Since the Bremer Bank feud burst into public in 2019, onlookers suspected greed motivated trustees of Otto Bremer Trust to sell the bank.
A Ramsey County judge dismissed that notion in his ruling on the dispute Friday.
"The evidence does not support the argument that Trustees pursued their strategy to increase their compensation or otherwise enrich themselves," Judge Robert Awsumb wrote in a 103-page ruling that marked a climax to a series of lawsuits, preliminary rulings and nearly a month of courtroom testimony.
Awsumb removed one of the three trustees, citing breaches of trust and deceptions. But he sided with the trust against the Minnesota Attorney General's Office on nearly every other issue, including the one at the heart of the dispute: whether the trustees had the right to sell the trust's 92% stake in Bremer Financial Corp., Minnesota's fourth-largest bank.
By ousting Trustee Brian Lipschultz, who pushed hardest for a sale — sometimes in offensive and profane terms — Awsumb laid a path for the trust and executives of Bremer Financial to amicably find a way to a confidential, high-value transaction. The judge told them to take a deal.
"Capturing the hard-earned value of BFC in today's marketplace would greatly increase OBT's charitable endowment, while allowing BFC to grow and prosper in the region deemed so important to its founder," Awsumb wrote, using acronyms and referring to Otto Bremer, who started both organizations more than 70 years ago and died in 1951.
A sale would put the Bremer organizations into compliance with federal law from the late 1960s that forced the charities of founding families to release control over businesses.
The Bremer organizations have long worked around that with legal compromises that included court oversight of the trust.
The charity kept its huge ownership stake but gave up voting and operational control over the bank, which has around 80 branches and $15 billion in assets. The bank gives most of its profits to the trust, which distributes them to charities in the towns where the bank has branches.
"The judge comes off sounding like a marriage counselor," said Paul Olson, a former leader of a Minnesota charitable trust who advocated for years that the Bremer entities separate. "By getting Lipschultz off the board of the trust, maybe that's a way of nice encouragement to sell [that will] put the bank people at ease."
Evidence showed Bremer Financial executives at various times in late 2018 and 2019 casually explored the idea of a sale. Bank valuations and deal volumes in the industry were high at the time.
Following a slump in the pandemic, bank transactions are rising again. If leaders at the Bremer entities agree to seek out a deal, opportunities are likely to appear, analysts say.
"They'll get robust interest," said Jon Winick, chief executive at Clark Street Capital in Chicago. "If you're a bank that's not in Minnesota, when else are you going to have an opportunity like this?"
The dispute evolved in spring 2019 after preliminary discussions between the bank's executives and a merger partner led trustees to more aggressively seek a deal. After privately disagreeing with bank executives for months, trustees in October 2019 publicly declared they were looking for buyers, for the trust's stake.
The bank sued to stop the trust and, in 2020, was joined by the Attorney General's Office, which has review oversight of charities in Minnesota. Both accused the trustees of pushing a sale so they could eventually pay themselves more money.
During the trial, evidence showed the combined pay of the three trustees had not exceeded the halfway point of the limit set by Otto Bremer when he created the trust. A compensation expert called by the trust's attorney testified their combined salaries and benefits of around $1.5 million put them below the median $1.7 million of three top officers at comparably-sized charitable organizations.
In the ruling last week, Awsumb said the trustees' pay and methods for setting it had remained the same since 2014 and been approved five times since then by the court. He rejected the allegation that trustees' pay would increase simply by the trust selling its stake in Bremer Financial.
Both the Attorney General's Office and the court would have to approve any increases, the judge noted. "It is impossible to envision a scenario where that would happen," he wrote.