegedly changed his mind after the bank hired an adviser, who wasn't named, with a political connection to him. In court documents, Ellison said the trustees withheld information from his office so it wouldn't block their plans.
The trustees have maintained that selling the bank would give the trust more money to spend on charitable causes.
However, Ellison says the 2019 sale follows a years-long attempt from the trustees to reframe the trust's brand from a charitable organization to a finance-focused, private-equity firm benefiting their private interests.
The petition seeks the trustees' immediate suspension or removal to "prevent ongoing harm to the trust like illegal investments, restructuring the trust to shield it from oversight and liability, and incurring tens of millions of dollars in legal fees," the release says.
Ellison proposes new trustees be appointed to investigate the allegations, manage the trust and rebuild independent oversight over the trust. Ellison suggests the court appoint Hennepin County District Court Judge Pamela Alexander, former Minnesota Council on Nonprofits Public Policy Director Marcia Avner, and former president and CEO of the St. Paul Foundation and the Minnesota Community Foundation Carleen Rhodes as interim trustees.