The CEO of Junior Achievement North testified in court Wednesday that one of the trustees of the Otto Bremer Trust was unhappy that the nonprofit was inducting the board chairman of Bremer Financial Corp. into its hall of fame and told her to "fix the situation."
That led to a series of meetings that culminated with the nonprofit deciding to return a $1.2 million grant to the trust last month, just days before a trial began over whether those trustees can keep their jobs.
The Minnesota Attorney General's Office is seeking to remove the trustees for alleged self dealing and mismanagement. The leaders of the trust, which owns the bank company in an unusual arrangement dating to the 1940s, have been fighting with Bremer Financial executives for more than two years over whether the trust can sell its stake.
For most of the day Wednesday, Ramsey County District Judge Robert Awsumb, who will decide the trustees' fate, listened to Sara Dziuk, chief executive of Junior Achievement North, describe testy exchanges with Brian Lipschultz, one of the Bremer Trust trustees, over the past year.
Dziuk was a last-minute addition to the hearing. She was subpoenaed last week by the state and deposed over the weekend by lawyers.
Dziuk testified that she had two "very difficult, very hostile conversations" with Lipschultz in which she felt disrespected and asked to do things that she felt were inappropriate. She noted that the trust has been Junior Achievement North's largest donor in recent years, accounting for about 10% of its funding.
In a November conversation, a few months after the Attorney General's Office filed its petition to oust the trustees, she said Lipschultz told her that some other grant recipients were standing behind the trust. He said he wanted her to speak up on behalf of the trust to the Attorney General's Office or the governor's office, she said.
Lipschultz told her the trust was not interested in funding Junior Achievement any longer. Asked by the Attorney General's Office specifically why, she said, "I felt that it was because we did not go to the governor."
She added that she had spoken to one other executive at another nonprofit who said Lipschultz had made a similar request.
Junior Achievement ended up receiving a $1.2 million grant from the trust in July of this year.
In August, she recounted a second conversation with Lipschultz in which he expressed frustration that Junior Achievement North was planning to induct Ron James, president of the University of St. Thomas' Center for Ethical Business Cultures, into its hall of fame. James is also the board chairman of Bremer Financial.
"He shared it was a catastrophic situation, that the timing was not good," Dziuk said.
She said Lipschultz said this issue would damage their relationship going forward unless she figured out a way to address the situation. She took that to mean that the nonprofit could lose funding support from the trust.
The executive committee of Junior Achievement's board discussed the issue and decided that the recognition of James would stand, and that Dziuk and another board member should have a follow-up conversation with Lipschultz about their partnership.
In the meantime, Jeanne Crain, CEO of Bremer Financial, found out about Dziuk's conversation with Lipschultz and called her. Dziuk testified that Crain told her she thought the issue could be relevant in the trial and asked her to speak to the Attorney General's Office or to Bremer's lawyers.
Dziuk did not do so. Instead she told her board about it, and an "urgent" meeting was held less than 24 hours later in which they decided that she should not proactively speak with lawyers for Bremer or the Attorney General's Office and that they would return the $1.2 million grant.
In his cross examination, Mike Ciresi, the lead attorney for the trustees, noted that in the August conversation, Lipschultz never threatened Dziuk or Junior Achievement North, never asked for the trust's money back, and never suggested he would pull funding for the organization.
"Not a word about the funding, correct?" he said. "Zippo. Nothing."
Dziuk said Lipschultz didn't explicitly mention funding that time and only spoke more generally about damaging the relationship.
Ciresi noted that after the November conversation, in which funding was brought up, that the nonprofit still received a $1.2 million grant from the trust in July of this year.
"So the relationship wasn't affected in any way," he stated.
Dziuk replied that funding was delayed, noting the previous grant expired in November. She added that the nonprofit wasn't "allowed" to reapply for funding until June and would have applied earlier if it could have.