A judge in St. Paul on Thursday set parameters around the sprawling legal disputes over control of Bremer Financial, the state’s fourth-largest banking company.
Meanwhile, the Minnesota attorney general told the judge its monthlong investigation will continue into Bremer Trust, the foundation that owns and wants to sell Bremer Financial.
Ramsey County District Judge Jennifer Frisch appointed a former federal prosecutor to act as a “special master” to manage three separate lawsuits in the dispute. She set May 15 for a court hearing to consider motions on the cases and gave the sides 150 days to conduct investigations and interviews.
“I want this moving along,” Frisch said at a meeting of nearly 20 lawyers involved in the litigation and investigations.
Bremer Financial since last summer has sought to slow efforts by its majority owner, the Otto Bremer Trust, to put the firm up for sale. Frisch sided with the company by allowing its shareholder meeting to proceed in April.
Attorneys for the trust argued in a letter that the meeting should wait until a decision is made about its efforts to bring on new shareholders. But when the judge asked them Thursday if they wanted to file a motion to stop the meeting, they said they might do so in the future.
Separately, Bremer Trust trustee Charlotte Johnson plans to retire from the Bremer Financial board at the April annual meeting. She is one of the three trustees who have broken with others on the 10-person Bremer Financial board over the bank’s future.
The battle is rooted in Bremer Financial’s status as the only banking company in the U.S. owned by a charity, a legacy of wishes that founder Otto Bremer set forth in the 1940s.
Bremer Financial contributes most of its annual profit to Bremer Trust, which now has assets of around $1.2 billion and distributes about $50 million annually. This month, Bremer Financial reported a profit of $156 million for 2019 and said it gave $80.6 million to Bremer Trust.
Amid the maneuvering by the two St. Paul-based institutions, the banking industry broadly is undergoing a wave of mergers and deals shaped by executives contending with the pressure and costs of technological change.
A potential buyer approached Bremer Financial last spring but didn’t make an offer. Executives subsequently disclosed that approach to board members, including the three trustees of the Otto Bremer Trust. That disclosure led the trustees to undertake their own efforts to obtain the valuations and prospective buyers for the bank.
By midsummer, according to court filings, trustees were pressing the bank’s executives and other board members to back their plan to more aggressively seek buyers. The split in tactics widened and spilled into the open in late October when trustees announced, separately from the bank’s executives and board, that they might sell the bank.
A few weeks later, Bremer Financial sued Bremer Trust and the trustees. Other lawsuits followed from Bremer Financial’s employee shareholders and some of the outside investors Bremer Trust attracted to purchase small stakes in Bremer Financial.
Heading into Thursday’s meeting, Bremer Trust lawyers asked Frisch to expedite legal matters and narrow her focus to whether the outside investors, chiefly hedge funds, are rightful shareholders in Bremer Financial and can participate in director elections.
Frisch appointed Andy Luger, a former U.S. attorney for Minnesota and longtime federal prosecutor, as a special master to oversee the various cases and voluminous filings they are producing.
Carol Washington, an assistant Minnesota attorney general, and two other state lawyers didn’t speak substantively on the investigation.