UPDATE: Judge halts distribution of assets from Simon estate
Cory Schouten
July 30, 2010
Indianapolis Business Journal
http://www.ibj.com/judge-halts-distribution-of-assets-from-mel-simon-estate/PARAMS/article/21437
A Hamilton County judge has banned distributions from the estate of the late Melvin Simon to his widow Bren or any other beneficiary without the court’s approval.
Superior Court Judge William J. Hughes entered the order on Friday afternoon. It will stand at least until the court determines whether to remove Bren Simon as trustee of the roughly $2 billion estate.
The order specifically prevents Bren from taking distributions unless all interested parties give their consent. The judge on Thursday grilled attorneys for Bren Simon about her decision as the estate’s trustee to advance herself $14 million to pay her legal team.
Hughes said state law requires a trustee to get approval from a court and trust beneficiaries before a loan can be given, and “I don’t think there’s evidence” that Bren did that.
Michael Ciresi, a Minneapolis attorney who represents Bren, said he thought Indiana law gave his client the right to take the advance.
“It’s not whether it can be done,” Hughes responded, “it’s how it was done.”
Ciresi portrayed the mistake as “inadvertent” at the hearing Thursday, in which Bren’s attorneys made final arguments to fend off a challenge from her stepchildren over whether she is fit to remain as trustee.
Bren did not attend the hearing in Hamilton Superior Court.
Attorneys for her stepchildren argued she is so incapable of serving as trustee of her late husband’s estate that she failed to take even the basic step of hiring a financial adviser to manage the fortune.
Specifically, attorneys for the stepchildren took aim at $500 million worth of Simon Property Group stock Bren has been trying to unload since her husband’s 2009 death. The publicly traded company declined to immediately convert the ownership units into common stock that could be easily liquidated, citing a challenge to the will.
Attorneys for Melvin’s daughter Deborah Simon, who attended the hearing, pointed out that the shares have increased in value by tens of millions of dollars since then.
“Ten months after Mel’s death, there’s no financial manager, no diversification [of assets],” said Barry Simon, who is not related to the Simon family.
Deborah’s attempt to get Bren removed as trustee of the estate is part of an effort to challenge her father’s will. A jury trial in the case is tentatively scheduled for September 2011.
Attorneys finish arguments on Simon estate issue
Scott Olson
July 30, 2010
Indianapolis Business Journal
http://www.ibj.com/attorneys-finish-arguments-on-simon-estate-issue/PARAMS/article/21428
Attorneys for Bren Simon’s stepchildren argued on Thursday that she is so incapable of serving as trustee of her late husband’s estate that she failed to take even the basic step of hiring a financial adviser to manage the fortune.
The charge came during a hearing in which her attorneys made final arguments to fend off a challenge from her stepchildren over whether she is fit to remain as trustee over Melvin Simon’s roughly $2 billion estate.
Bren did not attend the hearing in Hamilton Superior Court.
Melvin, who died in September 2009, co-founded Indianapolis-based Simon Property Group Inc., the nation’s largest shopping mall owner.
Specifically, attorneys for the stepchildren took aim at $500 million worth of Simon stock Bren has been trying to unload since her husband’s death. The publicly traded company declined to immediately convert the ownership units into common stock that could be easily liquidated, citing a challenge to the will.
Attorneys for Deborah Simon, who attended the hearing, pointed out the shares have grown in value by tens of millions of dollars since then.
“Ten months after Mel’s death, there’s no financial manager, no diversification [of assets],” said Barry Simon, who is not related to the Simon family.
Deborah’s attempt to get Bren removed as trustee of the estate is part of an effort to challenge her father’s will. A jury trial in the case is tentatively scheduled for September 2011.
Judge William J. Hughes on Thursday took the arguments to remove Bren as trustee under advisement and will rule at a later date.
But before he did, Hughes took to task lawyers on both sides as they wrapped up arguments.
Hughes questioned Barry Simon’s request to assign a corporate fiduciary to the trust to replace Bren when there are few assets presently moving through it.
