State planning to bow out of complex FLDS trust fund

Desert News/February 15, 2013

Salt Lake City - Eight years after Utah took control of assets belonging to a Utah-based polygamous sect, it is now trying to figure out how to return them.

Friday, attorneys announced that they are preparing exit strategies for the complicated trust fund.

The United Effort Plan was created by the Fundamentalist LDS Church in 1942 on the concept of a "united order," allowing followers to share in its assets. Utah's courts seized control of the FLDS trust in 2005, amid allegations of mismanagement by church leaders, including Warren Jeffs, the head of the church who is currently in prison in Texas.

Since the state took over the trust in 2005, state-appointed fiduciary Bruce Wisan, his attorneys and others charged with managing the $110 million-plus trust have racked up $5.7 million in fees. In a unanimous decision handed down in August, the Utah Supreme Court upheld an earlier ruling requiring the state to pay the fees until the trust's assets can be freed to pay for itself.

The state board of examiners, which reviews claims made against the state, recommended that the Utah Legislature appropriate the funds to pay the $5.7 million that was ordered. But the board said since it is an "advance" that will ultimately be repaid with trust revenue, there should be an exit strategy in place to end the fiduciary's duties and the state's future liability for the trust's costs.

Friday, the parties charged with proposing that exit plan to 3rd District Judge Denise Lindberg met to discuss their progress.

Shields said he, Wisan and those involved in the administration of the trust have a simple, straightforward proposal with four parts. The first is an exit strategy that calls for the creation of a board of trustees and the termination of the state's oversight.

Further, those managing the trust will not seek payment in excess of $5.7 million and will assume risk of payment for their future costs while they help wrap up the state's involvement in the trust. Finally, they would provide the state with a lien on property worth $5.7 million.

Assistant attorney general David Wolf said he thinks the groups, which also include the Arizona Attorney General's Office, need more time to come up with something more specific and concrete than what Shields presented.

"These issues need a little bit more development," he told the judge.

That includes, for example, what terminating the state trust would look like. Both Shields and Wolf pointed to the appointment of an independent, qualified board of trustees. But Lindberg said they need to look at other avenues, including termination of the trust.

She questioned whether they could find individuals representing FLDS members who continue to follow imprisoned leader Warren Jeffs, FLDS members who no longer follow Jeffs, former FLDS members, and community members who may have never belonged to the church to serve on the board. She also pointed to the staunch resistance of the FLDS faithful to work with the state.

"We can't involve a community that doesn't want to be involved," she said. "Still an option, not the best option, but if we can't resolve it, the only option left is termination. I don't want to go there unless I have to."

While Lindberg noted that when it comes to an exit strategy "the devil is in the details," she said she thinks the more simple and straightforward the better. She set another hearing for March 5, at which time the parties should have an agreement for the judge's approval.

"I think probably everybody in this room would like this to be done, but it must be done appropriately," the judge said.

Shields said a court-approved exit strategy does not guarantee payment by the Legislature, but it does show that they followed the board of examiners' recommendation. He said the process of getting approval of the exit strategy will be much quicker than the exit itself.

"Termination may be the most logical, best way to go," Shields agreed.

Wisan said he, too, felt that terminating the trust and distributing the property may be the "best route," considering the difficulty they may face in finding members of the FLDS faithful who are willing and able to serve.

"I'm not sure someone would be able to act independently without fear of losing their wife or children," Wisan said.

Willie Jessop, a former spokesman for the FLDS Church who no longer follows Jeffs, said he is hopeful that a board of trustees will be appointed and that the trust will be able to go forward. He said there are those in the FLDS community who have been working with Wisan and the Utah Attorney General's Office.

"Everyone seems to be on track with this," Jessop said. "There are enough people who recognize the importance of participating."

Still, he said those "subject to the dictates of Warren Jeffs" have a conflict with others in the community and would advocate only Jeffs' position if put on a board.

"That's something where we have to go get people on the board of trustees who are willing to help those people whether they are participants or not," Jessop said.

FLDS members consider sharing its assets under the United Effort Plan a religious principle and see state intervention in the trust as a violation of their religious rights. They have long been challenging the state takeover of the trust in both state and federal courts.

Valued at more than $110 million, the trust holds most of the property and homes in the two border towns of Hildale, Utah, and Colorado City, Ariz. The church also holds property in Bountiful, British Columbia, and Eldorado, Texas.

In 2009, Lindberg ruled that a liquidity crisis of the UEP trust made selling trust property necessary. The trust has around $3 million in debt and no steady source of revenue. The FLDS Church appealed the ruling to the Utah Supreme Court. But in August 2010, the state's high court found that the pending state lawsuit, which was filed in 2008 and challenged the administration of the trust, came too late.

Despite a ruling, in a separate federal court action from U.S. District Judge Dee Benson finding the state's actions were unconstitutional, the issue was then appealed to the 10th Circuit Court of Appeals. That court asked the Utah Supreme Court to clarify whether its ruling that the UEP lawsuit was too late barred any subsequent lawsuits stemming from the same argument in any court.

On Oct. 2, the Supreme Court ruled that their ruling did preclude any "subsequent action on the same claims between the same parties."

Neither the Utah Supreme Court nor the 10th Circuit looked at the constitutional claims brought by the FLDS.

Wolf said the bulk of the litigation centered around the constitutional question of the state's involvement and led to periods where the trust assets were frozen. He said the original intent was never to keep the trust in state control for eight years and it should be able to sustain itself on its own.

"It has a better chance of operating successfully without the state's involvement," he said.

Shields is optimistic they will work out an agreement that all parties are happy with.

"I think cooler heads will prevail," he said.

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