The South Dakota Supreme Court is scheduled to hear arguments this week on whether two sons of frozen food magnate Marvin Schwan can learn the details of how a foundation established by their late father lost hundreds of millions of dollars in offshore real estate deals gone awry, the Argus Leader reports.
In 2013, Mark and Paul Schwan, who are on the trustee succession committee of the Marvin M. Schwan Charitable Foundation, learned that the foundation had lost as much as $600 million in off-shore real estate ventures. "These offshore investments consisted of hundreds of millions of dollars in loans and equity investments, made with foundation assets, to develop a Four Seasons Resort at Emerald Bay, Great Exuma, Bahamas; a Ritz Carlton Hotel at Seven Mile Beach, Grand Cayman, Cayman Islands; and a Four Seasons Resort at Peninsula Papagayo, Costa Rica," the Schwans' brief reads. "Speculative by their very nature, each of the trustees' offshore investments failed in spectacular fashion, causing the foundation to suffer losses of hundreds of millions of dollars." The brief also alleges the foundation made $20 million in loans to an entity whose board of directors includes three foundation trustees.
As members of the foundation's trustee succession committee, the Schwan brothers argue they have a fiduciary responsibility to review detailed information about the losses sustained by the foundation. But three other members of the committee are foundation trustees who were responsible for the financial decisions. They, along with the other two non-trustee members of the committee, have blocked efforts by the Schwan brothers. The seven beneficiaries also oppose releasing any more details about the deals.
The Schwan brothers have asked a circuit court to exercise supervision over the foundation, which argues that the brothers cannot petition the court to do so because they lack standing under South Dakota law. The dispute also involves the attorney general’s office, which, under state law, has the authority to enforce the conditions of a charitable trust.
While South Dakota attorney general Marty Jackley would not comment specifically about the case, he told the Argus Leader, "It was important enough that we assigned two lawyers to it."