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Otto Bremer Trust leaders are asked to resign from Bremer Bank board

Twin Cities Pioneer Press logo Twin Cities Pioneer Press 2/22/2021 Frederick Melo
a building with a store on the sidewalk: The downtown St. Paul Bremer Bank branch is seen in an undated courtesy photo, circa September 2020. (Courtesty of Bremer Bank) © Provided by Twin Cities Pioneer Press The downtown St. Paul Bremer Bank branch is seen in an undated courtesy photo, circa September 2020. (Courtesty of Bremer Bank)

The board of the St. Paul-based Bremer Financial Corporation took key steps Monday to remove the trustees of its philanthropic parent company from its slate of board members, the latest salvo in an ongoing feud between the leadership of Bremer Bank and the Otto Bremer Trust.

In 1944, with the Great Depression in the rear view, German immigrant and renowned philanthropist Otto Bremer turned his attention to the many small farm lenders he had bailed out with his personal fortune to keep rural communities in the Midwest afloat. Bremer, like the Fords, the Carnegies and other famous captains of industry, established a foundation to continue his legacy of giving even after he was gone.

The Otto Bremer Trust opened during World War II and oversaw its own financial corporation, of which Bremer Bank remains its major asset. Fast forward nearly 80 years, and today the three trustees of the St. Paul-based charitable foundation — all of them descendants of Bremer’s advisers — remain at loggerheads with the nine-member board of the Bremer Financial Corporation, which oversees Bremer Bank, a $13 billion financial institution and one of the largest farm lenders in the Midwest.

A dispute over control of the bank and a potential forced bank sale has led to a series of back-and-forth legal suits, including intervention last year from the Minnesota Attorney General’s office on the corporation’s behalf.

On Monday, the split between the three Otto Bremer Trust trustees and the Bremer Financial Corporation entered a new phase. The board chose not to nominate trustees Brian Lipschultz and Daniel Reardon for reelection to the board in late April, when the annual meeting of shareholders will vote to seat the corporation’s governing body. A third trustee, Charlotte Johnson, chose to retire from the corporate board in April 2020. All three trustees remain at the helm of the Otto Bremer Trust (OBT) philanthropy.

In a written announcement on Monday, the Bremer Financial Corporation (BFC) board said they found Lipschultz and Reardon “unfit to serve as directors of BFC,” and made specific mention of previous allegations of “self-dealing, excessive compensation and spending, hostile work environment, and a shift in focus for (the trust) away from charitable giving toward financial services … a clear breach of their fiduciary obligations to BFC (as well as) BFC’s code of conduct and board governance policy.”

They also raised a new allegation — that the two trustees had circulated opportunities for federal Paycheck Protection Program loans last year in direct competition with Bremer Bank products: “Lipschultz and Reardon failed to disclose to the board OBT’s solicitation of customers for loans on behalf of competing financial institutions.”

In a written statement, the trustees said they acted quickly last year to make the federal loans available to nonprofits throughout Minnesota and the region. The loans were made by the Community Reinvestment Fund, a national community development financial institution, and Otto Bremer Trust “received nothing in return beyond the knowledge that those in most desperate need would have financial assistance during the pandemic,” the trustees’ statement said.

At their meeting Monday, the non-trustee board members requested Lipschultz’s and Reardon’s resignations from the board in accordance with BFC’s conflict of interest policy. The trustees refused, and the board resolved that Lipschultz and Reardon would not be nominated as board candidates at Bremer’s annual shareholders meeting on April 29.

Both sides have accused the other of failing to honor Bremer’s legacy, and the loss of all three trustees from the corporate board all but finalizes a parting of ways months in the making.

Bank officials have said trustees’ efforts to sell voting shares in the corporation to out-of-state investors would set the bank up for a forced sale and leave a consumer-minded farm lender in the hands of aggressive East Coast investors who will likely close branches, trim workforce and focus on other cost-control measures to raise share prices. Trustees have long maintained they have a financial obligation to grow the company, which could bring in millions of dollars in new philanthropic investment throughout Minnesota, North Dakota and Wisconsin.

The corporation’s latest announcement “merely reinforces and clarifies the Trust’s position that it must be allowed to sell its shares,” said the trustees in their written statement Monday.

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