“Which one, who doesn’t already have a conflict?” Hughes asked.
His most pointed exchange during the afternoon, however, came with one of Bren’s attorney, Michael Ciresi.
Ciresi argued Bren has no reason to hire a financial adviser to oversee $500 million in Simon shares she wants to sell, until she needs to reinvest the money.
“So what do you do [with the money]?” Hughes asked. “Put it in a bank?”
Ciresi maintained that his client is unsure what she will do, but putting the money temporarily in U.S. Treasuries is a possibility.
“It would be darn hard to find an adviser in this country who would say to immediately invest $500 million,” Ciresi argued. “Getting a handle on all the assets has been a horrendously difficult job.”
The judge also grilled Ciresi about a $14 million advance Bren took from the trust to pay her private counsel.
Hughes said state law requires a trustee to get approval from a court and trust beneficiaries before a loan can be given, and “I don’t think there’s evidence of the two.”
Ciresi said he thought Indiana law gave Bren the right to take the advance.
“It’s not whether it can be done,” Hughes said, “it’s how it was done.”
Ciresi portrayed the mistake as “inadvertent.”
“If you want to direct the consequences at anyone, direct them at me,” he told the judge.
Deborah contends her father was suffering from dementia near the end of his life and didn’t understand what he was doing when he revised his estate plan, boosting the share of his fortune going directly to Bren from one-third to one-half.
The changes also wiped out a portion that was to go to Deborah and siblings Cynthia Simon-Skjodt and Simon Chairman and CEO David Simon from Mel’s earlier marriage, and left charitable gifts stipulated in prior versions to Bren’s discretion. Bren, who married Mel in 1972, contends the changes fully reflected his wishes.
In a court hearing earlier this month, Deborah’s legal team played portions of videotaped testimony from Bren, taken in March, in which she describes Deborah and her siblings as spoiled, vicious and hurtful.
In e-mails entered into the court record, Bren calls Deborah “bin Laden” and describes the actions of David as “terrorism.”
Family fight seeps into Simon boardroom
Simon feud could play pivotal role in control of mall giant
Jeff Swiatek
July 30, 2010
IndyStar.com
http://www.indystar.com/article/20100730/BUSINESS/7300347/Deposition-reveals-family-fight-extended-to-Simon-boardroom
In a court deposition filled with examples of divisions in her family, Bren Simon, the widow of billionaire real estate investor Melvin Simon, admits that she has referred to stepson David Simon as a “terrorist.”
She also called her stepdaughter Deborah Simon “Debbie bin Laden.”
And she said Melvin’s brother Herb Simon “speaks from both sides of his mouth depending on the day.”
Court documents in the dispute over Melvin Simon’s will offer a rare glimpse into the emotional dynamics of a powerful Central Indiana family. But the implications go beyond mere soap opera. They reach into the Indianapolis boardroom of Simon Property Group, the nation’s largest mall developer.
That’s because the publicly traded real estate investment trust’s charter allows its founding family to control four of the 12 seats on the board of directors. “Those four board seats are pretty valuable,” said Mark Foster, chief investment officer of Kirr Marbach & Co., a Columbus investment adviser. “I think they would do whatever they need to maintain those four board seats.”
The catch is that in order to hold those four seats, the family must keep more than half of its 1996 holdings in the company.
And Bren Simon appears poised to sell.
She already has tried to sell about a third of her late husband’s company holdings, valued at about $500 million. If she goes through with a deal, it would be the first major dilution of family stock in the company’s history. That could loosen the family’s grip — however slightly — at a time when Simon Property Group is flush with cash and seeking other companies to acquire.
More important, it appears to be the beginning of a process that befalls many large publicly traded companies.
A founding family’s control of a public company tends to weaken over time, as the stock becomes spread among new generations whose members aren’t as active or interested in the company. That has happened at once family-led Indiana corporate giants such as Eli Lilly and Co., Cummins and Hillenbrand Industries. And as Herb Simon, 75, puts his own estate in order, the fate of even more family shares could be up in the air for Simon Property Group.
