Fight over trust outlives heir
Expert: Froedtert held back from charities
In her final year, Mazie Froedtert Willms devoted a lot of time, money and energy to challenging how the fortune her father left to Milwaukee has been managed.
Trustees of Froedtert Hospital Trust, where most of it went, and their lawyers at Foley & Lardner might have thought they could just outlast Willms, who died in June at 92.
But before she died, she hired a forensic trust accounting expert who determined that over four decades, the hospital trust sat on more than $26 million that should have been doled out to support other charitable endeavors Kurtis Froedtert favored in his will.
“Imagine one of your last shots on earth is to stand up to power. And she was right. Foley was holding back,” said her attorney, Joseph Goode. “The DOJ owes her a debt of gratitude, in my opinion.”
At Willms’ and Goode’s urging, the Wisconsin Department of Justice took an interest in the case late last year, under its authority to enforce charitable trusts, and, armed with the accounting report Willms obtained, appears to have brokered a possible settlement.
Her estate would like more say in the deal and to be reimbursed for the $500,000 Willms spent to shine more light on how her father’s legacy was administered. The DOJ says it dealt with Willms’ family appropriately, and lawyers for the hospital trust say some of Willms’ expenses resulted from her seeking greater allowances from her own trust, which a judge denied.
The hospital trustees also call the expert’s accounting report “fundamentally flawed” and based on an incorrect construction of Froedtert’s will.
(The same men served as trustees for both trusts).
And now Lutheran Social Services of Wisconsin and Upper Michigan has asked the judge to find it is in perfect position to carry out Froedtert’s charitable intentions beyond the hospital — to assist physically disabled children, orphans, those seeking to attend college, and research into food, medicine and chemistry.
There will be lots of legal pleadings in probate court over the next couple of months before Milwaukee County Circuit Judge Paul Van Grunsven, who could decide the matter in March.
Under an early outline of the proposed settlement, the hospital trust would give about $11.5 million to provide scholarships to people planning to work in the areas Froedtert set out in his 1951 will.
Froedtert left his daughter Mazie, then 23, $500,000 in trust, to be doled out in annual payments no larger than $20,000. It has grown to about $40
million, and, per her father’s will, became part of the hospital trust when she died, increasing the hospital trust principal to more than $130 million.
Before she died, Willms said her father would be appalled at how much money, more than $500,000 year, was paid from the trusts to trustees, lawyers and financial advisers who manage them, fees that would only increase with the size of the trusts.
She had asked that her own trust go elsewhere at her death, so her father’s wishes might be carried out by some other charity, if the hospital trustees were not going to do it from that pot of money.
But the judge ruled that her father’s will was clear on that, and about the limits on her annual stipend, which she asked to be increased so she could give at least some of the money away before she died.
Lutheran Social Services steps in
At a court hearing in November, Lutheran Social Services suggested it would fit the bill exactly and sought to intervene in the matter.
Gregory Lyons, a lawyer for LSS, argued that Grunsven should use his broad probate power to determine that LSS has standing as a specific, special public interest to contest where the trust money goes.
“What would Kurtis Froedtert want today? What are his charitable purposes? We believe LSS would match exactly. It checks all the boxes,” Lyons said.
Froedtert’s will said once the hospital’s construction, operation and maintenance were covered, any remaining income from the trust “shall” fund the other purposes.
LSS says the hospital trustees have committed waste by not doing that. LSS’s missions include services to children with developmental delays and disabilities, foster care and adoption, help for children and adolescents dealing with victimization and substance abuse, shelters for youth and independent living support, and providing housing assistance to families.
It has a score of 100 out of 100 from Charity Navigator, which rates charities on how efficiently they use resources to accomplish their missions.
At the November hearing, David Lucey, a lawyer for the hospital trust responded to LSS’s interest with some sarcasm. “Welcome to the party,” he said.
Lucey said the hospital trust would seek to dismiss LSS’s motion for lack of standing.
“If LSS has standing, then there are thousands and thousands of other charitable organizations in Wisconsin knocking on the door to ask for their share,” Lucey said.
The hospital trust argues that because it is affiliated with the Medical College of Wisconsin, it already addresses Kurtis Froedtert’s other charitable interests — physically disabled children, orphans, college scholarships and research into food, medicine and chemistry.
Far from “wasting” trust assets, Lucey says, the trustees have managed Froedtert’s original $5 million gift into $70 million (before the addition of the Mazie trust), while distributing $84 million in grants over the years.
Lucey stressed that the need for money didn’t end once Froedtert Hospital opened in 1980 and that the trust has and will continue to fund expansions and improvements.
Further, just as the Froedtert Hospital Trust didn’t believe Willms had standing to meddle in how it was managed, trustees don’t think her six children do either. But her estate has asked Van Grunsven to substitute it for Willms in the ongoing litigation.
Attorney general’s role
Willms went to the Department of Justice last year, seeking its help in enforcing the parameters of the hospital trust as she saw it.
DOJ officials admitted they rarely have enough information to take such action and sent lawyers to a January mediation the judge had ordered last year.
The mediation did not result in settlement, but it did get the hospital trustees to disclose information to the DOJ that it had been withholding from Willms, according to her estate in new court pleadings.
When the DOJ said it couldn’t afford a forensic accounting, Willms agreed to pay for one and hired Thomas Pastore of Los Angeles
He concluded that since 1980, the trust generated about $26.2 million in remainder income — beyond what was necessary to operate the hospital — that should have been given to support the other causes Froedtert intended to benefit.
With the benefit of Pastore’s work, the DOJ got the hospital trust to direct $11.5 million to scholarships.
“DOJ has worked with all parties to ensure the intent of the original trust is appropriately carried out,” said Attorney General Josh Kaul’s spokesperson, Gillian Drummond. “Characterization of family not being appropriately involved in the proceedings is simply incorrect.”
Lucey, the attorney for the hospital trustees, called DOJ involvement “welcomed and constructive,” and that, while the details were still being negotiated, he was hopeful a resolution would be reached by January.
Goode, the attorney for Willms’ estate, said Willms’ six children are fine with the settlement, as long as their grandfather’s intended beneficiaries benefit. He said they have not been involved in talks of how the scholarships would be distributed and to whom, have been told by the DOJ their approval is not needed, and that DOJ won’t take a position on the estate’s claim for fees and might even oppose it.
“We thought we had a seat at the table, until we didn’t,” Goode said. Still, he said, the family will be satisfied wherever the money goes, as long as its addressing the needs Kurtis Froedtert cited in his will.
Willms’ children also feel their mother’s $500,000 costs should be paid from the hospital trust if it ultimately leads to a broader public benefit through the scholarships.
Goode called Willms one of the three best clients he’s had in 26 years of practice.
“She was a well-intentioned lady, firm in her beliefs, who put her money where her mouth was,” he said.