Broken Trust

A trust is a legal agreement to have a Trustee hold and manage assets for other people called beneficiaries. Trusts are quite common, and a trustee has specific legal duties: 

Investopedia defines a fiduciary as:

A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients' interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other's best interests.

Broken Trust

Legal ideas like "decoupling" or "fiduciary" or "Trust Agreement" can be confusing, so this  case study should help people learn about and discuss these ideas. Teachers use case studies all the time: When people have a simplified specific example to discuss, it's easier to learn ideas and debate issues.

A Case Study: Raiding the Richardson Trust

Case Study Facts

Tom and Kathy Richardson spent a lifetime carefully saving and working hard, so they built and operate a profitable vineyard.  The Richardsons wanted to pass their vineyard to their children and grandchildren in a reliable way, so they signed a Trust Agreement; that is, a legal agreement that lets someone transfer property and assets for the benefit of someone else called the beneficiary.  

The Richardson Trust transferred the vineyard to Beaver State Bank who agreed to be the trustee for Richardson's descendants. The Trust agreement specifically required day-to-day vineyard management to be done by Oregon Vineyard Management, a well respected firm that managed many other local vineyards. 

After the couple died in 1950, the Richardson Trust worked as expected for decades: Beaver State Bank oversaw the Richardson Trust, Oregon Vineyard Management grew and harvested grapes, and each year the descendants got paid millions of dollars from profit. 

As time went on, a new Beaver State Bank employee  was assigned as Trustee, and she worried about the evils of drinking alcohol. So she fired Oregon Vineyard Management and hired her own vineyard expert instead. She told the new vineyard expert not to harvest any wine grapes. Naturally, the vineyard began losing money and started falling into disrepair. 

This new Trustee's next idea was to convert the vineyard into a public park, so she signed an agreement with Beaver Consultants to write a vineyard-to-park conversion plan, and no competitive bidding was allowed when this agreement was signed. Beaver Consultants was another company within Beaver Bank's parent company. Beaver Consultants was paid $870,000 to design playgrounds and other park amenities. Beaver Consultants worked privately: their meetings weren't open to outside observers, and their internal discussions and working papers were kept secret until a few months before the plan was released in December 2020. 

A central feature of the vineyard-to-park conversion plan was to transfer ownership of the land  from the Richardson Trust to Beaver Consultants. The conversion plan said this transfer would "decouple" the vineyard from  the Richardson Trust. In actuality, the term "decouple" was just a fancy way of saying the vineyard  would be sold. The plan said "decoupling" would happen at an "investment" value without allowing a competitive auction so other people could offer to  buy the vineyard.

Case analysis: Vineyards versus Treefarms

This case study is factually the same as the real life situation with the Elliott State Forest, only the names were changed. Here are the name changes:

We hope this case study clarifies why we feel Oregon's K-12 schoolchildren deserve trustees who don't have divided loyalties, who won't put the political interests of urban environmentalists ahead of their duty to act in good faith.

Just as it doesn't make sense to shut down vineyards over concerns about alcohol use, it doesn't make sense to shut down Oregon's forests over apparent concerns about carbon sequestration and endangered species. Yet the trustees who are overseeing the Elliott State Forest have stopped all logging and are trying to sell the Elliott State Forest from the State Land Trust for a fraction of its market value. This self-dealing is unethical and will not withstand legal scrutiny.