Court filings show that as Melvin Simon became ill in the past two years and Bren Simon began to assert control of her husband’s estate, David Simon, the company’s CEO, began to worry about the four board seats and insisted he should retain the right to fill them.
With the death of Melvin Simon at age 82 in September and Bren Simon’s plan to sell shares, more attention is likely to be focused on the family’s continued influence in the company.
His estate, valued at more than $1 billion, holds 16.3 million, or 40 percent, of the family’s holdings of 40.8 million shares and partnership units in the Simon company. Except for a portion dedicated to charity, almost all of those shares will go to his squabbling heirs. The main recipients are Bren Simon; her daughter, Tamme Simon McCauley; and three stepchildren, David and Deborah Simon and Cynthia Simon Skjodt.
Simon Property Group officials wouldn’t talk publicly about the family dispute or how it might affect the company.
A lawyer for Bren Simon, who’s defending her late husband’s revised will against a challenge from Deborah Simon, also wouldn’t publicly comment. Nor would a lawyer for Deborah Simon.
Deborah Simon wants a Hamilton County judge to declare the will invalid, saying Bren Simon pressured a sick and incapacitated Melvin Simon to change the will seven months before he died. The revision increases Bren Simon’s share of the estate from a third to a half and reduces the shares going to her stepchildren.
For Simon Property Group, the biggest impact from its co-founder’s death could come from what happens to his shares and partnership units or “founder’s shares.” They make up the largest block of the shares the Simon family holds in the company. The other main family shareholders are David Simon, 48, and Herbert Simon.
The family stake amounts to more than 14 percent of Simon Property Group’s outstanding shares. That’s far more than the 5 percent level needed for the family to hold on to its right to name the four board members.
But Bren Simon, 67, already has shown a desire to sell 6.6 million of Melvin Simon’s untradeable founder’s shares back to the company. If she’s able to sell them and they’re not bought by other family members, that would reduce the family’s stake in the company to about 12 percent.
The company rejected the request, and it’s bottled up in court until the will challenge is sorted out.
In a court filing, Bren Simon explained the proposed sale as a prudent attempt to diversify the investments in her late husband’s estate, which are almost all locked up in Simon company stock or partnership units.
The Simon seats on the company’s board are held by David and Herbert Simon and company President Richard Sokolov. The fourth seat was filled by Melvin Simon and has gone unfilled since his death.
Under the company’s charter and the setup of a trust, David and Herbert Simon vote on who fills the seats, the company said. Before his death, Melvin Simon also had a vote.
The rest of the Simon company’s common shareholders, who are largely made up of investment funds and other large institutional investors, as well as members of the Simon family, elect directors to the eight other board seats.
The Simon family holds the largest block of stock in the company. The next largest, amounting to 8.5 percent of all shares, is held by the Vanguard Group, a Malvern, Pa., investment management company.
It’s not unusual for founding families to retain disproportionate influence in their companies after they go public. Giving the founders a big voice in the company, by controlling board seats or other means, is a way to keep them involved and active in the company.
Eleanor Bloxham, a corporate governance expert, said the Simon family’s control of four directors and David Simon’s role as CEO add up to a large amount of control held by one family. Such arrangements could make it difficult for a board to impartially tackle sticky issues such as merger deals and executive-succession planning, she said.
“It can go toward creating certain blocs on boards, which is not what you want,” said Bloxham, CEO of the Value Alliance Co. and the Corporate Governance Alliance, a board advisory company in Ohio.
Simon Property Group doesn’t seem to face those issues.
Two independent board members from Indianapolis, Allan Hubbard and Larry Glasscock, declined to discuss the impact of any large sales of Simon family stock. But Glasscock, former president of health insurer WellPoint, said: “I’ve been incredibly impressed with management and with the board. They are extremely well-run.”
Foster, of Kirr Marbach, said David Simon is popular among major shareholders in the company, which has outperformed its industry overall in the current economic downturn. “Given the direction he provides for the company and the growth they have seen, it would be inconsistent” to reduce David Simon’s role in the company, Foster said.
