A Virginia investment firm has sued Bremer Financial Corp. after spending $9 million to buy the company's stock and not getting shares, starting a new battle in a broader fight over the future of Minnesota's fourth-largest bank.
For much of the year, executives and directors at St. Paul-based Bremer have fought with trustees of the foundation that owns the firm, Otto Bremer Trust, over whether and how the bank company should be sold.
The dispute may lead to the end of a 75-year relationship, unique in the banking industry, through which a sizable portion of Bremer Financial's profits have flowed to the foundation and made it one of the largest charities in Minnesota, distributing about $50 million annually to a wide variety of beneficiaries.
In October, the trust sold a portion of its shares in the bank to 11 outside investment firms.
Bremer Financial alleges the trust wanted to enlist those investors to support the removal of directors who oppose the trust's control over a sale of the company. The trust said it made no agreement with the outside investors but that it hoped they "will carefully consider the merits" of selling Bremer to another bank or buyer.
In a lawsuit against the trust last month, Bremer Financial said the trust sold those shares at "less than what they have claimed is full value" for its shares and breached its fiduciary duty by revealing confidential information about the bank. It refused to recognize the transaction.
Late Thursday, one of those buyers, FJ Capital Management LLC of McLean, Va., filed suit against Bremer Financial, saying it did not know of the dispute when it spent the $9 million to purchase 75,000 of the 725,000 shares in the firm that were sold by the Bremer Trust.
"Whether or not [Bremer Financial] has reason to disagree with the Trustees' position to sell a portion of its shares as a business matter, [Bremer Financial] has no right or authority to refuse to issue to the Purchasers the shares they validly purchased," FJ Capital said in the suit.
A call on Friday to FJ Capital for comment wasn't returned.
In the suit, FJ Capital said it made an "arm's length" deal with Bremer Trust and had not made any previous or further agreements with its three trustees.
Later Friday, Bremer Financial issued a statement saying that, for reasons cited in its lawsuit against the trust, it "does not recognize [Otto Bremer Trust's] purported stock transfer as valid."
The company repeated its description of the trust's attempt to invite new investors as "troubling." It said out-of-state investment funds "have neither the best interests of Bremer employees nor the communities we serve throughout Minnesota, North Dakota and Wisconsin in mind."