Bremer Financial Corp.'s top executive described on Wednesday her fight with the trustees who wanted to sell the company as an effort to preserve it as a community bank in the way she believed its founder wanted.
"I would not characterize it as a fight in the boardroom," Jeanne Crain, chief executive of the St. Paul-based bank, said in a court hearing about whether the trustees should be ousted from their jobs.
"The dispute is about BFC, as a community bank, continuing the successful work we've done for years, recognizing Otto Bremer's vision for keeping these two organizations together," Crain said, referring to the founder and namesake of Bremer Financial and its owner, the Otto Bremer Trust.
Leaders of the two organizations began fighting in summer 2019 over whether and how the bank, Minnesota's fourth-largest with $15 billion in assets, should be sold.
In doing so, the company has spent more than $20 million in legal fees over the past two years, Crain said in response to a question from the trustees' attorney.
"I would say it is an investment to maintain the quality of Bremer," Crain said to the attorney, who portrayed the costs as paid by "the owner's money."
Earlier testimony in the hearing showed the trust had spent $16 million on attorneys and other legal fees in the dispute.
The combined spending of more than $36 million, while not unusual for complicated litigation that unfolded over a lengthy period, indirectly affects the two Bremer institutions' ability to live up to their shared goal of funneling profits to charities in Minnesota and the three other states where they operate.
The trust is one of Minnesota's largest charitable foundations, distributing about $70 million annually. It gets most of its money from the profits of Bremer Financial, in which it owns a 92% stake in an arrangement that is unique in American banking and philanthropy.
Last year, the Minnesota Attorney General's Office, which has oversight of charitable organizations in the state, stepped into the legal fracas and asked a Ramsey County judge to remove the three trustees — Charlotte Johnson, Brian Lipschultz and Daniel Reardon.
For the past three weeks, Ramsey County District Judge Robert Awsumb has listened to arguments that have centered around allegations of mismanagement by the trustees and sharply different views of discussions about merger and sale prospects for Bremer Financial in 2019.
Separately Wednesday, Bremer Financial reported its latest quarterly results, saying its profit rose 10% to $47.8 million from July through September. It distributed $17.5 million in dividends, including $16.1 million to the trust.
Since the hearing began, testimony and documents showed that the two sides were in alignment for several months in 2019 after a South Dakota bank, Great Western Bancorp Inc., stepped forward to explore a merger of equals deal that would have kept the Bremer name and left Crain as CEO.
In late June 2019, trustees objected to that deal structure, telling the bank's board that an outright sale would be more lucrative to the trust. A sale, however, might lead to the ouster of Crain and other bank executives.
The Bremer board then ended its exploration with Great Western and the dispute grew over the next three months behind closed doors. In late October 2019, the trustees publicly announced they were putting the trust's ownership stake in Bremer Financial up for sale.
As she concluded her testimony, which stretched over parts of four days, Crain said the trustees used Great Western's inquiry for a merger of equals to "to open the door to create a sales transaction." If they became stewards of larger philanthropy, Crain said, the trustees could pay themselves more.
The trustees' attorney, Mike Ciresi, as he concluded his cross-examination of Crain, noted that, for nearly a decade, changes in the trustees' compensation have needed court approval. He pressed her knowledge of that restriction and then alluded to her self-interest in the bank's future.
"This comes down to the fact that you didn't want the bank to be sold," Ciresi said to Crain. "You wanted to fight and spent $20 million of the owner's money engaging in this fight, correct?"
"What's correct is I have every belief and confidence in Bremer's long-term success as a community bank," Crain replied.