Even Bren Simon, who conceded in a court deposition that she has called David Simon a “terrorist,” also expressed support for him in his role as chairman and chief executive of Simon Property Group.
In a February 2009 e-mail to David Simon, she wrote, “I have and always will support your work at SPG.” And in an e-mail to him the following month, she wrote, “I’ve told you many times how much I appreciate you and what you’ve done for SPG.”
David Simon apparently is aiming to slow down the dilution of family control at Simon Property Group, according to e-mails and other documents released earlier this month.
In one document, a financial adviser and lawyer for Bren Simon discussed a December 2008 meeting about Bren Simon’s proposal to restructure a family company that owns a large amount of Simon Property Group stock. David Simon was insistent that any restructuring not weaken his say in controlling the four board seats, the note says.
Indiana knows the Simons, in large part, for their generosity.
The corporate stake in the mall development company created the wealth that’s allowed the family to be one of the most charitable in Indianapolis’ history, donating more than $150 million to Indiana University and numerous Indianapolis civic institutions. Melvin Simon’s estate also co-owns the Indiana Pacers.
Marianne Hellauer, a Baltimore attorney who specializes in estate planning and has been hired by Bren Simon, told the court in the hearing this month that the estate has hired five appraisers to try to calculate the value of the far-flung holdings.
They include an oil company, a large stake in a Jersey City, N.J., mixed-use development called Newport Centre, a golf equipment manufacturer in China and an interest in a media company sponsored by former Vice President Al Gore.
But the biggest holding by far is Simon company stock.
And how much family unity Bren Simon or other heirs can maintain could have a big impact on the future makeup of the board of the company Melvin Simon co-founded.
Documents paint a picture of Simon family animosity
Jeff Swiatek
July 30, 2010
IndyStar.com
http://www.indystar.com/article/20100730/BUSINESS/7300349/1003/BUSINESS/Documents-paint-a-picture-of-Simon-family-animosity
A mound of documents made public in court this month in a lawsuit over Melvin Simon’s will reveals tension and animosity within the Simon family. The documents were released in a hearing to determine whether Bren Simon should be removed as trustee of Melvin Simon’s estate.
A few examples:
In a February 2009 e-mail to a friend, in which Bren Simon talks of landing an ambassadorship under President Barack Obama, she said she felt betrayed by her husband, Melvin, because of the way he did his estate planning.
“I have enough money to live a good life and run a beautiful ambassador’s residence if I’m blessed to be appointed. . . . If Mel joins me, OK. And if he doesn’t, I don’t care. He has betrayed me in the deepest sense.”
In a transcript of a meeting Melvin Simon attended with his wife and financial advisers, Melvin Simon asked whether he could sue his son, David Simon. “I can’t stand him,” he added.
In a deposition, Bren Simon said she ordered her staff to refuse to admit her three stepchildren into the couple’s California mansion while Melvin was sick. She also admits in the deposition that she has referred to stepson David Simon as a “terrorist” and to stepdaughter Deborah Simon as “Debbie bin Laden” and that she once said she hoped her stepchildren would “rot in hell.” In an e-mail to a friend, she said, “I’m not spending one more minute on this family.”
In an e-mail to David Simon, Bren Simon said she distrusted her brother-in-law, Herbert Simon. “I rarely speak to Herbert about anything,” she wrote. “He speaks from both sides of his mouth depending on the day.”
Bren Simon also said she distrusted her husband’s business associates. “My experience now with the people who surrounded Mel is that they frequently manipulate the facts, withhold information or flat-out lie,” she wrote in an e-mail to David Simon.
In an e-mail, David Simon told his stepmother he was tired of her bringing up complaints about his job performance, calling them “constant crap.”
Estate of Denial® provides news, analysis and commentary on abusive practices occurring in probate courts and via probate instruments (wills, trusts, guardianships, powers of attorney). We provide original perspective to educate the public regarding this growing threat to both individual freedoms and property rights.
