Brian Lipschultz ousted from Otto Bremer Trust by MN judge

Brian Lipschultz, one of three trustees of the embattled Otto Bremer Trust, will lose his position as head of one of the state’s oldest philanthropies by order of a Ramsey County District Court judge.

“There is no place in the charitable world for animosity and vindictiveness to seep into or impact the decision-making of a charitable trustee,” Judge Robert Awsumb wrote, at the end. of his 103-page legal order released Friday.

“Lipschultz has repeatedly shown that he cannot operate purely for charity,” Judge wrote, “and has allowed his personal interests, animosity, enmity, or vindictiveness to impact about his decisions and behavior as a trustee of one of the region’s most important charitable institutions.

The other directors – Brian Reardon and Charlotte Johnson – will be allowed to keep their seats, despite a request to the contrary from the office of Minnesota Attorney General Keith Ellison, who had sought to remove and replace the three philanthropic leaders based on allegations. personal transactions. .

Nonetheless, “this is a victory for the integrity of Minnesota’s charitable sector and the people of Minnesota,” Ellison said, in a written statement Friday.

A spokesman for the trustees released a brief written statement on Friday noting that the judge found no evidence of wrongdoing in relation to the potential sale of Bremer Bank, the largest philanthropy stake, and a central aspect of Ellison’s impeachment request. In fact, just the opposite.

While keeping the issue open, Awsumb’s legal order says the trustees were likely within their rights to explore a bank sale, which could have financial benefits for grantees and the community as a whole.

“The court has ruled favorably for (Otto Bremer Trust) on all other matters, with the exception of the removal of Mr. Lipschultz, for which we are extremely disappointed and are considering our options,” read the statement from the trustees. .

A LONG FIGHT

The court’s long-awaited response to Ellison’s dismissal request caps a lengthy evidentiary hearing that began last fall.

It’s also the latest entry in a high-profile probate battle involving the three trustees, the attorney general’s office (which regulates charities) and Bremer Bank’s board.

Established by German philanthropist Otto Bremer in the early war years after the Great Depression, the St. Paul-based bank is the charity’s largest financial asset and one of the largest agricultural lenders in the Midwest.

It is unusual for a charity to own a bank, and the efforts of two directors in particular – Lipschultz and Reardon – to sell majority shares of Bremer Bank to East Coast hedge funds and position the bank for the sale drew intense scrutiny and multiple legal challenges. Among those who filed the lawsuits were the bank’s board of directors, employees of the partially employee-owned bank, the state attorney general’s office and several hedge funds.

The case had also sparked the interest of members of the philanthropic community and its watchdogs.

THE JUDGE SUPPORTS THE SALE OF THE BANK

The judge did not make a final decision on the legality of a bank sale, but he implied it, while indicating that the question would arise later.

“There are many valid reasons for further exploration of strategic options to separate (Bremer Financial Corporation) from its Trust ownership, and it could very well be in everyone’s interest,” Awsumb wrote.

“The extensive and redundant regulations and investment restrictions imposed on the Trust due to its designation as a bank holding company are costly and impede the Trust’s ability to invest its assets and pursue consistent strategies.
with every other charity in the country, he wrote.

A spokesperson for the three directors released a written statement supporting the judge’s position on the sale of the bank.

“We are pleased that the court has ruled in our favor on the central issue of this case: the right of the trustees to sell Bremer Financial Corporation if it is in the best interests of the Trust,” the statement said. “The court found that the sale of the shares was ‘a good faith effort to protect and strengthen the Trust’, ‘and not an abuse of discretion or breach of trust.’

JUDGE AVOIDS LIPSCHULTZ

Awsumb, in his written order, expressed concern about Lipschultz’s general leadership qualities, including allegations of “insider trading,” failing to disclose personal use of charitable assets to the Internal Revenue Service. and inappropriately scolding the president of Minnesota Junior Achievement North during a discussion about the nonprofit’s grant funding.

Lipschultz had grown furious, Junior Achievement president Sara Dziuk said last October after learning the nonprofit would be honoring bank chairman Ron James at its celebration. of the Hall of Fame. He reminded her that “the administrators will be in power for a very long time,” she said at the time, and he urged her to contact the governor’s office to defend the trust in her legal battles.

“Lipschultz abused his grantmaking authority by making multiple hostile or coercive statements to the CEO,” Awsumb wrote.

After the incident, the Junior Achievement board voted to return a $1.2 million donation to the Otto Bremer Trust, a costly move meant to send a signal that they would not be bullied into making left.

Judge noted Lipschultz relied on Otto Bremer’s staff, including an executive assistant, to maintain his children’s schedules, send things to his daughter’s college, collect personal mail, oversee travel details personal information such as flight, hotel and car rental confirmations, and scanning documents for his side business.

An assistant testified that over a period of three or four years, she devoted up to one or two hours a day to non-trust work for Lipschultz.

Awsumb also expressed concern that Lipschultz had not indicated his chosen successor at the request of the attorney general’s office, even though he later admitted under oath that he had indeed chosen someone.

THE REPLACEMENT STILL IN QUESTION

While the other two trustees will be allowed to keep the positions they inherited from their parents, the judge said Reardon will no longer receive the advisory fees he and Lipschultz received for helping manage the trust’s investments , functions that the attorney general’s office had described as redundant because they had also been handled by other trust staff and outside consultants.

Instead, the two remaining directors will receive annual compensation set in a November 2020 court order, and the issue of compensation will be revisited at a future court hearing.

Awsumb did not immediately name a replacement for Lipscultz, leaving that matter “separate from the trial for later determination.”

Trustees have 60 days to submit a written proposal to fill the vacancy in writing, but the judge noted that a third trustee may not be needed.

About Jonathan J. Kramer

Check Also

Meet This Mom: Stephanie Farley :: WRAL.com

By Stephanie Llorente, WRAL contributor Raleigh, North Carolina — It’s no secret that the Triangle …