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In this 2023 file photo, Bikini Islanders demonstrate outside the local government town hall in Majuro, calling for an investigation into the spending practices of leaders that have depleted a trust fund that has provided aid to displaced people for more than 40 years. New leaders elected in November 2023 filed a lawsuit this week against their trustees in the United States.
photo: Hilary Hosea
Bikini Islanders have filed a lawsuit in the United States against the Arden Trust, seeking help from US courts to return tens of millions of dollars lost as a result of Arden’s “mismanagement” of two Bikini trusts.
Ardern administers the Bikini Settlement Trust and, more recently, the Bikini Claims Trust.
“Under Arden’s poor management, the resettlement trust fund was destroyed and the claims trust fund suffered heavy losses,” said the 80-page civil complaint, which was filed last month in Delaware, where Arden is headquartered.
The three attorneys — Delaware attorney Michael Vild and Washington, D.C. attorneys Jonathan Weisgall and Robert Huffman — are representing the Kili-Bikini-Egit (KBE) Local Government and Mayor Tommy Jibok, Congressman Jess Gasper, Jr, KBE Local Government Clerk Rodney Lewis and Assistant Treasurer Hemri Lajdrik, all of whom are plaintiffs in the case against Ardern.
The lawsuit seeks a judgment that Arden breached its duties as trustee of the Two Bikinis Trust and “requires Arden to be held personally liable for breach of trust and to recover the value of the trust property, including loss of principal and loss of principal appreciation, that would have been reasonably realized if the Claim Trust Assets and the Settlement Trust Assets had not been wrongfully dissipated.”
KBE’s lawsuit also asks a judge to order Arden to provide KBE local governments with a complete report on how the money from the two trust funds was spent.
The lawsuit states that Arden became the trustee of the settlement trust on November 30, 2018, and continues to serve as the trustee to this day.
Arden served as trustee of the Claims Trust from May 31, 2018 until October 6, 2023, when the company transferred the Claims Trust assets to its designated successor, Comerica.
“Soon after Arden took control of the two trusts, it began spending substantial amounts of trust income and principal therefrom — amounts far in excess of what was permitted or prudent under the trust instruments or under U.S. law establishing the trusts,” the KBE lawsuit states. “As one example, Arden was permitted to distribute only approximately $1,594,000 from the claims trusts to Bikini in 2018. Instead, it spent nearly ten times that amount — approximately $15,700,000.”
Both trust funds were established by the U.S. Congress in the 1980s to provide ongoing assistance to Bikini Island residents displaced by nuclear testing that began in 1946 and included the 15-megaton Bravo test, the largest U.S. hydrogen bomb test, on March 1, 1954.
“Instead of acting as a prudent fiduciary and limiting the beneficiaries’ requests for funds, Arden blatantly violated the trust instruments and the laws and regulations of Congress establishing the two trusts by spending funds without questioning withdrawal requests, never holding the board accountable or providing documentation for withdrawal expenditures, and forcing the board to sign a purported liability waiver in Arden’s service, causing the Bikini community to fall into severe financial distress and hardship,” KBE said in the lawsuit.
The lawsuit alleges that the value of the Bikini Settlement Fund fell from $60 million when Ardern became trustee in 2018 to $89,002 on June 30 of this year, “a drop of more than 99 percent.”
“During Ardern’s tenure as trustee, the market value of the Claims Trust decreased from approximately $59.1 million to approximately $28.7 million, a decrease of more than 50 per cent.”
KBE’s lawsuit claims trustees sometimes have the power to say “no” to beneficiaries who frequently want more money than they are allowed.
“During the nearly 32 years from 1986 to 2018 when other financial institutions served as trustees of the claims trust, the Board of Governors frequently required the trustees to make distributions in excess of the permitted amounts,” KBE said.
“Knowing they were bound by the strict rules of the claims trust instrument, these trustees denied these requests. By limiting distributions to what was legally permitted, they not only preserved the funds, but actually increased them from $39 million in U.S. government grants to more than $60 million.”
But the lawsuit filed by the Bikinis alleges that “for five years, (Arden) never said ‘no.’ Arden simply believed that it was his job to take tens of millions of dollars from two trust funds without any questioning, oversight or accountability, and without any concern for the prudence of his actions or the rules of the trust instruments.”
Between 1982 and 2016, the Bikini Settlement Trust Fund paid out more than $221 million in benefits to the people of Bikini.
Timeline
The problems with the Bikini Resettlement Trust Fund began in the early days of the KBE Local Government Administration when Parliament passed a “Royal Edict” resolution on the Trust Fund on August 18, 2017, which stated that the KBE Local Government “no longer recognizes the authority of the Ministry of Interior… to approve the annual budget of the KBE Local Government from the Trust Fund.”
On November 16, 2017, Assistant Secretary of the Interior Douglas Domenech followed up the KBE Board’s “Edict” resolution with a letter notifying then-Mayor Anderson Jibas that the Department of the Interior accepted the Edict resolution and gave the Mayor full authority to manage the Trust Fund.
The lawsuit said some U.S. senators were “deeply troubled” by the Interior Department’s actions.
In early 2018, the Senate Energy and Natural Resources Committee held a hearing to review the Interior Department’s actions.
“While I agree that we must respect the desire of Bikini residents to spend their money in a certain way, it is the Department of the Interior’s responsibility to ensure that (the resettlement trust) continues to exist for years to come,” said Sen. Maria Cantwell, D-Wash., the committee’s top Democrat at the time.
Domenech sent a letter handing control of the resettlement trust to the mayor, and a few days later Ardern took over management of the Bikini resettlement trust.
“A prudent trustee, knowing that the Resettlement Trust was established under U.S. law, would have inquired about the history of the Trust and learned that, notwithstanding the Statute Resolution, any use of Resettlement Trust proceeds for the Keeley or Edgett projects required approval by the Secretary of the Interior and that expenditures for such projects could not exceed $2 million in any year,” the lawsuit states.
“A prudent trustee would have insisted that the council provide an accounting or explanation detailing the use of the funds it remitted to the council, as the previous trustee did.
“A prudent trustee, knowing that the Resettlement Trust was established under U.S. law and funded by U.S. taxpayers, would have sought guidance from the U.S. government before using 99% of the Trust’s assets.
“Arden did none of those things. Instead, it completely depleted the settlement trust fund over the next five years, from approximately $60 million when it became trustee to $89,002 on June 30, 2024.”
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