The Otto Bremer Trust Faces The Music, And It’s Loud – Non Profit News
The three directors of a private foundation increased their salaries by about 300% in just a few years. They built lavish new offices, so lavish that administrators felt they might be embarrassing if a meeting with local officials like former Senator Al Franken and current Senator Amy Klobuchar was held there. One of the directors expressed concern that “posting wealth would be off-putting and lead them to investigate or inquire more seriously.[ly] about how we spend our money. At least one of the directors ran for-profit businesses from the non-profit offices. The Trustees have asked the Trust to provide grants to organizations outside its geographic mission area and to projects that do not meet guidelines. One of them, a half-million dollar grant, was reportedly intended to advance the political career of an acquaintance of one of the administrators. Now they are trying to sell the foundation’s most profitable asset, in an effort to line their pockets.
These are among the charges brought against the directors of the Otto Bremer Trust, based in St. Paul, Minnesota, by state attorney general Keith Ellison. According to reports in the Star Tribune and the Duluth News Tribune, Ellison is asking the Ramsey County Estates Court to remove the three trustees who currently run the Trust, replacing them with interim trustees.
In recent years, foundation staff have also expressed concerns about the ethics of directors, as have other foundations in the region.
Trust staff, currently 22 employees, questioned $ 3.8 million in grants to nine charities with which the trustees were personally affiliated, either by serving on their boards of directors or by having members of their immediate family.
“We have affidavits and testimony from current and former employees that are filed as exhibits,” said John Stiles, spokesperson for Ellison’s office. “We have 238 exhibitions. “
This is the second time in recent days that a state attorney general has brought major charges against a non-profit organization. Earlier, NPQ shared the news of the New York attorney general’s filing to dissolve the NRA and ban its CEO from getting involved with a nonprofit in the state. As in this case, an important part of the argument is that the leaders of the nonprofit organization took improper personal gain and therefore broke the state law on nonprofit organizations.
The case of the Bremer Trust is interesting, with a very unusual corporate structure. Otto Bremer immigrated from Germany to the United States in 1886. Otto had taken banking courses in Germany, and after a brief period working in the wholesale trade, he joined the National German-American Bank as an accountant and was climbed the ranks. Eventually, in 1924, Otto acquired a controlling interest in the American National Bank in St. Paul.
Otto quickly became committed to rural communities, and American National formed partnerships with several national banks in Minnesota, Wisconsin, and North Dakota. With challenges after World War I, Otto held controlling interests in 55 banks in those states and Montana.
Otto established the Otto Bremer Company in 1943 as a bank holding company to consolidate holdings in the country’s banks. A year later, he established the Otto Bremer Trust, which was to make charitable contributions to causes in areas served by banks across the country. In 1949, ownership of the Otto Bremer company was transferred to the trust.
The Otto Bremer Trust ended up with 92 percent ownership of what remains of these national banks, which were consolidated into Bremer Financial and the Bremer Bank. This makes Bremer Bank the only bank owned by a non-profit organization. The rest of the Bank is owned by its employees.
In its IRS Form 990-PF 2019, Bremer Trust listed over $ 1.1 billion in assets and contributions totaling over $ 45 million. He also shares that the three trustees have cumulatively received over $ 1.4 million and documents indicating that over $ 2.1 million in legal fees have been paid.
When the foundation was established, the intention was for them to own the bank holding company which would serve as an ongoing source of income so that the foundation could build up its assets and the funds it could donate. In recent years, the three trustees have taken a series of steps to sell Bremer Bank. Their argument is that this would dramatically increase, if not double, the trust’s assets and increase what it could give in the shorter term.
Due to certain changes in the law, the Trust is only allowed to have a minority vote on the board of directors of Bremer Financial, and the trustees of that entity fought against the sale. They argue that Otto Bremer’s original intention was for the bank to remain independent and continue to have a commitment to rural and farming communities. Lawsuits and legal filings have stolen. As part of the battle, the directors of the Trust transferred part of their voting shares to 19 non-state hedge funds in an attempt to replace the board of directors of Bremer Financial and then put the bank down. on sale.
In his written statement, Attorney General Ellison essentially sided with the executives of Bremer Financial, accusing the trustees of the Otto Bremer Trust of “serious breaches of fiduciary duty.” Ellison has asked that all pending litigation be stayed while his charges are considered. He’s asking that the trustees be ousted and replaced by a former district court judge, a former Minnesota Council on Nonprofits executive (and formerly NPQ author and supporter) Marcia Avner, and past president of the St. Paul Foundation and the Minnesota Community Foundation. — Rob Meiksins