By Jayvee Vallejera
From $60 million to just $89,000 in five years, and from $59.1 million to just $28.7 million in six years.
That rapid depletion of funds that were supposed to be held in trust for Pacific islanders displaced by early nuclear testing on Bikini Atoll is now at the center of a lawsuit against the company that was supposed to keep the funds safe and sustainable.
Representatives of former Bikini Atoll residents, who were displaced by early nuclear testing in the Marshall Islands, are suing Arden Trust Co., accusing the company of mismanaging and quickly dissipating tens of millions of dollars in congressionally authorized aid funds after years of careful management.
The five-count complaint was filed Monday in Delaware's Court of Chancery, by the Kili/Bikini/Ejit Local Government Council on behalf of the people of Bikini and four individuals.
"Under Arden's egregious mismanagement," the lawsuit said, "the resettlement trust was obliterated, and the claims trust was gutted."
Arden's actions left "the Bikini community in severe financial distress and enduring hardship," it added.
The plaintiffs are demanding that Arden return all fees it has received from managing the two trust funds, plus a full accounting for the funds.
Arden served as trustee of the claims trust from May 31, 2018 until Oct. 6, 2023, when it transferred the claims trust assets to its appointed successor, Comerica. It became trustee of the resettlement trust on Nov. 30, 2018, and remains trustee today.
Shortly after Arden took over both trusts, it began disbursing massive amounts of trust funds—far beyond what the trust instruments or the U.S. laws establishing them allowed or what was prudent, the complaint states.
In 2018, Arden was allowed to distribute only $1.59 million from the claims trust to the Bikinians. “Instead, it disbursed nearly 10 times that amount—about $15,700,000,” the plaintiffs alleged.
According to the lawsuit, the market value of the resettlement trust has fallen from approximately $60 million when Arden became trustee, to $89,002 as of June 30, a decline of more than 99 percent. The market value of the claims trust declined from approximately $59.1 million to around $28.7 million during Arden’s tenure as trustee—a decline of more than 50 percent.
The funds had been growing for the past 32 years, from 1986 to 2018, under the careful watch of previous trust managers, the complaint said, but it was only when the trust funds came under the watch of Arden that they reached a dismal state—largely due to unquestioned and enormous releases of funds.
Beneficiaries of the trust funds "frequently want more money from the trust than they are allowed to have, but it is the role of the trustee to obey and enforce the terms of the trust, which sometimes means saying, 'No,’” the complaint said.
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Arden "flagrantly violated" trust requirements and congressional statutes by making "extravagant" disbursements and never questioning drawdown requests, the lawsuit said.
It allegedly never sought accountability or documentation for the use of drawdowns and put no restraints on requests for distributions.
The resettlement and rehabilitation funds were established in the 1980s for thousands of residents, who were forced out of their homes in Bikini Atoll in the 1940s to allow nuclear weapons testing.
To preserve the funds, the former trustees consistently denied several requests for fund disbursements beyond what was legally allowed. As a result, the $39 million appropriation from the U.S. Congress grew to $60 million.
However, when Arden took over as trustee of the two trust funds in 2018, "it put no restraints on requests for distributions and for five years never refused," the complaint said.
"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," while also collecting fees, the filing said.
The lawsuit also accuses Arden of underhanded tactics by making the Bikini governing council sign “an Arden-serving purported release of liability” and waiver of account refunding and indemnification provisions, taking advantage of the council’s desperate need for funds in 2023 and their desire to change trustees.
That happened because Arden, with no explanation, suddenly froze all disbursements from the claims trust on Jan. 7, 2023, even though the fund balance at that time was about $28.7 million.
The council members said they tried to seek an explanation for such action but Arden refused to meet with them or respond to emails.
This was soon followed by an exodus from the Kili island, where hundreds of residents were left with inconsistent and inadequate power and a damaged ecosystem that could not produce an adequate food supply, the complaint said.
Only after the council agreed to the liability release, the complaint said, did Arden provide council members with trust statements covering the period from Jan. 1, 2018, to June 30, 2023.
"Arden's gross mismanagement of the resettlement trust left the Bikinians without sufficient resources for essential needs, including supplemental food purchases, healthcare, student scholarships, and the maintenance of critical infrastructure on Bikini, Kili, and Ejit Islands, which undermined the trust's original purpose of ensuring their resettlement and rehabilitation," the suit said.
News of the lawsuit, issued by Law360, stated that Arden did not immediately respond to a request for comment. The company is a subsidiary of Texas-based Kestra Financial Inc.
The Kili/Bikini/Ejit Local Government Council and individual plaintiffs are represented by Michael L. Vild and Christopher P. Simon of Cross & Simon LLC, Robert K. Huffman, Qijia Yu, Madeline Pruhs and Christine Nelson of Covington & Burling LLP and Jonathan M. Weisgall.
Counsel information for Arden Trust Co. was not immediately available.
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