In this file photo from 2023, Bikini islanders demonstrate outside their local government town hall in Majuro calling for investigation into leaders' spending that has exhausted a trust fund that provided aid to the displaced community for over 40 years. New leaders, elected in November 2023, filed suit this week against their US-based trustee. Photo: Hilary Hosia
Bikini Islanders have filed a lawsuit in the United States against Arden Trust Company seeking aid from a US court for the return of tens of millions of dollars lost through what it says was "mismanagement" of two Bikini trust funds by Arden.
Arden manages the Bikini Resettlement Trust Fund and until recently managed the Bikini Claims Trust Fund.
"Under Arden's egregious mismanagement, the Resettlement Trust was obliterated, and the Claims Trust was gutted," the 80-page civil complaint said. It was filed in the US state of Delaware last month where Arden is based.
Three attorneys - Delaware-based lawyer Michael Vild and Washington, DC-based attorneys Jonathan Weisgall and Robert Huffman - are representing the Kili-Bikini-Ejit (KBE) local government and Mayor Tommy Jibok, Parliament Member Jess Gasper, Jr, and KBE local government Clerk Rodney Lewis and Assistant Treasurer Hemri Lajdrik, who are the named plaintiffs in the case against Arden.
The lawsuit is seeking a court judgment that Arden breached its obligations as trustee of the two Bikini trust funds and "holding Arden personally liable for its breach of trust and requiring Arden to restore the value of the trust property, including both principal lost and lost appreciation in principal that reasonably would have been realised if the Claims Trust assets and the Resettlement Trust assets had not been wrongfully dissipated."
The KBE lawsuit also wants a judge to order Arden to provide a complete accounting to the KBE Local Government of the use funds from the two trust funds.
The lawsuit points out that Arden became trustee of the Resettlement Trust on 30 November 2018, and remains trustee today.
Arden served as trustee of the Claims Trust from 31 May 2018 until 6 October 2023, when it transferred the Claims Trust assets to its appointed successor, Comerica.
"Shortly after Arden took over both trusts it began disbursing massive amounts of trust income and corpus from them - far beyond what the trust instruments or the US laws establishing them allowed or what was prudent," the KBE suit said. "To take but one example, Arden was allowed to distribute only about $1,594,000 to the Bikinians in 2018 from the Claims Trust. Instead, it disbursed nearly ten times that amount - about $15,700,000."
Both trust funds were established in the 1980s by the US Congress to provide ongoing support to the Bikini Islanders displaced by nuclear testing that started in 1946 and included America's largest hydrogen bomb test, the 15-megaton Bravo test, on March 1, 1954.
The KBE suit stated: "Instead of acting as a prudent trustee and limiting requests by the beneficiaries for funds, Arden flagrantly violated the trust instruments and Congressional statutes establishing the two trusts by making extravagant disbursements, never questioning drawdown requests, never seeking accountability for or documentation of how drawdowns were disbursed, and then coercing the Council into signing an Arden-serving purported release of liability, leaving the Bikini community in severe financial distress and enduring hardship."
The value of the Bikini Resettlement Fund fell from $60 million when Arden became the trustee in 2018 to $89,002 as of 30 June this year, "a decline of more than 99 percent," the lawsuit said.
"The market value of the Claims Trust declined from approximately $59.1 million to around $28.7m during Arden's tenure as trustee - a decline of more than 50 percent."
The KBE lawsuit said it is up to the trustee to at times say "no" to the beneficiaries who frequently want more money than they are allowed to have.
"For the nearly 32 years that other financial institutions served as trustee of the Claims Trust from 1986-2018, the Council regularly asked trustees to make distributions in excess of what was allowed," KBE said.
"Those trustees, knowing that they were bound by the strict rules of the Claims Trust instrument, turned down these requests. By limiting distributions to what was legally allowed, they not only preserved the corpus but actually grew it from the $39m that was appropriated by the US Government to over $60m."
But, said the lawsuit brought by the Bikinians, "for five straight years, (Arden) never said 'No.' Arden simply saw its role as being to spew out tens of millions of dollars from the two trusts, with no questions asked, no oversight, no accountability, and absolutely no concerns about the prudence of its actions or the rules of the trust instruments."
Between 1982 and 2016, the Bikini Resettlement Trust Fund paid out over $221m for the benefit of the Bikini people.
Timeline
The problems with the Bikini Resettlement Trust Fund began with an earlier KBE local government administration when on 18 August 2017 the council passed a "Rescript" resolution for the trust fund, which said KBE local governmenet "no longer recognises the authority of the Department of Interior…to approve the annual budget of the KBE local government from the Trust."
The KBE Council "rescript" resolution was followed on 16 November 2017 by US Assistant Secretary of the Interior Douglas Domenech issuing a letter informing then-Mayor Anderson Jibas that Interior accepted the Rescript Resolution and giving the mayor total authority for the trust fund.
A number of US Senators were "deeply disturbed" by Interior's action, the lawsuit said.
In early 2018, the Senate Energy and Natural Resources Committee held a hearing to review Interior Department action.
"While I agree we must respect the Bikini's desire to spend their money in certain ways, the Department of the Interior has a responsibility to ensure the (Resettlement Trust) remains for years to come," said the committee's ranking Democrat, Senator Maria Cantwell of Washington at the time.
Arden took over management of the Bikini Resettlement Trust Fund a few days after Domenech's letter was issued giving the mayor control of the Resettlement Trust Fund.
"A prudent trustee, knowing that the Resettlement Trust had been created by US law, would have inquired about the trust's history and learned that, despite the Rescript Resolution, the approval of the Secretary of the Interior was needed for any expenditures of Resettlement Trust income for projects on Kili or Ejit and that expenditures on such projects were not to exceed $2,000,000 in any one year," the lawsuit said.
"A prudent trustee would have insisted on an accounting or explanation from the Council detailing the use of funds it wired to the Council, as had the prior trustee.
"A prudent trustee, knowing that the Resettlement Trust had been created by US law and funded by US taxpayers, would have sought US Government guidance before draining 99 percent of the trust's assets.
"Arden did none of these. Instead, it proceeded over the next five years to thoroughly deplete the Resettlement Trust from a level of approximately $60m when it became trustee to $89,002 as of 30 June 30 2024."