6 minutes reading time (1207 words)

ASSET PROTECTION, CONTEMPT OF COURT, AND THE LATEST DECISION IN THE GRANT CASE

The issue in the contempt of court aspect of the U.S. v. Grant case was whether Raymond and Arline Grant (the “Grants,” or individually by first name) in fact had the power to repatriate trust assets based upon the provisions of two offshore trusts they settled in the early 1980s (one of which was settled in Bermuda, and one of which was settled in Jersey, Channel Islands).  

Procedural Background - In 2000, the U.S. government brought a civil action against the Grants to collect over $36 million from them on account of their unpaid federal income tax liabilities.  In 2003 final judgment entered against the Grants for this amount, plus interest.

In the United States District Court for the Southern District of Florida’s (the “Court”) September 2, 2005 “Report and Recommendation that the Government’s Amended Motion for Repatriation of Assets be Granted,” the Court addressed the issue of whether Arline (Raymond having deceased by that time) had the power to effect a repatriation of the trusts’ assets by stating: “Clearly, she has such power. She has unreviewable discretion to change the trustees, and the present trustees must comply with such a request.  This Court can, therefore, order [Arline] to change the trustee of each trust to a U.S. trustee, which will result in the repatriation of these assets.”

There following, the Court held in a “Repatriation Order” dated December 22, 2005 that based upon the trusts’ provisions, the Grants had the power to repatriate the assets of the two trusts, and repatriation was ordered.  

Repatriation did not follow, however, so in October 2007, the government filed a Motion for Issuance of Order to Show Cause.  This was denied on May 27, 2008.  In denying the Motion, the Court concluded that Arline had sufficiently established she was unable to comply with the Court’s Repatriation Order.  

The Court acknowledged that Arline “made significant efforts to repatriate the funds to the United States, either directly to her or to a U.S. trustee, to no avail.  For example, on January 17, 2006--less than a month after the repatriation order was issued, she sent a letter to the Jersey trustee, enclosing the repatriation order and seeking information about the procedure to repatriate funds.” In response to Arline’s letter, the Jersey trustee’s lawyers informed her “that any attempted exercise by you of your right to remove our client as trustee of this Trust and to appoint a U.S. resident trustee in its place would not be a valid exercise of [Arline’s power as trust beneficiary] and would therefore be void and of no effect, which means that our client will remain the trustee of the trust, notwithstanding your attempted exercise of your power.”

The Court further acknowledged that Arline contacted the trustee for the Bermuda trust.  Her attempt was met with a similar response, which stated “the Trustees of the above trust have considered your request to transfer the entire trust fund to you.  We wish to advise at this time we cannot comply with your request.”

Arline also sent letters to financial institutions, asking them to serve as transferee trustees.  These requests were rejected in part because of the possibility that the offshore trustees would fight any attempt to repatriate.

The Court acknowledged that while more than two years had elapsed since the issuance of the Repatriation Order, the failure to repatriate the funds was “not for a lack of effort.”  The Court stated that it was “reluctant to fault [Arline] for her trustees’ denial of her requests to repatriate the funds.”

As a result, the Court ruled in this 2008 decision that Arline had sufficiently established that she was not able to comply and repatriate the offshore funds.  Therefore, the government’s Order to Show Cause was denied and Arline was not held in contempt of court.  Note, however, that while Arline was not found to be in contempt of court, the Repatriation Order still continued and stood in full force and effect.

Subsequent Actions Led to Contempt of Court Finding - And that was the end of it...or so Arline (and likely her advisors and the trustees) thought - so much so that in the years following the 2008 denial decision more than $500,000.00 of the many millions held offshore was repatriated to the U.S., part of which was spent by Arline and part of which was placed in accounts in the names of the Grant children.  

When this came to the attention of the U.S. government, it was not too pleased and in fact on January 13, 2012 the U.S. government filed a Motion for Permanent Injunction and a second Show Cause Motion.  The Court granted this Motion and required Arline to show cause why she should not be held in contempt of court for her failure to comply with the 2005 Repatriation Order upon her receiving funds from the trusts (Order dated June 22, 2012).  Arline responded with a Motion to Discharge the Show Cause Order, which the court denied, instead holding Arline in contempt with respect to both the Repatriation Order and the June 22, 2012 Order.  

As of April 22, 2013, the date of this latest Order in the Grant case, “[Arline] has not satisfied the judgment, nor has she paid to [the government] any portion of the monies transferred to her from the trusts.” 

In this latest decision, the government’s Motion for Permanent Injunction was granted, ordering that:

  • Arline request on a quarterly basis that the trustees of the offshore trusts transfer all available income to accounts within the United States.
  • Funds transferred to Arline in the past and that are still in her possession, custody or control of her or her children be provided to the United States.
  • Funds transferred to Arline or her children in the future be similarly turned over.
  • No further accounts be opened by Arline or others acting in concert with her for the purpose of receiving funds from the trusts, without those being immediately turned over to the United States.
  • Neither Arline nor anyone working in concert with her communicate to the foreign trustees the existence of this latest Order “or the suggestion that distributions requested are being compelled.”  

The question arises, is this latest incarnation of the Grant case a victory or a loss for Arline, for the Grant trusts and for asset protection principles generally?  In the course of deciding, the reader should consider:

  • That many millions remain offshore, secure from the judgment and after more than a decade of litigation, secure from the reach of the adversary.
  • Several hundred thousand dollars had been repatriated that were expended for the benefit of Arline and/or her family.
  • The adversary accessed only $221,000 of the many millions held in the trusts. 
  • The favorable contempt of court principles of the 2007 Order and of any related cases remain unchanged...it was the fact that Arline had subsequently taken receipt (or custody or control) of assets without turning them over, in violation of the 2005 Repatriation Order, that led to her being found to be in contempt of court and that led to the Court being offended to the extent it was.
  • There is no mention in the Order of Arline being fined, penalized, incarcerated, or the like.
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